Blog & Advice

Avoid Nightmares with Out of State Rental Properties

Have you considered investing in rentals in another state? This can be a great investment strategy, as long as you hire a professional to manage your properties. Here are a story and some tips from a Real Property Management Indianapolis Metro client. Rick lives in the Denver metro area of Colorado, and he and his wife did some investigation, attended classes, and read up on investing in real estate. They learned that the coasts were better suited for fix and flip investments, while the rust belt area of the U.S. was touted as being ideal for investing in residential rental properties.

One of Rick's properties managed by Real Property Management Indianapolis Metro

Their research led them to Indiana. They hired a realtor and purchased their first rental, followed by other properties. Rick says of their first property manager, The guy was honest, but his heart wasn’t in it and our properties were vacant a lot. The next property manager Rick hired turned out to be horrible. They found creative ways to steal all our income, like fictitious repairs, lawn mowing, and things like that. When you have zero income for a period of time you start to wonder. I can’t fly out there for $600 to review a $200 repair and they knew that. You have to be able to trust your property manager and communicate with them regularly and that wasn’t happening.

Another one of Rick's properties managed by Real Property Management Indianapolis Metro

Rick now owns five properties, consisting of single-family homes and duplexes, managed by the team at Real Property Management Indianapolis Metro. I found Real Property Management by just calling around. I spoke with Larry (owner) and he seemed to know property management inside and out and had a plan. He visited the properties, let me know what work was needed on them, and told me what he was willing to do. I’ve been with them for over 7 years now.” Rick admits being far away from the properties is hard. The management office makes it easier to deal with. There’s no way to confirm what’s being done, I just have to trust them. Jamie has always been honest, is very responsive, and does a good job. Rick indicated that they are by far getting better quality tenants than his previous managers. “I know they are doing a good job because the tenants are staying there for years, and paying market rental rates. It means they are keeping the properties maintained and being attentive to the tenants.”

Jamie Smith (third from left) with the Real Property Management Indianapolis Metro team

Jamie Smith, manager at Real Property Management Indianapolis Metro, speaks highly of Rick as a client. “Rick came to us in 2011 with all of the properties struggling, needing repairs, and not performing well financially. We renovated his properties to great conditions and he’s been receiving a positive cash flow for the past few years. Turnover is very low in his properties because Rick works with us and to take care of his properties. Rick is truly a model owner to work with!” People invest in real estate to diversify their financial portfolio and enhance their earnings.

Rick said, “My primary motivation to change property management companies was to make money. Everybody’s in this to make money but I like to make my share too. Owning rental property provides both short-term cash flow and long-term property appreciation. Rick sees a positive cash flow most months since turning to Real Property Management Indianapolis Metro, but says real estate has not rebounded in Indiana like in other parts of the country. While properties continue to skyrocket in his home state of Colorado, his rentals in Indiana are not yet appraising for what they appraised when he bought them in 2004, so having a positive cashflow is important to him. “At the time, the rust belt was a good investment. You could buy properties cheaply and rent them for a good amount of money. In other areas like Denver you couldn’t even afford your monthly mortgage payment.”

Another one of Rick's properties managed by Real Property Management Indianapolis Metro 

Rick’s advice to those interested in investing in rentals is to be realistic and know what you’re getting into. My biggest learning experience is that you may not net what you think you might net after paying taxes, management, insurance, maintenance, etc. But you do have a lot of paper write-offs including depreciation. If you have a positive cash flow and your property value eventually appreciates then real estate is a good investment.

Are you interested in purchasing properties in another state? Check out our article on New Marketplaces for Buying & Selling Single Family Rental Housing.