How is the real estate market doing, really?

Is the real estate market overpriced, undervalued or just right?

It turns out the answer is a resounding ALL OF THE ABOVE!!!

It comes down to the type of property and is of course, dependent on location. For example, the median home price in New Orleans, LA is $199,000. Contrast that to San Jose, CA where a comparable home will cost nearly six times that number at around $1,200,000. If you live in one of the overpriced markets, it may benefit you to look into investing out of state. 

Now before we all hop in a plane and head down to the Big Easy to purchase some single family homes with a side of shrimp etouffee there are two questions people often ask about investing in real estate, not in driving distance of their respective homes.

The first question I hear is, “Why consider investing in out-of-state real estate?

Two major benefits include the following: 

• Access to different types of markets. Whether you’re buying for income, appreciation, or both, matching the market to your solution works.
  • If we could go back to the year 1995 would you have bought said home in San Jose, CA for $285,000?
• Diversification. Reduce risk and increase the gain by taking advantage of being in different markets across the country.

Do either of these benefits resonate with your situation? Suffice it to say we all have our reasons for doing what we do.

Is it safe to invest in real estate estate outside of your area?

The second question I often get is, “Is it safe to invest out of state?”

I would argue that an essential answer to this question is in the form of another question — 

“As compared to what?”

As compared to the stock market? As opposed to sitting idle in cash for 20 years? As opposed to handing it to a mutual fund company betting on international companies you’ve never heard of?

That said, the most obvious pitfalls come from needing help to see the property with your own eyes.

It can be easy to value the property inaccurately as the surrounding neighborhoods are unfamiliar. Compound that with hiring unknown contractors for renovations or maintenance and it’s no wonder folks generally stay away from buying when out of driving distance.

All of these risks can be significantly reduced or eliminated by spending time and energy finding the right market and team to support you. Let the market do the appreciating, and the property managers handle the day-to-day. The property itself is the last piece of the puzzle.

So, to surmise — yes, investing in out-of-state real estate can be a great way to produce more financial wealth!