Whether you’re holding onto a home with a great mortgage rate, snagged an investment property in a high-cash-flow market, or had to relocate for work, managing a rental property out of state is more common than ever. With today’s real estate landscape, renting out a property remotely can be a smart financial move—but it also comes with unique challenges.
If you’re considering becoming a long distance landlord for a rental home in Baltimore, MD, an apartment in Phoenix, AZ, or anywhere else, you might be asking, “What do I need to know before managing a rental property out of state?” Here’s what to consider before taking the plunge into long-distance real estate investments.
In this article:
What is a remote rental property?
When managing a rental property out of state makes sense
The pros and cons of managing a rental property out of state
Legal and financial considerations for remote landlords
Common mistakes remote landlords make and how to avoid them
How can I be a successful long distance landlord?
Meet the expert: Zach Cohen, Managing Partner at rental investment lender Ridge Street Capital.
What is a remote rental property?
Let’s start off by defining a remote rental property. According to Cohen, a remote rental property is any investment property that is owned by someone who does not live within a reasonable commuting distance to manage it in person.
“Typically, this means a property located in another city, state, or even country,” specifies Cohen. “Investors often buy out-of-state rentals to take advantage of better affordability, higher cash flow potential, or more landlord-friendly regulations.”
What are different types of remote rental properties?
Before delving deeper, here are the different types of remote rental properties you might encounter when managing a property out of state:
- Long-term rentals (LTRs) – Standard 12-month leases.
- Short-term rentals (STRs) – Airbnb, VRBO, vacation homes
- Mid-term rentals (MTRs) – Corporate housing, traveling nurses, extended-stay tenants.
- Section 8 or subsidized rentals – Government-backed rent payments.
- Student housing – Properties in college towns with seasonal demand.
When managing a rental property out of state makes sense
An investor might focus on a rental property out of state to expand beyond high-cost markets like New York City, Los Angeles, Miami, and Boston, to name a few. “Many investors in these high-cost markets find it difficult to purchase rental properties that will have a positive cash flow,” Cohen shares.
Lower-cost markets allow investors to purchase properties with lower cash-to-close requirements and higher rent-to-price ratios. “Then, the rent can cover the cost to own and operate the property,” Cohen says.
“For example, if a Los Angeles based investor had $50,000 to invest in a rental property, they’ll likely find very little housing stock in the L.A. metroplex for that amount, even if they finance 80% of the purchase. However, that same investor could purchase a duplex in Cleveland, OH for $100,000 by contributing $20,000 toward the down payment. If the rental property brings in $1,500/month in rental income and only costs $1,000-$1,200/month to own and operate, the investor could generate $300-$500 per month in cash flow. Here lies the opportunity of managing a rental property out of state.”
The pros and cons of managing a rental property out of state
Owning a rental property in another state can be a smart investment move, offering the potential for better returns, lower home prices, and a chance to diversify your portfolio. But managing that property from miles away comes with its own set of challenges. Here are some potential advantages and pitfalls to out-of-state rental property Cohen says to consider.
Pros:
- Access to more affordable, high-cash-flow markets – Lower home prices in certain areas mean better ROI and rental income potential.
- Geographic diversification – Investing in multiple states spreads risk and protects against local market downturns.
- Lower competition in emerging markets – Smaller, up-and-coming cities often offer better deals and fewer bidding wars.
Cons:
- Harder to manage without local help – Handling maintenance and tenant issues remotely often requires a reliable team on the ground.
- Legal differences between states – Landlord-tenant laws vary by state, so staying compliant takes extra research and attention.
Legal and financial considerations for remote landlords
Managing a rental property out of state isn’t just about finding tenants and collecting rent—it also comes with legal and financial responsibilities that vary by location.
- State and local landlord-tenant laws – Different states have differing rules for evictions, security deposits, and rent control. “States like New York are notorious for having a long litigious tenant eviction process that can take between 6-12 months,” warns Cohen. “Landlord friendly states like Texas can support tenant evictions in 3-6 weeks.”
- Short-term rental regulations – If you’re using the property for Airbnb or vacation rentals, local laws may require a business license, zoning approval, or even restrict short-term stays altogether.
- Taxes – Rental income is typically taxed in the state where the property is located, meaning you may need to file tax returns in both your home state and the state where your rental is. Some states have higher property taxes than others, and certain locations might impose additional taxes on rental properties.
- Licensing and registration requirements – Certain cities require landlords to register their rental properties with the local government, often to ensure compliance with housing codes. Others might require a rental license before leasing a property. This may involve inspections, fees, and renewal requirements.
Common mistakes remote landlords make and how to avoid them
Cohen says there are three main mistakes out-of-state landlords tend to make when managing a remote rental property. Here’s what they are, and what you can do to avoid making the same mistakes.
1. Hiring the wrong property manager – Vet your property manager thoroughly, get referrals, and track performance. Ask to try out the software system they use, and make sure that it is easy to use.
2. Underestimating maintenance needs – Have a local handyman on call and budget for repairs. Depending on the size of the property, aim to contribute 5% of your monthly rent collected to a small maintenance fund.
3. Poor tenant screening – Be sure to perform credit and background checks, obtain employment verification, and request a healthy deposit to cover unexpected events.
How can I be a successful long distance landlord?
Self-managing a rental property out of state is possible, Cohen affirms. “But, focus on one metro area so you can assemble a team that can efficiently service your needs in a single city or region.”
Managing a rental property from another state requires smart systems, reliable local support, and a proactive approach. The key is to treat your rental like a business by investing in the right property management tools, screening tenants carefully, and staying on top of maintenance, even from far away.
“Long-term rentals might require less hands-on involvement, but lease enforcement and maintenance coordination are key,” Cohen emphasizes. “Short-term rentals require active guest communication, cleaning coordination, and local compliance with city regulations. This said, if you are managing a short-term rental from out of state, it is almost always advisable to hire a property manager.”
Key Takeaways:
- Remote rental properties are owned by investors who don’t live close enough to run the property in-person.
- Why investing out of state can be a smart choice: More affordable properties, better cash flow, and landlord-friendly markets.
- Pros of managing a rental property out of state: Access to better investment opportunities, geographic diversification, and lower competition.
- Cons of managing a rental property out of state: Harder to manage without local help and legal differences between states.
- Legal and financial considerations: Landlord-tenant laws, rental licensing, and multi-state tax filing.
- Common mistakes to avoid: Hiring the wrong property manager, underestimating maintenance, and poor tenant screening.
- Yes, you can be a long-distance landlord: With the right team, tools, and strategy, managing a rental property out of state is absolutely possible.
Whether you’re looking to buy your first home or expand your investment portfolio, Redfin can help. Explore Redfin’s real estate listings and connect with a local real estate agent in your target market to get started.