Finding a New Market: The Challenges & Rewards of Investing Remotely

“Real estate is an imperishable asset, ever increasing in value.

It is the most solid security that human ingenuity has devised.

It is the basis of all security and about the only indestructible security.”

                                  ~Russell Sage, American financier and politician

As a real estate investor, you’ve probably chosen this career path for the financial security and success that it can ultimately provide. It takes time to reach the level of financial freedom, but the efforts are completely worth it.

In the beginning, one of the most critical decisions you need to make concerning your real estate investing business is simply… where you want to invest.

It’s a huge “make it or break it” factor that you can’t take lightly.

In fact, when it comes to finding a new market to invest in, you’ll want to put a ton of time and research into your decision before pulling the trigger.

Maybe your current market isn’t ideal for investing and you’re not willing or ready to move. Or, maybe you have built a successful investing business in your own community, and you’re ready to branch out to other cities or states.

Either way, deciding to invest remotely in a new market is a BIG decision.

Luckily, I’m here to help. 😉

So, without further ado, let’s get into my 3-step approach to finding a new market to invest in. I want to give you as many details as possible, because I think this is a topic that warrants going the extra mile.

Step 1: Hitting the Books (Heavy-Duty Research)

For this type of thing, there’s no such thing as doing too much research. It’s time to make your high school science teacher proud.

There are SOOOO many factors that go into choosing a new market to invest in, but here are the first ones you should look in to…

Market Type: You’re only one Google search away from finding the “fastest growing markets in the U.S.” The tricky part is: deciding what to do with that information.

You don’t necessarily want to immediately jump on board with the #1 market. It may be right for you, but chances are that it’s not.

Consider the direction you’d like your investing business to go. Some investors like the hot markets because of appreciation, while others like tapping into undervalued or up-and-coming markets, so they can get ahead of the competition and take advantage of lower property prices.

So, your search results will be a very basic starting point – but there’s a lot more work to do from here.

Growth Factors: Once you have a few cities/areas of interest, dive deep and research the following factors for each one:

Taxes: Some investors prefer to purchase properties in states that don’t have state income tax, because this eliminates one administrative task that will need to be completed each year.

It’s totally up to you. But if this matters to you, you may want to invest in states where there is no income tax, such as Florida, Tennessee or Texas.

Climate: The local weather isn’t simply a preference. If you’re hoping to purchase rental properties in the Midwest or Northeast, consider doing so in the summer months.

It will probably be tricky to find new tenants in the dead of winter, when moving sounds about as thrilling as scraping the ice off your car windows.

Region: It’s also important to consider not only the state where your market is located, but also the overall region.

Many investors steer clear of the east and west coasts, simply because of soaring property prices – but this doesn’t mean that you can’t build successful businesses there.

Still, if you’re looking for a “safer” choice, many investors prefer the Midwest or certain areas in the South. Popular cities for investors right now include:

Step 2: Packing Your Bags

Once you feel confident with your research, narrow your list down to 2-3 potential markets that you think would be the best fits for you and your business.

Now comes the fun part (sorta)… you need to visit those locations.

Yes, this will cost money (between the travel costs, hotel and meals). BUT it’s 100% necessary. If you’re planning to invest in properties remotely, you have to visit the area before making a decision.

Even if you’re confident that you’ve chosen an awesome city where investing opportunities abound, you still need to see it for yourself.

Remember: Neighborhoods can vary greatly from block to block, and choosing a home that is just ONE block in the “wrong” direction can make all the difference in your profit.

In most cases, you probably want to find a B- or C-level neighborhood to invest in.

Stay away from luxury properties (unless you have extensive experience with them), as these types of homes carry a high amount of risk. Also, avoid neighborhoods where safety is a concern – it’s just not worth it.

Being somewhere in person makes a huge difference on your impression of it. There may be things that you never would have discovered, unless you’re there.

For instance, I heard of an investor who visited a city, thinking it was the perfect market… until she met with a local agent who told her that investors would remove the AC units from their vacant properties because those were stolen frequently. Let’s just say… that investor decided to look elsewhere for opportunities.

Another Good Tip: Try to plan your trip for a time when that city/town is having a Real Estate Investor Association (REIA) meeting. This would be an awesome opportunity to meet other investors in that area, so you can get an idea of the types of challenges they face.

If there’s no formal meeting taking place, it could still be helpful to arrange to meet up with an investor or two while you’re in town…

Find a Facebook group (for example, “Memphis real estate investors”) and connect with a few people who seem to be active in the group. Then, when you’re ready to make the trip, ask if you could take them to coffee or lunch and chat about the local market.

Finally, when you’re visiting a potential market that you’d like to invest in, ask yourself a simple question: “Would I enjoy visiting here again?”

If you make a commitment to invest in this area, you’re more than likely going to need to make occasional trips. Make sure it’s a place where you would actually enjoy spending time.

Now that you have a solid idea of what your market of choice has to offer, it’s time to start building a skilled and dependable local team that will be your “go-to” people in the area.

Step #3: Assembling a Solid Team

When investing remotely in a real estate market, you NEED to have a team of reliable people who are local to the area.

No matter how awesome a deal is – and no matter how perfect the market may seem – you won’t be successful if you don’t have the right people on the ground.

In fact, I’d go so far as to say that your team (or lack of one) will most likely make or break your investment.

Your team of pros should include:

Make sure your team understands the property locations and types that you’re interested in. You might find it beneficial to work with property managers who are also investors or licensed agents. It’s always a plus if they understand the mentality and process of an investor.

I also recommend getting pre-approved with a lender, if that is how you will be financing your deals. Conversations with agents will go much more smoothly if they know you’ve already been pre-approved.

It also might be a good idea to hire a 3rd party property inspector, who can give you a second opinion on the state of the properties you’re interested in purchasing. These professionals will provide a highly detailed report on the condition of the property. If you’re using a bank or other non-private lender, you’ll also need to get an appraisal.

Also, as you already know, it’s essential to get a clear title. A lender will require you to do this; but, if you’re paying cash for your properties, it’s your responsibility to ensure that a clear title is provided.

Overall, you cannot completely eliminate all risk associated with investing in another state, but you can certainly mitigate it – if you have the right people on your team.

One Final Thought: If you are not in the financial spot to hire property managers or other team members in another state, you may need to start working locally in that market (and handling the property management yourself). Or, you can simply wait until you have the financial means to manage those investments remotely.

The Heart of the Matter

Ultimately, the perfect market is the one where you can establish the best cash flow. But it’s not going to be easy. It’s going to take a lot of blood, sweat and tears (figuratively and literally).

Don’t think that remote investing is a passive venture… it’s not.

You need to be 100% engaged and dedicated in order to be successful. Plus, you need to work regularly with your team on the ground – the more time you invest in those relationships, the better your chances of succeeding.

Remember: Investing in other markets (other than your immediate location) is probably not the best idea if you’re a new investor. Wait until you feel you have the skills, expertise and finances needed to expand to another area or state.

In the end, investing in another market is an amazing opportunity…

It takes a ton of research, a highly talented and reliable local team, and a lot of time and effort on your part. But the rewards, profits and overall success can be completely worth it.

Go Forth and Invest

Have you considered investing in another area or state? What challenges or questions are holding you back? Let me know in the comments section below.