Managing a rental property out of state has become increasingly common in today’s real estate landscape. Whether you’re holding onto a property with a great mortgage rate, investing in a high-cash-flow market, or have relocated for work, being a long-distance landlord comes with its own set of challenges and benefits.
If you’re considering becoming a long-distance landlord for a rental property in Baltimore, MD, Phoenix, AZ, or elsewhere, it’s important to know what to expect before diving in. Here’s a guide to help you navigate the world of managing a rental property out of state.
In this article:
What is a remote rental property?
When managing a rental property out of state makes sense
The pros and cons of managing a rental property out of state
Legal and financial considerations for remote landlords
Common mistakes remote landlords make and how to avoid them
How can I be a successful long-distance landlord?
Meet the expert: Zach Cohen, Managing Partner at Ridge Street Capital, a rental investment lender.
What is a remote rental property?
A remote rental property is an investment property owned by someone who does not live within a reasonable commuting distance to manage it in person. This often means owning a property in another city, state, or even country to take advantage of better affordability, cash flow potential, or landlord-friendly regulations.
What are different types of remote rental properties?
There are various types of remote rental properties, including long-term rentals, short-term rentals (such as Airbnb), mid-term rentals, Section 8 or subsidized rentals, and student housing properties.
When managing a rental property out of state makes sense
Investors often choose to manage rental properties out of state to explore more affordable, high-cash-flow markets and diversify their investment portfolios beyond high-cost markets. Lower-cost markets offer opportunities for better returns and rental income potential.
The pros and cons of managing a rental property out of state
Owning a rental property in another state can provide better returns, lower home prices, and geographic diversification for your investment portfolio. However, managing a property remotely comes with challenges like the need for local support and navigating different legal requirements between states.
Pros:
- Access to more affordable, high-cash-flow markets
- Geographic diversification
- Lower competition in emerging markets
Cons:
- Harder to manage without local help
- Legal differences between states
Legal and financial considerations for remote landlords
Managing a rental property out of state involves legal and financial responsibilities that vary by location. It’s important to research and stay compliant with landlord-tenant laws in the specific state where your property is located.
Common mistakes remote landlords make and how to avoid them
Three common mistakes that remote landlords make include hiring the wrong property manager, underestimating maintenance needs, and poor tenant screening. To avoid these pitfalls, vet your property manager, budget for repairs, and conduct thorough tenant screenings.
How can I be a successful long-distance landlord?
Self-managing a rental property out of state is possible with the right systems and support in place. Focus on one metro area to build a reliable local team and stay proactive in managing your property from afar. Treat your rental like a business, invest in property management tools, screen tenants carefully, and prioritize maintenance and compliance.
Whether you’re looking to buy your first home or expand your investment portfolio, Redfin can assist you. Explore Redfin’s real estate listings and connect with a local real estate agent in your target market to get started.