BiggerPockets

Hi Zubair,

What are some of your reasons for choosing to invest out of state? I am sure you have very valid reasons, but I am just curious.

Having a credible broker and investor in the area you are looking to purchase in.

Someone not out for a quick buck but life long business relationships and friendships.

Watch out for companies that talk fast and seem excited and pressure you to act or you will "lose the deal of the century".

Zubair,

Not trying to change your mind but there is a reason those properties are prices much lower, and they are often very difficult to successfully flip (as they surrounding properties hold the value down). I am assuming the guy you found is investing somewhere in Detroit, Cleveland, etc. There is money to be made in these markets, but there is no way I would invest from out of state (as a beginner), as many people are having problems trying to do exactly that. Additionally have you verified the credentials of "this guy on an investing website". There are a lot of dishonest people out there and investing out of state is a huge risk unless you have a great and trustworthy team in place.

I would highly recommend reconsidering. If you decide to proceed please make sure you do your due diligence on the property, the area, the repair costs, the property value, etc. I would not trust anyone to provide this information to me. If I were you I would continue to save money until I was able to invest in my local area where I could monitor the rehab and ensure the area is a place I would want to invest in.

In addition to what Sharad said, perhaps you should look to partner with someone in your area and go 50/50 on a deal. With some searching you might be able to find someone who not only has some experience, but can add to your funding capabilities. This would allow you to invest in a local property, learn more about the business directly from you partner, and start meeting and working with contracts, banks, and others in your area that will come in handy for future deals.

Zubair -

If your strategy is to invest in an out of state area because of price point in your area, make sure you are not using price point as the "main" attraction to out of state investing. Many, many investors purchase out of their area and are successful, but many more are not.

You have two hurdles that are going to be very important for you. One, define exactly the criteria you want in an investment property. Price needs to be at the bottom of your criteria list. Just because properties are under 40K does not mean they are good deals or will be a good long-term investment.

"PRICE IS WHAT YOU PAY, VALUE IS WHAT YOU GET" Charlie Munger

2nd hurdle is the market itself. Great advice above on doing your due diligence on the market and the people you team with. Once you have identified a market you like, you MUST go and visit that market. Rent a car - view the houses and neighborhoods you are interested in during the day AND at night. Rely on the local experts to give you their advice, but THEN get a feel for yourself. It is your money - your investment - and you have to be willing to own that process and your decision to purchase.

You can have success as a passive investor, but you just have to be real clear on why you are buying in another market and don't simply buy because the price point is good compared to where you live.

I wish you the absolute best of luck -

@Sherry: I'm looking more into rehab and flip so I can move my money around instead of buying and hold.

I invested in my first property in Arizona earlier this year. I bought in the town I went to college in, where I had lived for ten years, had friends, etc.

It is critical to have a broker you like and trust who will guide you to gems and away from bad neighborhoods, risky properties, etc. I was fortunate to find a broker who new the area well, was an investor himself, and had a GC background.

My goals are hold and rent over the long term. I located a property that was a short sale opportunity, and closed on it within 30 days. I then spent one week at the property, renovating it (roof replacement, A/C upgrade, floors, paint, etc).

Getting a good local team in place is critical. I needed to locate a good handyman, electrician, etc. Additionally, I interviewed 3 property managers, then went with one my broker recommended. She has done a great job helping me stabilize the property which is now flowing cash with a good tenant in place.

McKellar's comments about 'managing managers' is correct. I can't imagine trying to manage this property directly as some tried to convince me to do. Having a property manager has been a key to success.

I'm now beginning my search for my second property. Acquiring and rehabbing for long term hold one property per year will be my focus. I plan to continue investing in this out of state market as the Bay Area, where I live, is not a suitable climate for investors. Now that I know where to go for repairs, property management, etc., I anticipate it will be much easier moving forward.

Overall, it would be preferable to be in the same city as the properties I own, but this simply isn't possible currently.

Zubair:

I am in your area. Have you looked at properties in Baltimore, MD? About an hour drive from you, but doable. I don't invest there, but a contractor who works on our houses does and he has bought houses for $5K and up. Those are in rough neighborhoods, but you could probably find something in the $40K or less price range in a more desirable neighborhood that needs to be fixed up.

Hire a good property manager and fly out to where you invest to visit the property before buying. Also to meet the property manager face to face as well as anyone else you plan to do business with. In the beginning I did everything via phone and email but once I started showing my face and meeting the people I was working with face to face things got much better.