There will always be situations where an investor has the motivation to invest in real estate but for any variety of reasons the local market just doesn’t provide that many opportunities. Perhaps the town has a relatively small population or maybe the investor thinks the market is overheated and wants to sit the local “boom” out. Or maybe the local real estate market is too rich for the novice investor and coming up with a 20 percent down payment on a home is unworkable. So what does the investor do? The investor can look beyond local borders for opportunities.

Investors learn how important knowing the area is, the economy, trends and demographics. Many investors like to invest in a particular area and regularly visit the neighborhood to drive by the properties they own. But what if you live in California and see an opportunity in say, Ohio? The numbers look good and you’re able to pay cash or finance an acquisition, but how can that work? What are the benefits? What is there to look out for?

Buying a property in Cleveland means that, unless you’re a native and have family there, you don’t know the economic conditions of Cleveland, long-term job prospects, schools and neighborhoods. A home may have an excellent return but how do you know you’re not buying in drug-infested area with a high crime rate?

What about property management? What if the tenants don’t pay or the hot water heater breaks and I’m three time zones away? And what about vacancy rates, who can make sure the home is constantly rented out and maintained?

You can do your own research locating local real estate agents, plumbers and property management firms but you’ll be doing all that research sight unseen. You know your own agent and contractor here but how do you find experienced professionals there?

Instead of doing all your own heavy lifting locally you can work with a turnkey real estate investment firm that fully vets the entire transaction and provides you with a fully operational investment. This is where there is an interesting twist on being a passive investor, which is you can literally invest anywhere. You are responsible for selecting the investment goals, return, property type and so on, then work with the turnkey company that has already acquired the asset, repaired it, cleared title and found tenants. The turnkey can also manage the property and market it when needing new tenants or you want to sell.

Your only obligation is to thoroughly review the proposal as well as the reputation of the turnkey organization.

However, turnkey companies don’t just make money managing properties but sell the property to you for a profit. You’ll pay at or near retail for the home but then again they did all the heavy lifting. All you had to do was decide whether or not to buy.

You can also invest in foreclosures out of state and there are various online firms that provide foreclosure data including the home, but buying foreclosures mostly sight unseen is fraught with potential issues. Yes, the purchase price will be lower but it’s not very practical to hire local contractors to perform any needed repairs, make inspections and shepherd the transaction from start to finish. Many foreclosures will have structural defects and may be in such a condition that a conventional lender won’t even finance the transaction.

The tradeoff with a turnkey is the difference between knowing everything about the transaction to knowing very little other than the property address. Buying out of state can provide a wealth of investment opportunities but using a turnkey real estate investment firm can get you to your goals quicker with less risk.

We work regularly with turnkey partners and fully vet their philosophy, approach, contractors, licenses and history before working with them directly. We buy our own properties first through the partners and test the model before investing alongside other investors. We’ve been able to secure 10%+ cap rates that can deliver 20%+ cash on cash returns with properties that have long-term leases and come with warranties on the work completed. Not all partners work out but when you find one with integrity who is focused on the long-term relationships it has with investors then the passive investor can achieve great results.

There appears to be good and bad real estate investment markets all over the country. At any given time there are lists made of the best regions in which to invest. Watch out, as the right location for you will depend on your own goals and personalized strategy. Use consistent criteria to select the right market for your goals. These criteria typically include such things as rent-to-purchase price ratios, population trends and economic conditions. See below for a list of data that I like to use.

• Favorable rent-to-purchase price ratios
• Property is undervalued for appreciation potential
• Stable employment or job growth
• Diversification to its employment industries
• Has investment into industry or redevelopment
• Reasonable levels of crime
• Reasonable vacancy rates
• Landlord vs. tenant friendly laws
• Strong demographic appeal – great for baby boomers or the millennial* generation
  (*millennial are 70+ million Americans born between 1977 and 2000)