Geography Matters: Could You Be A Landlord From Afar?

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(Gerd Altmann, Pixabay)

30 May 2017. The cost of property is not geographically neutral, we can all agree. In some areas of the country, it’ll cost you more money than you could ever earn in a lifetime to buy a small studio property. In other areas, the same amount of money can buy you something close to a mansion. As a rule, cities are more expensive than rural areas, but the price variation between cities is huge.

It’s not even a metric than can be determined by state or even prominence of the city. It’ll cost a lot less to buy in Augusta than it will in Atlanta, for example; Chapel Hill is more expensive than Raleigh; Naples will cost more than Jacksonville. So even if you live in one of the more affordable states, there’s still a potential for price hikes purely because of location.

If you want to make property investment your business, this can be hugely problematic. If you live in an expensive area, then finding homes for sale that are within your buy-to-let budget can be a problem. You might be able to afford to live in the expensive area, but the property business is all about maximizing profit – something that might not be possible if you stay within your geographical limits.

It can therefore become tempting to consider buying investment property that’s far from your home. If you buy in a more affordable area, you reason, then you stand to gain more from the investment when the market rises – as it almost inevitably does. In the meantime, you can rent the house out and collect a monthly sum. It seems so simple, but is it?

There are benefits to operating a property business from afar, aside from the more affordable purchase prices. The biggest is how it can help create a separation between you and the property, which can be easier to deal with mentally. One issue that many landlords have is that they fail to truly see that the property is not theirs; they don’t like handing over entirely to the tenants, even though by law, that’s what a tenancy contract does. If you can’t just drive to the house to see how it’s doing, you’re able to foster a healthy level of ignorance.

However, there are a few problems to be aware of as well.

Fixing issues is more difficult

If your rental house is ten minutes away and the tenants call you at 1am saying a water pipe has burst, you can be on the scene in half an hour. That’s not the case if you live 200 miles away.

You don’t know the local market

While you can do some research about rental prices online, it’s going to be more difficult to keep abreast of the local market – and particularly how busy it is – when you don’t live near the area you have bought in. If you plan to make regular trips, of course, this can be somewhat mitigated.

Rental prices will be lower

If it’s cheaper for you to buy property in an area, then you are almost certainly going to get less in terms of rental income, too. However, you can offset this by calculating your yield before you buy. 6% rental income is a great deal regardless of the actual sums involved, so keep a strict eye on the numbers.

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