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How to Invest in Out of State Multifamily Real Estate (Without Losing Money)

“Nothing in life is to be feared. It is only to be understood.”

—Marie Curie

Have you wanted to invest in multifamily deals, but you have concerns about investing out of state? How can you feel comfortable investing in a property that you have never seen?

Investing out of state will mean that you may never see the property in person. 

Given that these are passive investments, you will also have less control overall. 

With all that, I can see why this scares some people. I thought the same thing for a while too!

But do you really need to see the property in person? Do you have to be close?

I live in Los Angeles, and that is some of the most unaffordable real estate around. A 12 unit deal in Venice Beach could go for the same price as 100 units in Atlanta. And often these Atlanta deals will have better ROI

So, for me, investing out of my area makes a lot of sense. 

I understand the idea of wanting to invest locally, but there is more to it. There are ways to invest out of state where you will be comfortable, and you won’t lose your money. 

Let’s explore it! 

Times Have Changed

There is an old adage that you should only invest in property within a two-hour drive from where you live. 

There is some wisdom in this. You want to be able to judge the quality of the property, fix any issues that come up, and make sure you are comfortable with the deal. 

But this is an active model

In this case, you would be checking in on the property and often doing whatever work or task came up. 

In passive investing, on the other hand, your main duty is finding a trusted team and having them do the work for you.

Because you’re not the one doing the day-to-day work, passive investments allow you to scale. You could be invested in deals in multiple states without a change in effort! 

You’re not having to drive that two hours in every direction to check on your properties like in the old days. That is not scalable.

On top of this, with the change of technology, you can do many of the things online that were once only done in person.  

Do Your Homework

As I said, there are so many things you can do online now that make investing easier. 

Go online! Look up the area the property is in. 

Do a virtual walkthrough of the property, look at Google Maps and do street view, and do a walking tour on Google Maps to get a feel for the neighborhood. 

You can review crime, income, schools, unemployment, etc. A great website for this is city-data.com.  

All of this information will allow you to get a better sense of the property. You will better understand the context of the investment and see if it is the right fit for you. 

On top of this, you want to research your sponsor

I have talked about this before, but it is worth repeating. The sponsor of your deal can be an amazing relationship, but you want to be able to trust them. 

That’s why you want to trust but verify what they tell you. 

Is what they are telling you true? Does the business plan make sense? Does their record match their reputation? 

Vet your Sponsor.  Ask questions. Talk to their other investors. Do your due diligence to make sure that they are telling you the truth and are reputable

Another thing I often tell people is to be willing to take a trip out to the property. If you have the means to fly out to see the property, do it! 

Seeing the property will often make you feel more comfortable about the deal. 

It is also a great chance to get to know your sponsor!

Just tell the sponsor you’re willing to fly yourself out to see the property. It will be worth it!

Combined, all of this homework will allow you to get a sense of the property. From there, you can gage your interest and comfort. 

3. What’s the Difference?

Think about where you live. 

You know all the factors that make it up. What are the good areas? What are the bad areas? What are the economic factors that will help you make a decision? 

Being in an out of state market, you’re not going to be an expert in this new area.

That’s why you want to be able to trust your sponsor. 

They are the ones doing the heavy research. They often live in the area. They are the ones making the deal work day-to-day. 

That’s the key difference. You have to put more faith in the sponsor’s knowledge in an out of state deal. You are no longer the expert, they are. 

Do you believe their story about the property? Do you trust their experience? 

If yes, then you can have more faith in their handling of the deal.

Do whatever you need to feel good about the deal. Trust your gut! If something feels off, just move on. There is no shame in doing what you need to protect your money.

Once you can trust your sponsors though, investing out of state becomes easy. 

I invest almost entirely out of state. For me, the returns are projected 2-3 times higher than where I live in California!

That alone is a good reason to be open to out of state deals, right?!

Take your time to learn what you can about the area and the sponsor. Do what you need to get comfortable investing. 

If the first thing you want to do is learn more about passive investing, then I have you covered. 

Check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future. 

If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.

Bronson Hill

Bronson used to work as a consultant for a medical device company but switched to investing in apartment buildings to make his money work for him. He started with a single rental property that made good money and, after some advice from a family member, moved into bigger real estate projects. Now, he's all about helping others get into this kind of investment to earn money without having to work all the time. When he's not dealing with investments, Bronson loves to travel, write songs, stay active, and help fight modern slavery through his work with Dressember. He believes in working smarter, not harder, and wants to share how that's possible with everyone.

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