Whether you’re holding a home with a large mortgage rate, getting investment property in the high-speed flow market, or having to move for work, managing out-of-state rental properties is more common than ever. With today’s real estate landscape, renting real estate remotely can be a wise financial move, but it also comes with its own challenges.
If you are considering becoming a long-distance landlord for a rental home in Baltimore, Maryland, or an apartment in Phoenix, Arizona, or elsewhere, you may ask, “What do you need to know before managing an out-of-state rental property?” Here are some things to consider before you start investing in long-distance real estate.
In this article:
What is a Remote Rental Property?
It makes sense when managing rental properties out of state
Pros and cons of managing rental properties out of state
Legal and financial considerations for remote landlords
Common mistakes that remote landlords make and how to avoid them
How can you become a successful long distance landlord?
Meet the experts: Zach Cohen, Managing Partner at Rental Investment Renderridge Street Capital.
What is a Remote Rental Property?
Let’s start by defining remote rental properties. According to Cohen, a remote rental property is an investment property owned by someone who does not live within a reasonable commute distance.
“Usually this means property in another city, state, or country,” Cohen specifies. “Investors often buy out-of-state rentals to take advantage of affordable prices, higher cash flow possibilities, or landlord-friendly regulations.”
What are the different types of remote rental properties?
Before digging deeper, here are the different types of remote rental properties you may encounter when managing your property outside of state.
Long-term rental (LTR) – Standard 12-month lease. Short Term Rental (STRS) – Airbnb, VRBO, Vacation Homes
Medium-term rental (MTRS) – Corporate housing, travel nurses, extended stay tenants. Section 8 or Subsidized Rental – Government-supported rent payments.
Student Housing – A property in a university town with seasonal demand.
It makes sense when managing rental properties out of state
Investors can focus on out-of-state rental properties to expand beyond high-cost markets such as New York City, Los Angeles, Miami and Boston. “Many investors in these high-cost markets find it difficult to buy rental properties with positive cash flow,” Cohen shares.
A low-cost market allows investors to purchase property with lower cash-to-closure requirements and higher rent-to-price ratios. “The rent can then cover the costs of owning and operating the property,” Cohen says.
“For example, if a Los Angeles-based investor had $50,000 to invest in rental property, funding 80% of the purchases, there will be very few residential stocks in LA Metroplex for that amount. However, the same investor could buy a Cleveland, Ohio duplex for $100,000. If the rental property brings $1,500 per month with rental income and costs only $1,000 to $1,200 per month for ownership and operations, the investor could generate $300 to $500 per month in cash flow. Here you will have the opportunity to manage rental properties out of state.”
Pros and cons of managing rental properties out of state
Owning a rental property in another state is a sensible investment move, offering better revenue, lower home prices and opportunities to diversify your portfolio. But managing that property from a few miles away has its own challenges. Here we say Cohen will consider the potential benefits and pitfalls for out-of-state rental properties.
Strong Points:
Access to more affordable high cash flow markets – Lower home prices in certain regions improve ROI and rental income. Geographical Diversification – Investing in multiple states spreads risk and protects against sluggish local markets.
Lower competition in emerging markets – Small and promising cities often offer better trading and a reduction in bidding wars.
Cons:
It’s difficult to manage without local help – Maintenance and tenant issues often require a reliable team on the ground. Legal Differences Between States – Landlord and Tenant Laws vary from state to state, so maintaining compliance requires special research and caution.
Legal and financial considerations for remote landlords
Managing rental properties outside of state not only involves finding tenants and collecting rent, but also involves legal and financial liability that vary from location to location.
State and Local Landlord and Tenant Laws – Different states have different rules regarding eviction, security deposits and rent management. “States like New York are well known for having a long litigation tenant eviction process that could take six to 12 months,” Cohen warns. “A landlord-friendly state like Texas can support tenants evictions in 3-6 weeks.” Short-term rental regulations – If you are using property for Airbnb or vacation rentals, local laws may require you to fully restrict business licenses, zoning approvals, or even limit short-term stays. Taxes – Rental income is usually taxed in the state where the property is located. This means that you may need to file a tax return in both your hometown and rental state. Some states have higher property taxes than others, and certain locations may charge additional taxes on rental properties. Licensing and Registration Requirements – In certain cities, in many cases, landlords need to register with the landlord to register rental properties with local governments to ensure compliance with housing codes. Others may require a rental license before leasing the property. This may include inspections, fees and renewal requirements.
Common mistakes that remote landlords make and how to avoid them
Cohen says there are three major mistakes that out-of-state landlords tend to make when managing remote rental properties. What these are and what you can do to avoid making the same mistake.
1. Hire the wrong property manager – thoroughly reject the property manager, get referrals and track performance. Try the software system you are using. Also, make sure it is easy to use.
2. Underestimate your maintenance needs – List your local handyman and budget for repairs. Depending on the size of the property, the company aims to donate 5% of the monthly rent collected to a small maintenance fund.
3. Poor screening of tenants – run credit and background checks, get employment verification, and request healthy deposits to cover unexpected events.
How can you become a successful long distance landlord?
It is possible to self-manage out-of-state rental properties, Cohen declares. “But we can focus on one metro area and build a team that can efficiently serve needs in a single city or region.”
Managing rental properties from another state requires smart systems, reliable local support, and a proactive approach. The key is to treat rentals like a business by investing in the right property management tools, carefully screening tenants, and staying on top of maintenance even from afar.
“Long-term rentals may require less practical involvement, but lease enforcement and maintenance coordination is important,” Cohen emphasizes. “Short-term rentals require aggressive guest communication, cleaning coordination and local compliance with city regulations. This is what we recommend that you hire a real estate manager almost always if you are managing short-term rentals from outside the state.”
Important takeouts:
Remote rental properties are owned by investors who do not live close enough to operate the facility face-to-face. Why out-of-state investment can be a wise choice: more affordable real estate, better cash flow, and landlord-friendly markets. Managing out-of-state rental properties: access to better investment opportunities, geographic diversification, and reduced competition. Cons of managing out-of-state rental properties: difficult to manage without interstate local help and legal differences. Legal and financial considerations: Landlord and tenant laws, rental licences, and multi-state tax returns. Common mistakes to avoid: hiring the wrong property manager, underestimating maintenance, and poor tenant screening. Yes, you can become a long distance landowner: With the right team, tools and strategies, managing out-of-state rental properties is absolutely possible.
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