Should I invest Locally or Out of State
Benefits of investing in real estate in the Mid-Valley:
- Strong rental market: The rental market in Linn & Benton Counties is very strong. There is a high demand for rental housing, due to the presence of Oregon State University and other colleges and universities. This means that landlords can expect to have their properties rented out quickly and for a good price.
- Appreciation: This area is a desirable place to live, and the real estate market has been appreciating steadily in recent years. This means that investors can expect to see their investment grow in value over time.
- You can easily watch and maintain your own property. If you want to be a hands-on landlord, investing in your own “backyard” makes everything easier.
Downsides of investing in real estate in Corvallis, Albany and surrounding areas:
- High cost of living: The cost of living is relatively high. This can make it difficult for investors to find properties that are affordable to buy and rent out. The current interest rate environment makes it much more difficult to cash flow.
- Limited inventory: The inventory of available properties for sale is limited, especially in Corvallis. This can make it difficult to find a good investment property.
- Tenant-friendly laws: Oregon has some of the most tenant-friendly laws in the country. This means that landlords have more restrictions on how they can evict tenants and raise rent. We believe this is a double-edged sword with many benefits to our communities like residents having more security in their shelters. However, It is harder for investors to evict “bad” tenants. Investors also need to review the constantly updating laws to avoid litigation or fines. There are unintended consequences in rent controls, as rents can climb faster when homeowners feel obligated to raise rents in order to avoid losing value in their investment properties.
Investing in real estate out of state can be a good option for investors looking for higher cash flow. However, it is important to do your research and understand the local market before you invest. This is a great option for investors that want to be a “passive owner” and will use property managers out of state, or looking for tax deductions when they visit their properties (and family/sights) in other states. Here are five crucial factors to consider:
- Market Conditions: Researching the local real estate market is a must. Understanding trends like the area’s appreciation rates, rental yield, vacancy rates, job growth, economic growth, and demographic trends can help you predict whether your investment will be profitable.
- Property Management: If you don’t live near your investment property, you will likely need to hire a property management company. They’ll handle everything from minor repairs to tenant issues. Make sure to factor in this cost when calculating potential returns and choose a reputable company to protect your investment.
- Legal and Tax Differences: State and local laws vary, as do taxes on property. Understand landlord-tenant rules, zoning regulations, and any restrictions on renting out properties (like short-term rentals). Similarly, property taxes, state taxes, and any other relevant tax implications must be factored into your investment decision.
- Local Expertise: Partnering with local real estate agents, brokers, or investors can be a significant advantage. They can provide you with critical insights about the area that you may not easily find online. Additionally, they can keep you updated about the on-ground realities of your property, especially if you can’t visit often.
- Insurance Costs: Natural disasters, climate risks, and other location-specific threats can drastically impact insurance rates. For example, you’d want to consider flood insurance in hurricane-prone areas or earthquake insurance in seismic zones. Be aware of these costs and factor them into your investment analysis.
Remember, real estate is all about “location, location, location”. Even if you’re not in the same state, being as familiar as possible with the local area and its real estate trends is key to making a successful investment.