Diversify into Multiple States with a National Lender
By Kerry Curry, Contributing Writer
Investing out of state can be appealing to residential real estate investors who want to diversify their holdings, but not all lenders will finance multistate portfolios.
Community banks, for example, generally focus on their local community when making real estate loans. Investors tapping community banks would likely have to form relationships with a bank in each market where they want to invest.
Seeking a lender with a national footprint enables investors with a multistate portfolio to work with one financial partner, simplifying the process of financing new purchases or refinancing their portfolio.
While it’s common for an institutional investor to have a multistate real estate investment portfolio, it is less common for individual investors to have a geographically diverse portfolio.
The reason often comes down to the comfort level of the individual investor. Some real estate investors may feel confident knowing properties located in their own city, but may not be as confident about the real estate investment potential in other markets.
Investing out of state will most likely require hiring a third-party property manager so that there will be “boots on the ground” actively managing properties that are distant from the investor’s home base. For investors not used to hiring third parties or paying management fees, this is a new frontier.
However, once an investor embraces third-party management, they could, in theory, invest nearly anywhere they see an opportunity. Lenders with national footprints make financing multistate portfolios possible.
One key benefit is diversification to protect your investment. Similar to diversifying a stock market portfolio, diversifying a real estate portfolio protects against shocks to the system. For example, if one market in the portfolio stagnates, there will likely be others generating cash. Or, as another example, if properties become too expensive to buy in one market, the investor can hold the line on further investments there but still grow their portfolio by investing in another region where residential properties are more affordable.
While geographically diverse investing could be a boon for portfolio expansion, an investor’s lack of knowledge when it comes to new markets could hinder a successful expansion. Investors who want to diversify should spend time researching a new market to determine if it’s a good place to invest. They’ll want to know if the economic base of the new city is growing, what’s happening with rents and home prices and what yields current investors are getting, among other factors.
As you develop your geographically diverse real estate portfolio, you’ll want to build a relationship with a national lender who has the ability to service multiple markets via a single loan product for ease of management.
B2R Finance offers rental investors innovative lending products to help unlock equity from existing portfolios and provide the cash needed to build rental portfolios nationwide. For more information about how B2R can help you obtain rental property financing, just call 800-227-8107 or visit http://www.b2rfinance.com/apply-now and follow us on Twitter @B2RFinance.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.