While it can seem intimidating at first, many property managers find great success in adding properties to their portfolio that are out of their general geographical area. The ability to tap into other markets outside your own can bring tremendous opportunity to grow and increase your profitability. Does it make sense for you to jump in and take the plunge? To make that decision, consider the following pros and cons.
Access to new markets
What happens when the properties in your geographical area become too expensive or too scarce? Does that mean your chances to grow will also be limited? Not when you have access to other markets where properties are more plentiful and/or more affordable. Additionally, by expanding into long distance markets, you’ll have the option of choosing areas where there is less competition.
Get additional tax benefits
There are many attractive real estate tax benefits for property managers to take advantage of, including the ability to write off interest paid on a mortgage. The more you grow your portfolio, and strategically choose places where the market is favorable, the more your company can benefit in terms of deductions and depreciation. If you’re unclear of what tax advantages are available to you, consulting with a professional is strongly recommended.
Develop a longer-term strategy
You may be perfectly content with where your property management company is located currently, but if there’s a chance that you may want to relocate in the future, investing in one or two properties there now can help build a foundation for a smoother transition when the time comes. Likewise, investing in areas that are predicted to boom in the future can be a wise long-term strategy for your business.
Unfamiliarity with the market
You probably know everything there is to know about being a property manager in your current location, but venturing into the unknown can seem risky. For instance, you may not be familiar with the local taxes or how much fair market rents are, etc. Research can account for some of this, but it’s never quite the same as actually residing in the real estate market where you invest.
Limited network of service providers
As an experienced property manager, you probably have a list of trusted service providers to whom you can turn for whatever need may arise at any of your local properties. When you expand to other areas, however, you’ll have to start fresh. That means if something goes wrong before you have a chance to develop a new network, you’ll be scrambling to get things taken care of and taking chances that the names you pick out of the Yellow Pages are trustworthy and adequately qualified.
The need to outsource
Realistically, for your long distance property management endeavors to be successful, you will need to rely on others to handle much of the day to day operations. You won’t be able to just drive by to check on one of your properties or screen prospective tenants in person. Keep in mind that you will also need to account for the added expense of hiring others to handle these things.
In cases for which the pros outweigh the cons, here are a few tips to help make your long distance investment go smoothly:
- Do your homework. Learn as much as you can about the area you’re considering investing in. You may find that what appears attractive on the surface really isn’t that great of an investment after all.
- Make the trip. If possible, schedule at least one in-person visit to the properties you’re considering adding to your portfolio.
- Use automation. If you haven’t already, investing in property management software can help streamline things like rent payments and lease renewals. This will make things much more efficient.
- Stay on top of maintenance. Being proactive about maintenance can help prevent serious issues that may be harder to handle from afar.
In the right situation, adding long distance properties to your portfolio can be a lucrative investment for your business. Just make sure you go into it with eyes wide open, understanding fully the advantages and disadvantages and planning ahead as much as possible.
Have you had success as a long distance property manager? Please share some advice in the comments below.