Investor · sacramento, CA · Member since 2013 · 39 posts · 13 votes
since here in Sacramento CA , the prices are so high and there are so many cash buyer investors , that there is barley any inventory left for new investors like myself , is it smart to go ahead and buy houses from websites like Auction.com online in other states (i see houses selling on last bids for less than 20K in some states like NC , TN , TX , KY , ... ) without actually looking at poperty itself ?! is there any limit or legal action that prevent a person from investing in other states for buy , flip and hold ?!
That's going to take a very long explanation to answer and it comes down to, It depends on you. What risk are you willing to take if the house/s have issues? What research are you able to complete prior to purchasing? Who is going to fix up/manage the property for you and how will you check them out/hire them? If you are very new investor and intend to focus on a new area I recommend you learn as much as you can about purchasing/renovating/managing homes for a few months minimum first. Then find the area that fits the risk/returns/goals that you have set and then VISIT that city to meet the contacts you have found for purchasing/fixing/managing the properties. I, myself, would not purchase from an auction site or realtor unless I knew the area and had the people in place to ensure I would be successful. One option to consider, but with lots of due diligence, is a turnkey company. While the returns don't seem to be as high the quality and management is in place. You still need to research the companies and locations.
I currently own eight properties in CA and agree the prices are going up. August last year I asked myself the same question you posed. I spent a month doing research and then flew out to Memphis, TN for a week, where my wife is from. I chose Memphis because my wife goes there a few times a year and has family there. We met with realtors, turnkey companies, property managers for a quick but very intense tour of the city. I ended up purchasing one home even though my goal was three. I found that after spending weeks researching and physically walking many homes that it still was difficult to meet my goal.
Luckily I found another person selling homes out there. I closed on my 2nd Memphis home this past Friday and am working on the 3rd deal now.
To sum it up, don't rush into another area, do your research and, if possible and you are set on it, visit the area you want to invest in. A $1,000 trip for five days will be much better than a $30k+ disaster. Feel free to message me if you have any specific questions. I'm not an expert but I am also learning. Good luck.
That's going to take a very long explanation to answer and it comes down to, It depends on you. What risk are you willing to take if the house/s have issues? What research are you able to complete prior to purchasing? Who is going to fix up/manage the property for you and how will you check them out/hire them? If you are very new investor and intend to focus on a new area I recommend you learn as much as you can about purchasing/renovating/managing homes for a few months minimum first. Then find the area that fits the risk/returns/goals that you have set and then VISIT that city to meet the contacts you have found for purchasing/fixing/managing the properties. I, myself, would not purchase from an auction site or realtor unless I knew the area and had the people in place to ensure I would be successful. One option to consider, but with lots of due diligence, is a turnkey company. While the returns don't seem to be as high the quality and management is in place. You still need to research the companies and locations.
I currently own eight properties in CA and agree the prices are going up. August last year I asked myself the same question you posed. I spent a month doing research and then flew out to Memphis, TN for a week, where my wife is from. I chose Memphis because my wife goes there a few times a year and has family there. We met with realtors, turnkey companies, property managers for a quick but very intense tour of the city. I ended up purchasing one home even though my goal was three. I found that after spending weeks researching and physically walking many homes that it still was difficult to meet my goal.
Luckily I found another person selling homes out there. I closed on my 2nd Memphis home this past Friday and am working on the 3rd deal now.
To sum it up, don't rush into another area, do your research and, if possible and you are set on it, visit the area you want to invest in. A $1,000 trip for five days will be much better than a $30k+ disaster. Feel free to message me if you have any specific questions. I'm not an expert but I am also learning. Good luck.
You're right about the high prices in coastal California making it very difficult to invest for cash-flow, on top of the fact that inventory levels are low making it hard to find much in the first place!
Like @Tyler Caruso, there are many investors, particularly from higher-priced markets that look to invest their capital in out-of-state markets where the rates of return are higher, and in many cases where the local economy is better.
