Episode Overview

Podcast: Optimal Finance Daily
Host: Diania Merriam
Episode: 3316: "The Downsides to Owning Out of State Rental Properties" by Joel of 5AM Joel
Date: October 13, 2025

This episode explores the often-overlooked pitfalls and challenges of owning out-of-state rental properties, as detailed by Joel from 5AMJoel.com. Diania Merriam reads Joel’s reflective blog post, highlighting the practical considerations, risks, and lessons learned from managing properties far from home. The episode offers frank insights on everything from maintenance headaches to legal complexities, and concludes with both Joel and Diania offering strategic recommendations for those considering—or already navigating—the remote landlord journey.

Key Discussion Points and Insights

1. The Inconvenience of Distance

• [01:36] Joel’s Personal Experience:

  • Joel describes his situation: the closest property he owns is 1,463 miles away from his residence, making hands-on management impossible.

  • Repair Challenges:

    • Example: A storm caused minor property damage in Texas. Joel felt frustrated that, while he could easily fix the issues himself, distance forced him to hire contractors at a much higher cost ($800–$1,200).
    • This extends to routine tasks: “There are many other DIY projects I've had to hire local contractors for, such as easy toilet fixes, simple paint jobs, or trash removal.”

  • As a solution, Joel now inflates his estimated maintenance budget for prospective deals, making his purchase criteria stricter.

    "I have to fork out a thousand dollars to contractors, even though fixing myself will cost so much less. I've just come to accept it as a part of being a remote landlord."
    — Joel ([02:30])

2. Navigating State and Local Laws

• [03:25] Legal Complexity:

  • Each locality (city, county, state) has its own ever-evolving laws and regulations, which can catch remote landlords off guard.

  • Staying Informed:

    • Joel joined local real estate meetups for each investment area and subscribes to newsletters summarizing local news.
    • He uses keyword alerts on Bigger Pockets to monitor relevant online discussions.
    • Maintains regular phone communication with property managers for insider updates.

  • Risks:

    • Small political or legal changes (taxes, employer presence, infrastructure developments) can significantly impact investment profitability.

    "Small political changes can have huge effects on the profitability of your investments... You need to stay on top of it all."
    — Joel ([04:08])

3. The Hassle of Multiple-State Tax Filings

• [04:47] Tax Filing Frustrations:

  • Owning rental properties in multiple states generally obliges landlords to file separate state tax returns for each.

  • Joel notes that the logistical burden prompted him to switch from self-prepared returns (using TurboTax) to working with a professional tax advisor—even though it remains “a big pain in the ass to file every year.”

    "My tax guy does most of the heavy lifting, but it's still a big pain in the ass to file every year."
    — Joel ([04:59])

4. Building Trust Remotely

• [05:10] Relationship Management:

  • Developing a trustworthy team from afar (property managers, contractors, agents) is difficult. Cultural, ethical, and logistical differences add complexity.

  • Joel admits all his properties were purchased “sight unseen” and he’s had to rely heavily on relationships formed over the phone.

  • He credits The Speed of Trust by Stephen Covey and Long Distance Real Estate Investing by David Greene as significant influences for building remote partnerships.

    "There can be huge differences in culture, religion, education and business ethics between the city you live and the city you invest in."
    — Joel ([05:23])

    "If you're considering buying some out of state rental properties and are worried about trusting the locals, read this book."
    — Joel ([05:40])

5. Final Reflections and Encouragement

• Resilience and Positive Perspective:

  • Despite significant downsides, Joel concludes that, for him, the rewards (financial, experiential) outweigh the risks and hassles.

    "If you want rainbows, you have to put up with the rain."
    — Joel ([06:02])

Diania Merriam’s Commentary and Advice

6. Real Estate vs. Stock Market Investing

• [08:15] Diania’s Perspective:

  • Diania distinguishes between active (real estate) and passive (index funds) investing, highlighting the higher barrier to entry, risk, and managerial burden attached to real estate.

  • Suggests that beginners start with passive stock investing, build a cash reserve, and only consider real estate as an “advanced” step.

  • Emphasizes that investing in real estate often includes leverage (debt), which heightens risk if cash flow estimates are off.

    "If you’re going to start investing in real estate, I think it helps to have a really strong cash position as you're bound to make some incorrect assumptions when you're evaluating an investment property."
    — Diania Merriam ([09:10])

    "Most people investing in real estate do it on leverage... This adds a level of complexity because you need to ensure that your rental income covers the cost of the mortgage, property taxes and insurance, plus maintenance and vacancies."
    — Diania Merriam ([09:45])

Notable Quotes & Memorable Moments

• "None of my rental properties are even remotely close to where I live. In fact, the closest property I own is 1,463 miles away, just a cool 23 hour drive from my house." — Joel ([01:45])
• "You have to file a return with each state in which you earn rental income... it's still a big pain in the ass to file every year." — Joel ([04:55])
• "All of the properties I own today were purchased sight unseen. I rely tremendously on the local individuals I've built trust with over the phone." — Joel ([05:16])
• "If you want rainbows, you have to put up with the rain." — Joel ([06:02])
• "As I get more comfortable with different ways to invest, I may reconsider. But right now my investing strategy consists of passively investing in the stock market and actively investing in my own business." — Diania Merriam ([08:48])

Timestamps of Major Segments

| Timestamp | Segment | |-------------|--------------------------------------------------------------| | 01:36 | Introduction to Joel's experience with out-of-state rentals | | 02:15 | Challenges of long-distance repairs | | 03:25 | Keeping up with laws and local developments | | 04:47 | Complexity of multiple state tax returns | | 05:10 | Building trustworthy teams remotely | | 06:02 | Joel’s big-picture perspective | | 08:15 | Diania’s commentary: Real estate vs. stock investing | | 09:45 | Real estate leverage and risk |

Concluding Thoughts

Joel’s candid breakdown demystifies out-of-state property investing, balancing optimism with a clear-eyed view of its obstacles. Diania’s closing advice reinforces the need for caution and preparation—especially for newcomers. Both emphasize the critical value of adaptability, ongoing learning, and strong support systems in real estate, ensuring this episode delivers actionable, realistic guidance for all levels of investors.