Question: What are the pros and cons of purchasing properties as investments outside of California? Answered by Libby Guthrie
Hi, I’m Libby Guthrie with Keller Williams Realty in Northern California. And I have a lot of clients asking me about the pros and cons of purchasing a property out of the state of California and making it into a rental property. And there are some pros and cons to that, and so I’m going to go over that with you today.
And of course, the big “pro” would be that usually out of state properties are a lot less expensive than the state of California properties. So that’s a huge pro and it is very attractive to some people. The other pro would be usually the eviction process in other states compared to the state of California, it’s a lot less expensive and time-consuming. So that could be another big pro for you in case you had to evict the tenants for some reason or another. The other pro would be that out-of-state properties, a lot of times do not have rent control provisions like some of the localities do in the state of California.
So that’s some pros for you. There are some cons. Obviously, you’re not going to be able to drive by that property unless you make a lot of trips say back East if that’s where you’re going to be purchasing the property and you won’t be able to look and see you know, how the tenant keeping up the property.
What’s the neighborhood doing? And just in general about what’s happening around that property. The other con would be that you would need to make sure that you if you are going to manage the property yourself, that would probably be a big con because you would not be there to collect rents. Make sure that the tenant is paying on time and things like that.
So you would it would be cumbersome for you to do that unless you did hire a property manager or a local real estate agent to manage that property for you. And so the other things to look into in purchasing any rental property is finding out what the current rents are and compare it to what your expenses would be.
Of course your big expense, if you’re financing the property would be your mortgage payment. The other thing would be to find out whether the tenant usually pays for the utilities in that area. For example, like water, garbage, and or electricity. So who pays for that, does the landlord usually pay for that or do the tenants usually pay for that in that area?
So look into that. The other thing is there are some localities in certain areas that require that a landlord register as a business owner in that locality. So you have to have a business license. Some localities actually want to see how much you’re making on that property each month and year and they want to to view a copy of certain portions of your tax return.
So that they know how much to charge you if they are going to be charging any kind of tax on that returns. So just think about that. Please hook up with a savvy real estate agent before you look at properties in the local areas that an agent that knows that area knows what their rents are, and knows what the prices are, and knows who pays for what so that you understand all this stuff before you purchase the property.
And also if you are going to have a property manager manage the property for you ask for about three or four different property manager companies and interview those companies and ask for references and talk to other landlords that use those property managers so that you’re comfortable with knowing what they’re going to do and what they’re going to provide for you and how much they’re going to charge.
So if you need any help looking into finding a really good agent outside of the State of California, we can certainly help you with that, and I’d be happy to give you some names and numbers so you can give me a call. Or if you need any information about purchasing a rental in Northern California, I’d be happy to help you out.
My phone number is (925) 628-2436
Do you have questions about buying investment properties? Leave your question in the comments below and I’ll do my best to answer them, or call me at 925-628-2436 and I’ll be glad to help!