Regarding sites like Auction.com, what you will find are mostly (or exclusively) distressed and/or wholesale properties. You will need to manage the rehab of these properties in order to turn them into performing assets. If you're looking for more passive hassle-free investments you should look for fully turn key property options.
Smart move on your part coming here and checking things out. Plus you already had some background info and will be coming back every once in a while. I think feet on the ground here is one of the keys to success.
Just curious, what parts of town are you looking at?
Hi Sam, there are no extra legal issues as compared to Cali. Each state has it own set of landlord/tenant laws and protections. Bp will be your goto source to learn which out of state location could fit. Check out the sub30k post if you are looking for that price range. You will be amazed. I like the western states. I can be at property in short notice, newer homes and nicer climate.
@Marco Santarelli thank you for the info , i have listened to one of your podcast a while ago , you are absolutely right about the turnkey options in other state since it's easier to manage while making profit .
Don't invest out of state! I would prefer to see no out of state investors in my area...especially coastal investors that come to the Midwest because of what they perceive to be cheap prices. They only bid up the inventory that I want to buy!
I'm obviously kidding however my point lies in the fact that many out of state investors over pay for deals. Even your post shows me that you have sticker shock when seeing a 20k house for sale. I've talked to so many brokers and property managers that have horror stories of out of state investors getting burned.
With that being said you can definitely make it work though. It takes a lot of work to understand another market (and to chose one). You have to dedicate a lot of time and resources to that specific area. Payouts can take longer because of the amount of time it takes you to get familiar with the area, travel costs, outsourcing costs etc. Building a solid team is extremely important. It also depends on what you want to do....buy and hold can be more forgiving than flipping when out of state. Either way be very careful when selecting your new market and understand the costs involved. Good luck!
@Kevin Perk I was looking at Cordova/Bartlett, which is where I bought my first home. Couldn't believe I could get a 1700 sq ft brand new home, 4/2.5 for $155k with a decent return. Now I'm looking at the Frayser area to Bartlett. That is where my house just closed and have another great deal going through, both about 15% ROI including the vacancy, maint, mgmt., etc.
I'm currently (slowly) building a team there. I found the real estate lawyers to be very helpful for leads. Kevin Hudson has been great for assistance if anyone is looking for a good lawyer/closing attorney in Memphis.
You can definitely invest out-of-state all you want, no restrictions. I live in LA and have only bought out-of-state. I would however be incredibly leery of buying sight unseen auction properties. You have NO idea what condition they will be in, the areas, etc. Plus winning at local auctions is hard enough much less trying auctions far away. I would tend to say that if you go that route, you are taking on the maximum risk possible. That's dangerous territory.
There are plenty of ways to buy out-of-state properties much safer and with a lot more knowledge of what you are actually buying!
You can definitely buy out of state and profit but I would research the market you're planning to invest in to make sure the prices you're paying are fair and the area you're investing in is somewhere you actually want to invest in.
Personally, I would take a trip down there as well to see the property and interview some of the management companies in the area :)
You can definitely invest out-of-state all you want, no restrictions. I live in LA and have only bought out-of-state. I would however be incredibly leery of buying sight unseen auction properties. You have NO idea what condition they will be in, the areas, etc. Plus winning at local auctions is hard enough much less trying auctions far away. I would tend to say that if you go that route, you are taking on the maximum risk possible. That's dangerous territory.
There are plenty of ways to buy out-of-state properties much safer and with a lot more knowledge of what you are actually buying!
Hi Ali. I'm in Pasadena. Do you personally visit each property that you purchase? And if it needs work, do you fix it yourself? Out of state is VERY attractive to me. But I need to make sure I follow in a pro's footsteps. Like you!
