What Should I Know Before Buying Rental Property in a Different State?

Buying and owning property is rarely easy or simple. When the property in question is in a distant location, the challenges multiply. Nevertheless, investing in out-of-state property might seem appealing if you live in an area where real estate is expensive.

Firstly, keep in mind that either you have to manage the rental property from a distance or hire a property manager, so choose what works for you.

Also, it may require constant pest control, termite treatment, roof shingle repair, gutter cleaning, hot-water heater replacement, dishwasher installation, and midnight plumbing.

The next thing you should know is that you should never invest in a market you do not know and have not scouted personally. Cash-flow math is key to making good cash-flow investment decisions, but so too are your personal beliefs of the market dynamics.

Lastly, when purchasing a rental property, especially rental property out-of-state, you're likely to encounter higher homeowners insurance rates, higher mortgage interest rates, and higher down payment requirements. Lenders consider rentals riskier than owner-occupant mortgages.

You'll also complicate your tax situation by owning rental property and earning income in more than one state. I’d advise you to hire yourself an income tax professional.