Investing in out-of-state real estate- should you or shouldn't you?

Written By: Sanya Kaushik

The real estate industry has overtaken almost all other businesses to be today deemed as the most lucrative and profitable industry on an international scale. With so many opportunities opening up every day, it is a mammoth task having to choose between hundreds, even thousands of alternatives. One of the biggest decisions you’ll have to make in terms of real estate investment is whether or not you should invest in out-of-state property. Like all other earthly material wares, this decision has its fair share of pros and cons. 

DO IT because-

1. Property prices may be lower in other states:

If you live in a metro city, you already know that property prices in upcoming towns are lower than in your own city. If you can’t afford to buy real estate in the city in which you live, you’re better off investing in other cities where the current prices are low and more pocket-friendly.  

For example: Surat, Coimbatore, Pune etc

2. The economy of other states may be more stable than the economy of yours:

Properties in Delhi, Mumbai and other metro cities are prone to foreclosures when an economic slowdown hits the real estate market. During the year 2007, prices of real estate rose to alarming heights. As a result, people stopped buying property altogether. This led to a fall in prices and subsequent buying. However, a number of home owners had their properties foreclosed because the erratic state of the market. Places like Coimbatore and Pune are less prone to such changes. 

3. Out-of-state real estate may fetch a higher Return on Investment (ROI):

Laws and regulations, taxes, market conditions, ROI etc in another state may be more hospitable for investment than in your city. You could do a comparative analysis of all likely choices and base your decision on a quantitative investigation. 

For example: Kochi, Ahmedabad, Coimbatore, Kota (Rajasthan), Rewari (Haryana),Bhiwadi (Rajasthan) etc. are in nascent stages of real estate development and are expected to fetch high returns in a few short years. 

Speed bumps to consider-

1. Unfamiliarity with the market:

You will probably be unaware of the market that prevails in your preferred state for investment. Geographically, socially, economically, you are completely oblivious to the real estate and other conditions prevalent in this city. 

2. Unfamiliarity with the property tax laws:

Real estate tax laws differ from state to state. You will have to do a lot of groundwork regarding the same in order to avoid accidental tax fraud. 

3. Maintenance and upkeep:

Maintenance of the property can be a problem considering you’re not there to oversee the same. Cleaning, water damage during the rainy season, clogged pipes etc can easily bring down the value of your home. 

Since you cannot be physically present to supervise all the nitty-gritties of the out-of-state property, your best course of action would be hire a top-of-the-field real estate company that can look after your assets for you. You may have to spend a bit now, but it’ll pay off in the long run.