Some context: I am 22M based in OR with about 50k in cash assets looking to get into the real estate game. What is your typical process for buying and then renting out a property while living in a different state? Did you start an LLC and put the property under the llc? I already know I’d hire a property manager. Lastly those in this situation what are your tax implications?
What is your typical process for buying an out of state property and renting it?
byu/ChaoticNeutral159 inrealestateinvesting
Posted by ChaoticNeutral159
4 Comments
Every person I know who has done an out of state rental has lost money on it every year. Don’t do it, especially as a newbie. Being inexperienced with property selection, managing your PM, repair management, and contractors will eat you alive.
I have friends/family in the area. Found a trustworthy gc to run rehabs/repairs and have a family friend to do showings. No pm at the moment. I do still visit the property every few months.
I reside in California & have ZERO LLCs. I own 10 SFR rentals & the 6 most recent purchases are in Texas. I had the Property Management company act as my local RE agent to purchase the houses. As part of the deal I got a 1% rebate as part of the buyer’s sales commission. After the purchase deal closed, the PM company proceeded to screen applicants & rent out the houses.
I don’t understand “Lastly those in this situation what are your tax implications?”. Taxes are paid based upon earned income which is standard operating procedure. Property taxes are paid based upon the assessed value.
I’d start by building your team first.
Out of state only works if your boots on the ground are solid.
1. Find an inspector who will do quick, discounted walk throughs with a report.
Make sure they’re willing to do milestone inspections during your renovation (if you’re rehabbing).
This alone will save you thousands in missed items. Rehab process is a different conversation for later.
2. Interview multiple PM companies and research them hard.
Avoid PMs that are growing too fast.
When they scale faster than their systems, your property gets ignored.
Make sure they specialize in your area and local.
Ask if they mark up maintenance cost. If they do it might be best to find your own handyman to keep cost down.
3. Hire someone outside the PM company for quarterly inspections.
Don’t skip this.
At every inspection they should swap furnace filters, check smoke detectors, and replace batteries once a year.
4. Keep rehab materials simple and standardized.
Same paint, same flooring, same vanities, same lights.
Easy to replace materials make out of state management way easier and cheaper long term.
5. Find a professional who is local is willing to partner or help guide you.
In short build the team slow and fire fast.
I likely buying warranties for major appliances and sewer.