Best Way to Mobilize Equity

[David McDonald]

I've built up over $300,000 of equity in my condo that I want to tap into for rental properties. I don't want to buy in California since it's so expensive and landlord laws suck. Since I want to invest out of state, I'd need a property management company to help out. Ideally, I'm looking for a single-family home in a market with good rent-to-price rates. Turnkey would be best since it's my first rodeo. I plan on taking out a HELOC to access the funds for purchase(s), and I'd love to do multiple properties so I can get this train rolling. I want to buy and hold for both cash flow and appreciation.

Any advice is welcome. Thanks.

[Evan Polaski]

@David McDonald, do people trade short term cashflow for long term equity?  Yes, but typically in high appreciation markets, like greater LA area. :)

I am lucky enough to live in a "high cash flow" market, Cincinnati, OH.  But, based on long term averages, my rentals would have performed 3-4x better financially if I bought in Los Angeles back in 2011 instead of Cincinnati. As Nicholas noted, there are a lot of often overlooked risks when investing OOS, which would have been true if I invested in Los Angeles.

As for the tenant laws, while I hear your concern, I also know of many people that have had rentals in CA and NYC that have performed VERY well.  Generally, like all rentals, I think a good tenant screening will mitigate many of those risks. 

Lastly, as you are chasing returns, one of the most common items I see overlooked is the cost of travel, when investing out of state.  Travel to the market to tour houses and neighborhoods before you buy.  Then, travel at least annually, ideally twice a year, to see your properties.  In many cases, when you are buying $200/mo in cash flow before travel, and then add even one trip: flight, rental car/uber, hotel for a night, a couple meals out, you have eaten most, if not all of your cash flow for the year.  Of course this gets amortized over many properties if you build a portfolio there, but it is still a cost that must be considered.