Commercial Real Estate

The Video You NEED to Watch Before Buying Out-of-State Multifamilies

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
154 Articles Written
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There appears to be a “grass is greener on the other side” mentality going in in the real estate investing circles these days. What I mean by that is investors are looking for opportunities outside of their own local markets, looking across the country and even into other countries for the “best” market to get themselves in.

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I am a big fan of the “acres of diamonds” mentality for new investors, meaning there are plenty of deals to get started on, right in your own backyard. But once you have established yourself as a viable real estate professional with a few deals under your belt, it may be time to expand your network. Investors do this for many reasons—diversification, expanding their brand, tapping into networks they may have, and capitalizing on areas with high potential for growth in the future.

What to Do When It’s Time to Expand to New Markets

We invested in our own area for years, building a portfolio that we were able to manage with our in-house team. Our investments were no more than 30 minutes from my office in downtown Trenton, New Jersey, and we did fine with that. We fund most of our projects through syndications with equity investors. Some of them weren’t comfortable with the greater Trenton MSA, and the deal size we could do here was only so large. For those reasons and others, we decided to expand our coverage and get into deals outside of our 30-minute radius.

Related: Looking to Invest Out-of-State? Here’s How to Pick and Analyze a City

In today’s video, I talk about what I’ve learned in our expansion outside of our local area into more regional investments. It’s imperative to do the right homework on these deals, especially if they are more than a drive away from your base of operations. There are certain factors that need to be considered that will make or break you, as well as work you need to do up front before you even start looking at deals. Watch the video to find out what those factors are and get some more detail on how to make an out-of-state multifamily investment successful!

I hope to get in some chatter with you in the comments down below, so please leave me some thoughts. Have you done an out-of-state deal already? How did it go and what homework did you do first?

Thanks for watching and have a great and profitable week!

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

    Carl Patten Real Estate Investor from Denver, Colorado
    Replied over 2 years ago
    Thank you for this. I am looking to purchase multi families in Luther areas, and this is helpful. I am also looking for a diversity of industries/employers as well. I grew up in a small oil town, and I know how volatile things can be when one industry dominates heavily.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied over 2 years ago
    Hey Carl, I assume you meant “other” areas, lol. I agree on the diversity of employers. Lots of people are betting on Texas and even the Dakotas right now because of the oil boom. Those areas are seeing growth but if oil takes a dive it will affect the local job market. I think the same thing plays for NYC with it’s dependence on the financial sector but to a much lesser degree. What other areas do you see as “one trick ponies” for employment sectors? Anyone else can chime in on this one also. Thanks Carl! Matt
    Peter Sjolin Investor from Mansfield, Texas
    Replied over 2 years ago
    Thanks for wisdom Matt!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied over 2 years ago
    You are welcome Peter!
    Michael Steven Harris
    Replied over 2 years ago
    I have found when investing a ways from home can be profitable because I am in a high cost area and make 30 grand a year. I save about a grand a month and pay cash for rentals. Having the big cushion reduces risk I have found even if out of state.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied over 2 years ago
    Hey Michael, Great points. Do you plan to refinance the properties you own free and clear to scale up in the future, or do you want to continue to hold free and clear to maintain that cushion? Matt
    Jacob Elbaum from Deerfield, Illinois
    Replied over 2 years ago
    Fantastic video and post. Really useful information. One of my biggest difficulties is the decision of whether or not to look at deals within a market I’m familiar with since I grew up nearby, OR to do this neighborhood research first, and then only after knowing the economics of that market, look at the deals within them.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied over 2 years ago
    Hey Jacob, If you are just getting started, I would consider investing in areas you know the best. Once you get your feet wet you can start expanding out of your local area. Just my humble opinion. Matt
    Alina Trukhina
    Replied over 2 years ago
    Matt, Great article! Very detailed and right to the point! Thanks for posting! Question/idea: if you have enough apartment buildings in the area to have your own property management company, and as you stated ask the property manager to invest in the deals with you as well, then the local ownership becomes unnecessary. Is that a true statement? Thanks, Alina
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied over 2 years ago
    Hey Alina, You are correct. The numbers I have calculated show that with 150 units or above you could swing the payroll to manage with an in-house team. You could, as you said, give or sell ownership to the lead manager of that team to create a local owner. That being said, make sure they are approaching it from an “owner” mindset. Managers look at things differently than managers. Matt
    Elena Moffatt Real Estate Agent from Charleston, WV
    Replied over 2 years ago
    My investment portfolio consist of single residential properties however I’ve been contemplating buying multi-family. The problem I’m having is that the population in our state is decreasing. I did find your information helpful as it is somewhat related to the research I am currently doing. Thank you.
    Elena Moffatt Real Estate Agent from Charleston, WV
    Replied over 2 years ago
    My investment portfolio consist of single residential properties however I’ve been contemplating buying multi-family. The problem I’m having is that the population in our state is decreasing. I did find your information helpful as it is somewhat related to the research I am currently doing. Thank you.
    Nathan Diones Investor from Redlands, California
    Replied over 2 years ago
    Matt – Great post. Market data that makes sense with am upward trend is key. Making sure an out of state manager is approaching it from an “owner” mindset is also key. I am shopping out of state right now because cap rates are compressed so low in CA it’s almost embarrassing. Ideally I’d like to obtain a management co that would like to participate within the deal with a preferred position. Things run much more efficient when they have a stake in owning versus just passing the expenses along. Thank you.
    Jackson Wu Investor from Monrovia, California
    Replied over 2 years ago
    Hi Matt, Great video. You mentioned the Central PA market in your video. How do you feel about the market there? I know a lot of nationwide companies are setting up or have set up distribution hubs. Do you see this continuing? Any thoughts on how automation in warehouses and trucking might hurt the job and housing market there?