7 Landlord Tips for the Out-of-State Investor

Adhering to sound landlord tips can help investors enjoy the benefits of out-of-state real estate.

Although investing in real estate includes many advantages, such as increased wealth through property appreciation and superior tax benefits, it also comes with a myriad of potential pitfalls.

Out-of-state real estate investing is a strategy that can be especially lucrative because it allows for property diversity as well as the ability to target and enjoy emerging markets.

If one is not prepared properly, though, it can possibly end up being emotionally or financially draining.

Following these seven landlord tips can be of great service in helping to provide a positive investing experience.

The most important of all landlord tips is probably the fact that it’s best to keep from becoming one. Owning property should be about building wealth, not cleaning toilets.

Each of the landlord tips listed below is offered with this investor philosophy in mind.

1) Detach All Emotion From Each Property

Becoming a landlord isn’t the same as purchasing and living in a personal residence. Most people understandably feel a deep emotional attachment to their own home. It includes personal possessions that hold sentimental value.

An investment property requires a different mental paradigm. It’s important to go into each out-of-state real estate purchase without any emotional ties.

This is an area that causes many a potential real estate investor to shy away from further purchases after their first one. Instead of looking at the house as an investment, decisions come from an emotional standpoint rather than a business standpoint.

This can lead to unwise decisions ranging from putting too much money into extravagant fixtures, carpets, flooring, or roofing. While it’s important to provide a quality residence for renters, it’s inevitable that damage will occur and the excessive upfront investments will end up hurting the investor’s bottom line.

This is one of the most vital of all landlord tips. If an investor becomes emotionally attached to the property or tenants, future business decisions will be negatively affected.

2) Hire a Property Manager

An investor should concentrate on being an investor. This means spending time finding and analyzing possible future deals. Leave the collecting of rents, repairs, and tenant questions to those set up professionally to handle such issues.

Paying 5-10% of monthly rents to a qualified property manager will more than pay for itself as additional properties are added to the investor’s portfolio.

3) Credit Check

When interviewing potential property managers, be sure to pick the one who proves capable of performing proper credit checks on possible tenants. Negative experiences with tenants can be minimized by screening for past bankruptcies, judgments, or evictions.

4) Higher End Properties

As with the previous landlord tips, this one is designed to help minimize future problems. Although investing in higher-end neighborhoods usually incurs more upfront costs than investing in distressed neighborhoods, the tenants will be of higher quality, which will minimize future repair or eviction costs. Additionally, long-term appreciation profits will usually be higher in the better areas.

5) Take Care of Tenants

This is another issue that should be handled prior to hiring a property manager. Never hire a property manager who can’t give a 10-15 minute speech on his “client retention” program. Replacing tenants incurs the greatest costs to an investor. Do everything to keep good tenants in place. Make timely repairs and hire a property manager who understands this concept.

6) Place Property Inside an LLC

A real estate attorney should be consulted before setting up an entity to hold an out-of-state property. Generally, though, a Limited Liability Company (LLC) that is set up in the state where the property is located is the best strategy.

If a tenant slips and falls on ice during the winter, an LLC can help protect an investor’s personal and other business assets by keeping any liability limited to the property where the injury occurs.

7) Adequate insurance

Be sure to secure adequate insurance on any out-of-state property. This should seem logical but many investors are under insured and surprised during times of disaster with their inability to rebuild properly.

The above landlord tips are not all inclusive of the information needed to successfully invest in real estate. They are a good start in understanding an important concept when investing in real estate: it’s much better to spend a lot of time investing and little to no time being an actual landlord.

By delegating the day-to-day landlord activities to a property manager, the investor is free to obtain more wealth building properties.