The process of investing in out-of-state real estate is not any different than investing in real estate in your own community. You have two choices. You can do it on your own or you can work with a professional and reputable real estate company.
To an extent, investing in out-of-state properties has developed a negative stigma because investors have had bad experiences. Sometimes the problems arise because an investor "jumped" into a situation based on poor information provided by a friend, family member or business associate. Other times a bad situation is created by individuals or companies who are promoting themselves as "experts" in out-of-state real estate investing. Frankly, many out-of-state real estate companies don't have any idea what they are recommending, have never been to the area they are recommending you invest in, and don't care what you buy. They are simply looking for a way to get a pay check.
Before you invest, ask these questions:
1) Are they licensed and do they carry the proper insurance?
2) Is working with investors to purchase out-of-state properties the only focus of their business or is it something they do part time?
3) If they are a mortgage company, do they only recommend that you invest in areas/states where they are licensed to write loans? If so, what does that tell you?
4) What type of research do they conduct? Do they travel to every location they recommend? What demographic studies have they done? What reports have they read? Do they subscribe to any real estate investment newsletters they could recommend you read?
5) What services to they provide? Do they provide referrals for brokers, property managers and mortgage companies? Do they provide an escrow coordinator throughout the escrow process?
6) Are they recommending you become a speculator or an investor? (Speculator: get rich quick, big promises, take a chance. Investor: long term, buy & hold to create wealth)
7) What areas are they recommending you invest in? We can't stress this enough. Are they doing what is easiest for them or best for you? Ask them for verification for everything you're told (rental comps, sales comps, cash flow analysis, current appreciation rates - not last year's appreciation rates, projections and demographics).
8) What types of properties are they recommending you buy? Are they matching your goals, tolerance level and financial abilities with properties that will help you achieve your goals? Or are they just selling you anything so they can make money? DO YOUR DUE DILIGENCE!
9) How long have they been in business of out-of-state real estate investing?
10) How many rental properties do they own and where?
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