Distant Rental Properties
Invite Problems for Owners

Question: I’m considering the purchase of an investment home in a neighboring state in the next year. I have the money to make the purchase, but I’m worried about keeping it rented. Since the property is more than 130 miles way, my concern is finding a good tenant who will pay the rent on time and keep the property in good condition. I want to avoid having to go to the home as much as possible. Any clues?

-- Bill, St. Louis

Bill: Once, a long time ago, I bought two homes in a neighboring state. The distance was about 200 miles and my concern was exactly the same as yours.

I hired a management company (which took 12% of the monthly rent) to handle the problems for me, and I believe they did a relatively good job of screening and finding tenants. However, problems always arise. There was a dishwasher that gave out, then roof repairs, then one tenant lost his job and couldn’t pay and eventually had to be evicted and the home refurbished, then there was water damage after a storm and on and on.

The result was that I had two options: Let the management company do all the renting and hiring out of all the repair and maintenance work (which resulted in some months when I didn’t get any money from the rent and had, instead to pay out of my pocket), or jump on a jet and go there and do it myself, which often cost more.

The moral of this story is never, NEVER, buy investment property more than about a half hour from where you live. If you’re nearby, you can easily go down and fix a leaking washer, as opposed to spending $50 to $80 to have a plumber do it. Similarly, you can handle the rent up and carefully check out tenants by calling their former landlords (especially the one before last) to see how they behaved.

Owning a rental home or two can be quite profitable when it comes time to sell. But it’s best done close to your home where you can personally take care of the rent-up, maintenance and repair. Distant ownership can be a nightmare.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips and Traps When Renovating Your Home," (McGraw-Hill, 2000).

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