One of the best ways to diversify a real estate portfolio is to buy a property in a state outside of the one you live in. Your home market is a good place to get started, but when you decide you want to grow your portfolio and really scale your success as an investor, it may be time to look at other markets.
St. Louis is an excellent market for many reasons. Investors from states like California, Colorado, and Nevada have been looking at rental properties here because the cost of entry is so much lower than in their states.
Today, we have some tips on how to find, acquire, and manage a St. Louis investment property from out of state.
Choosing an Investment Market for Rental Property
We have found that three reasons in particular lead real estate investors to look at markets like St. Louis. These are:
- High property costs in other markets.
- Higher taxes.
- Tenant-friendly laws that don’t favor investors.
All of these things can hurt ROI.
Take a look at California, for example. In most California markets, an investor will need to spend a million dollars to acquire a rental property. Then, there will be high taxes and a lot of laws such as rent control and eviction protection that make renting out the property a bit more difficult. It’s reasonable that an investor in San Francisco or San Diego would turn to a market like St. Louis, where they could buy several high-performing properties for the cost of one in California.
Due Diligence: Visit and Understand Your Market
Wherever you happen to be looking, make sure you do a site visit before you buy in a market that isn’t your own. Technology has made it easy to click and buy anything online – including rental property. However, this step is important. Too many times, buyers will fall in love with a reasonably priced property and forget the importance of location, inspections, and tenant pools. This is a huge mistake. Go to the market you’re considering. Spend time in the neighborhoods. Talk to local real estate and property management experts.
There are also laws to consider. Every state, city, and municipality has different rules and regulations when it comes to rental property. You may not have the strict screening and rent control standards that are found in California and Washington, but there will be licensing requirements and habitability standards that need to be met.
Work with a Local Property Management Company
If you’re going to invest in St. Louis, work with a St. Louis property management company. This is essential. As an out-of-state investor, you’ll need to surround yourself with local experts.
Do your research so you can have a property manager ready to advise you on local rental rates, vacancy numbers, and the cost of maintenance and other expenses. You’ll want to get your new investment on the market quickly, and your property manager can find a tenant and work hard to manage and maintain your property. Don’t wait until after you close to ask for help from a property manager. You need the expertise from the early stages of your investment.
Many times, buyers have come to us confused because they were assured the investment property they bought was 100 percent occupied with tenants who pay on time and follow the lease. That may be the situation before you buy it, but once you close on the deal, who knows? You could find terrible tenants, a lot of deferred maintenance, and high turnover. Talk to an expert.
We’re here to be your St. Louis property management expert. Contact our team at Deca Property Management when you’re interested in learning more about this market.
