Lessons from the Pros

Real Estate

Owning, Managing and Investing in Property Out of Area

You have heard people say that real estate is a “local” or “regional” commodity, and it is. I’m from Southern California and when I speak to groups in the Midwest or South and talk about prices here they look at me like I’ve lost my mind. What it costs to get a typical 3 bedroom 2 bath house in a coastal community in CA is crazy compared to the same house in the Midwest. That’s because real estate is more about the land than the structure. As Will Rogers said, “Buy land. They ain’t making any more of the stuff.” My point being that you can be successful in any market but you must have knowledge of that market or hire someone who does. You can’t assume that what works in your market will work in a different market.

Information on Investing in Property and Rental Property Management.

The two biggest areas of concern when buying out of your local area are property selection and property management. If you, as an investor aren’t familiar with the local market, choosing a good property can be challenging. Rental Property Management can also be a challenge and make or break an investment. An out of area investor needs a property manager who understands the local rental trends and demands, one who can ensure that the property is taken care of and deal with day to day issues. They also need to insure that local laws are adhered to.

Here is a list of services you should expect from a reputable rental property management company:

  • Assistance in selecting quality investment property (make them part of the process)
  • Assistance with finding lenders/bankers in the area of the property
  • Full Property management Services which include but are not limited to the following:
    • Tenant placement
    • Repair management
    • Tenant management
    • Accounting

Now let’s look at the qualities that make up a professional rental property management:

  • Low vacancies
  • Low tenant turnover
  • Creative and innovative marketing
  • Good track record with notice delivery
  • Good policy for delinquencies
  • Efficient and cost effective system for property repairs and maintenance
  • High level of tenant satisfaction
  • Quality accounting and property reporting
  • Responsive to phone calls and emails
  • A presence in the community, for example member of the local chamber
  • Relationship with city staff

“Feet on the street” is the most important aspect of investing out of your local area. There is no denying that. However, because of the internet, there are now many ways to research and get local data online. In the Professional Real Estate Investor class (make a short URL please), I share many of the best websites to find data such as: school rankings, access to services, transportation, how walkable a neighborhood is, vacancy rates for a specific area and crime stats just to name a few. This kind of data is very helpful in the first part of your process of investing out of your local area.

Some of the things to focus on when looking for a property are:

  • Properties that have high cash flow – most important that have good CADS (cash after debt service)
  • Find the highest quality area you can afford
  • Low maintenance property – the more amenities the higher the maintenance
  • A sustainable tenant base

Investing out of area can be a little scary, just do your due diligence and it will be OK.

Diana Hill



DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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