Real estate investing is a great way to build long-term wealth, plan for retirement or even just to earn some extra cash to pay off your own mortgage faster. But real estate trends can often fluctuate in different areas, which means the current hot market might not necessarily be where you live.
One way to keep up with the trends is to simply move to where the action is, but this isn’t a practical solution for everyone. Many investors choose instead to stay at home and invest long-distance, so they can still take advantage of real estate trends without having to uproot themselves every few years.
This can present its own challenges, especially when you can’t easily see your investment in-person.
In general, long-distance real estate investing is completely safe, but that doesn’t mean there aren’t things to think about before making the leap. Here are a few things to keep in mind when considering whether or not long-distance investing is right for you.
Having a Team on the Ground
When you invest long-distance, you’re going to need a property management company at the very least. We’ll go into that a little deeper in the next section. Depending on how many properties you have and how complicated your investments are, you may need some other help.
You want to have a good lawyer, a smart investment real estate agent that understands the market and investment properties, and a mortgage broker that specializes in financing rental properties. Sourcing the right people makes all the difference to long-distance investing.
You’re probably not going to be able to tour the property, so another person is going to have to do that for you, then report back on the quality of the building. This needs to be someone you trust a lot.
These days, it’s definitely easier to see things virtually, and your boots-on-the-ground person may even be able to video chat with you while they tour the property, giving you the opportunity to ask on-the-spot questions. Although relying on technology isn’t quite the same as seeing it in person, you still get to familiarize yourself with the property.
That’s why it’s so important to select your team with care. Interview them. Ask for references. Trust your gut. Look for experience, a proven track record and a focus on customer satisfaction.
A Key Member of Your Team
When you’re investing long-distance, you’ll have to rely on other people, so you want to make sure you have a solid team, as we mentioned.
You’re going to be less involved in finding and placing tenants. It’s simple logistics - you're not there! This means you need a property management company, and it’s this company that will take care of showing the property to prospective tenants, doing background checks, and deciding who gets to live in your investment. Again, it’s going to be incredibly important for you to find a property management company you trust, so make sure you’re carefully vetting any possible companies.
Essentially, all of this means you’re less involved in the detailed management of your properties than you might be if you were investing in your hometown. Some people don’t mind this, but others prefer to play a more active role.
Many More Possibilities!
At the same time, there are some big advantages to investing long-distance! For instance, if you live in a city like Toronto or Vancouver, investment properties can be prohibitively expensive, making it tough for them to produce cash flow. It can be a struggle to even find the down payment funds to get started.
When you’re open to investing long-distance, you’re able to consider places where real estate is more affordable and can produce better financial results. This allows you to purchase multiple properties, and you can grow your business easily.
Additionally, long-distance investing gives you the opportunity to own property in a growing market. In a city like Edmonton, a top-rated city for real estate investors, you can still buy property that offers great cash flow. But it’s also a market poised for growth and capital appreciation, giving a greater chance for stronger long-term profits.
As it stands at the time of publishing, Edmonton is one of the few major metropolitan areas left in Canada where you can make a positive cash-flow on rental properties, especially when it comes to new construction homes.
Every investor is different - some people prefer to be more hands-on with their investments, while others might be more interested in earning passive income and don’t want to be as involved with the day-to-day running and maintenance.
Long-distance investing is more hands-off by its nature, but there are plenty of ways you can stay involved if you wish! Most investors take a more active role in the beginning when they’re selecting their team. You’ll want to visit the city and meet with people in person, have them show you around.
Once you’ve acquired your first property in the area and have your team in place, it’s a great idea to plan a visit at least once a year to see how things are going. It’s not unreasonable to have your property manager set up a tour of your properties so you can make sure things are operating the way you see fit.
Trust is a beautiful thing and if you see your properties in tip-top shape you can rest easy knowing everything is operating smoothly.
Is Long-Distance Investing Right For You?
There are many great reasons to invest in real estate outside of your home city, but the truth is it isn’t for everyone. If you’re the type of person who prefers to be hands-on with your investments, you're going to want to keep your investments closer to home.
One of the best ways to find out if this style of investing is right for you is to talk to some experts in the field. They can guide you through your options, answer any lingering questions you may have, and outline some more personalized investment strategies based on your own unique situation.
When handled properly and with the right team, long-distance real estate investing can be just as safe as investing in real estate in your own city. The approach might be a little different to what you’re used to, but with a good team of people on your side to take care of all the details, you can feel confident in your decision to invest in another city.
Originally published Nov 6, 2019, updated Oct 8, 2020