Managing a rental property out of state has become increasingly common in today’s real estate landscape. Whether you own a property with a great mortgage rate, have invested in a high-cash-flow market, or had to relocate for work, being a long-distance landlord comes with both financial benefits and challenges.
If you’re thinking about managing a rental property in cities like Baltimore, MD or Phoenix, AZ from a distance, there are important considerations to keep in mind. Before diving into long-distance real estate investments, here’s what you need to know.
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 rental investment lender Ridge Street Capital.
What is a remote rental property?
A remote rental property is an investment property owned by someone who is not within reasonable commuting distance to manage it in person. This often involves properties located in different cities, states, or even countries, allowing investors to take advantage of affordability, cash flow potential, and 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 like Airbnb, mid-term rentals, Section 8 or subsidized rentals, and student housing in college towns with seasonal demand.
When managing a rental property out of state makes sense
Investors often focus on out-of-state rental properties to expand beyond high-cost markets and take advantage of better affordability, higher cash flow potential, and lower cash-to-close requirements. Lower-cost markets offer opportunities for positive cash flow and diversification of investment portfolios.
The pros and cons of managing a rental property out of state
Owning a rental property in another state can yield better returns, lower home prices, and portfolio diversification. However, managing a property from a distance presents challenges such as maintenance issues, legal compliance, and the need for a reliable local team.
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, requiring research and attention to ensure compliance.
Common mistakes remote landlords make and how to avoid them
Three common mistakes made by out-of-state landlords include hiring the wrong property manager, underestimating maintenance needs, and poor tenant screening. Avoiding these mistakes involves thorough vetting, budgeting for repairs, and conducting proper background checks.
How can I be a successful long distance landlord?
Success as a long-distance landlord requires smart systems, reliable local support, and proactive management. Investing in the right tools, screening tenants carefully, and staying on top of maintenance are key aspects of managing a rental property from afar.
Whether you’re looking to buy your first home or expand your investment portfolio, Redfin can help. Explore Redfin’s real estate listings and connect with a local agent to get started.