How to Invest in New Real Estate Markets

November 5, 2021

Diversify your portfolio and increase your income by investing in new real estate markets.

For real estate investors who’ve always worked locally, the idea of buying an investment property in a different real estate market might feel intimidating. Those feelings aren’t without precedent.

Old-school real estate investment advice has often included the 30-minute rule. This “rule” advises investors not to buy a property that’s more than a 30-minute drive from their home. In doing so, you’re never too far if something goes wrong.

These days, that kind of thinking is obsolete. Technology continues to improve and communication across state lines is easier than ever. Now, you can invest from your home office with the click of a button.

It’s clear that exploring new markets has become convenient. But is it worth it? If done effectively, investing outside of your area can have huge upside. This article highlights the benefits of investing in new markets and what you need to get started.

Benefits of investing in new real estate markets

Make more money

Let’s face it, making a high return on your investment is a big part of the real estate investment game. Not all real estate markets are equal. Some are better for cashflow, certain areas have high appreciation, and others are best suited for vacation rentals. Any of the above strategies can work, but it’s largely area dependent. Don’t let geography limit your investment potential.

Shopping for real estate outside of your area allows you access to:

  • Exactly the type of investment you want
  • The price point you want and can afford
  • Markets and real estate conditions that work for your investment strategy
  • Areas that make you the most money

Diversify your investments

On one hand, being able to drive to all of your properties has its advantages. However, if all of your investments are in one place, what happens if the area experiences an economic downturn? On the flip side, you might feel that your market is overpriced. Maybe you just want to try a new strategy. Diversifying your real estate portfolio offers options.

Every local real estate market has its strengths and weaknesses. You may live in an area where short-term rentals like AirBnB thrive. With sky-high real estate prices in many destinations, you’ll have to pay more for the property. This may impact your bottom line. Or, you may live in a competitive market for flipping. Shopping around offers opportunities that might not be available in your area or state.

It’s wise to diversify your real estate investment portfolio. In many cases, that means you have to look outside of your local area.

Questions to consider when researching a new real estate market

Research is key in any real estate deal. Just because you don’t live in a market doesn’t mean you can’t find out everything you need to know about it, including important details you shouldn’t overlook including the following:

  • The ROI for the specific type of investment in the area. Are you planning to flip, buy-and-hold, BRRRR, or something else?
  • The state of the housing and rental market. Are there low levels of vacancy? What’s the price-to-rent ratio?
  • The economic conditions and makeup of the area. Who are the major employers? Are people moving to this area? How are the schools? These questions give insight into the future of a market.
  • The local and/or state real estate rules and regulations. Does the area allow ADUs? Are there certain zoning restrictions?
  • The tax rates in the area. Does this area have high property taxes? If so, are there other benefits that offset them?

Looking outside your local area due to market conditions and housing prices makes good sense. Remember to consider what type of real estate investment you’re focusing on as well. Not all strategies are good for all markets at all times.

For instance, if you are looking for good cash flow on single-family rental homes, you’ll find that returns vary widely by area. Or, if you only have a certain amount of money to invest, you may want to stay away from the coastal markets such as San Francisco and Manhattan. Instead, look at cheaper markets to buy a house, which are often less populated and more rural. This all depends on your strategy and preferences.

How to make out-of-area investing work for you

Build a team

Building a team is crucial, whether local or thousands of miles away. No matter what kind of investment you’re looking to make, you want to have people on the ground managing and maintaining your properties. These might include a real estate agent, a lender, property manager, turnkey management company, interior designer, handymen, and local contractors.

Vet these people thoroughly and communicate with them often as they’re key pieces of your real estate investment team. In fact, they’re an investment in your business. You may find the time saved not having to deal with day-to-day hassles yourself ends up saving you money as well.

Use technology to your advantage

Today’s real estate technology works in favor of out-of-state investors. Locating vetted properties has never been easier. Find properties on investor marketplaces such as at Sundae.com to streamline deals.

You can also use real estate property management apps to help manage your real estate investment. Here are a few helpful ones:

  • Zillow Rental Manager and similar landlord management sites put everything from listings to applications to collecting rent in one place.
  • Rentometer to check area comps and see if you’re charging the right rent.
  • AppFolio and other property management software that helps track the business side of your business.

Expanding your real estate investment range means you have access to the right deals for you. This can help grow and diversify your business — and bolster your bottom line.

New markets and a new beginning

There are many people who prefer to keep investing locally. For those willing to explore new markets, there are readily available opportunities at your fingertips. Be sure to consider these factors as you build your out-of-area business.

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Erin B

Erin Behan is a writer and editor covering real estate investor strategy for Sundae. She's lived in L.A., New York, and Atlanta and currently resides in Portland, Oregon, where she writes and edits for a number of outlets, including WebMD, Farmers Insurance, and Vox Creative. She spends her free time hiking with her two boys, snuggling with her cat, and enjoying the best of the Pacific Northwest.