Hi @Tyrone Lewis! Pasadena is awesome, very cool part of town. I only saw one house I bought prior to buying it and bought the others sight unseen but that was only because I knew the teams working on them and trusted the system. I would never buy random individual houses without checking them out. I don't buy anything that needs work. That's way too much work :)
Hi @Tyrone Lewis! Pasadena is awesome, very cool part of town. I only saw one house I bought prior to buying it and bought the others sight unseen but that was only because I knew the teams working on them and trusted the system. I would never buy random individual houses without checking them out. I don't buy anything that needs work. That's way too much work :)
Thanks for such a quick response. Yeah, Pasadena is great. But affordable investing is a negative, in this city. I HAVE to broaden my horizons. What's your take on houses that have been on the market for over 90 days or more? Risky?
Depends on the market @Tyrone Lewis. If it were somewhere like Atlanta or Houston or somewhere where so many investors are buying, and some of which in huge quantities, I would avoid the property like the plague because that means all the professionals passed it up. But in less hectic lesser-known markets, I guess it just depends on why it's been on the market for so long. Is it over-priced? Why don't people want it?
I don't buy listed properties, only unlisted, to avoid a lot of that.
Depends on the market @Tyrone Lewis. If it were somewhere like Atlanta or Houston or somewhere where so many investors are buying, and some of which in huge quantities, I would avoid the property like the plague because that means all the professionals passed it up. But in less hectic lesser-known markets, I guess it just depends on why it's been on the market for so long. Is it over-priced? Why don't people want it?
I don't buy listed properties, only unlisted, to avoid a lot of that.
@Sam Hadad I know Sacramento well - lived in the Bay Area most my life. I am an out-of-state investor (Indiana), and I echo @Romica P. - you should definitely take a trip to your target area to scope it out before making any purchase.
And don't assume just because you are using a turnkey company you are getting quality properties or management (same goes for any realtor you find). Whomever you use to help you, vet them thoroughly, and frankly, I always use people referred to me, which helps make sure I am working with honest and competent people.
BP can be a great resource for referrals and research. Good luck!
@Sharon Tzib 100% agree!! Make sure you do your due diligence I've seen out of state investors pay out the nose for properties that they should have paid $10k less or more than they actually paid. A lot of turn-key outfits fluff up their numbers and tell you how great a particular area is. If they weren't referred to you contact a third party (realtor) and ask for comps in that area. Or their opinion on what a 3bd/1ba house would rent or sell for in that area. They may not know the rental market, but if they are a realtor they should be able to pull up comparable sales in that area that way you can make sure you are getting apples to apples at the price you are paying!!
I'm a wholesaler in the Hot Houston! You really have to have feet on the ground that you can Trust when dealing with Out of area deals. Make sure you do your research/due diligence as well.
Ok, @Sam Hadad , well I don't really care how many states they work in - that in and of itself does not make them "your best option." You need to do some research and find out what kind of reputation they have, talk to some of their clients and see if they are truly happy, take the properties they are showing you to a third party to verify if the comps are appropriate/accurate, and vet the property manager as well.
A good place to begin would be to start a new thread in the forums asking for feedback from anyone who has used them. Also, search their name here on BP and read through old threads. Google their company name too to see what comes up. I'm sure you get the idea of what I'm talking about now.
And as we've all said, whichever of the nine markets you decide to begin in, go visit it first, but only after you've done some intensive online market research to make sure the area is as good as it is being touted to be. Good luck!
@Sharon Tzib makes several good points @Sam Hadad. The underlying theme is to do your due diligence... Or as I like to say, "Trust, but verify".
Make sure whoever you work with is completely open and transparent about the team of people they work with (property managers, inspectors, lenders, builders, etc, etc.) and make sure they allow you to speak directly to their team members. This helps eliminates biases, and gives you multiple angles on the information you're looking at and verifying.
Also, keep in mind that all information can be cross checked and/or verified through third-party sources such as websites, property managers, invoices, MLS, scope-of-work, leased, etc. You name it.
Selecting the right market is only part of the purchase process - your due diligence will play a role throughout that process.
Finally, don't be afraid to ask lots of questions. It's a great way to learn.
@Sharon Tzib thanks for the good tips on doing due diligence on the company i want to work for , from checking with their clients or local third parties .
@Marco Santarelli"Trust, but verify" really good point , thank you guys for all the helpful comments .