Out of State Investing

59 Replies

@Adam R.  @Christine Kankowski   Congratulations on your first post! BP is a great place to ask questions and get great advice.

@Eric T.   If you are considering investing in the Chicagoland area I would consider doing flips instead of holding. Chicago, to me, is not a buy-and-hold market. The taxes alone will eat up your cash flow. You can only raise rents so much to cover the constant increase in taxes. Cook County or Crook County, where Chicago and some surrounding suburbs are located, is tenant friendly not landlord friendly. It can take months to get rid of a tenant.

For me, I have found that investing in Indianapolis and the surrounding areas is a much better market for buying and holding. As for evicting tenants, that can be done in a matter of weeks in most cases. 

If you decide to invest in Fort Wayne, Kokomo, or Indianapolis your rate of return will be much better. 

@Chris L.  I agree with you on the property management being one of the most important keys to success with out of state investing. 

 @Adam R.  -Welcome to BP. I'm sure you'll find this a good sight. I'm from CA also and am well aware that it's possible to get anything to cash flow here. Like some of the others that have responded, I like Indianapolis and Kansas City a lot. Both are great cash flow markets and are actually seeing some good appreciation there also. In fact, Clear Capital predicts that the Midwest will be the fastest appreciating region in the U.S. in 2015.

If you'd like any info on Indianapolis or Kansas City, feel free to reach out. I also have a report I wrote on how to invest out of state that I'm happy to share with you.

Best wishes,

Mike

@Adam R.  I'm from NY and I also invest out of state for similar reasons.  Up until a few months ago I was investing in the Las Vegas area.  I own several homes in Henderson.  I actually just put my first offer in on a home in Indiana.

Being an out of state investor isn't the same as investing in your own market.  Always keep in mind that you aren't going to be around to take care of maintenance, tenant complaints, problems, etc.  I personally try to invest in ways that reduce my risk.  Sometimes that can mean accepting a lower return in exchange for less stress.  I generally invest in single family homes because I've found its easier to deal with a single tenant than multiple tenants.  I've also noticed that the quality of tenants are usually better with single family homes.  I try to always invest in homes located in excellent neighborhoods.  I buy newer homes, built after 2000, because they usually don't require much maintenance.  I always buy in high income areas with good schools because once again I find better quality tenants. 

I'm sure there are plenty of investors who will argue with my investment style and say that the returns are far better in some of the more mediocre areas.  However I learned the hard way that you can't always chase returns, especially when you are located out of state. 

From my experience I would say be careful where you invest, and who you take advice from.  Good Luck

Originally posted by @Raj S. :

@Adam R.  I'm from NY and I also invest out of state for similar reasons.  Up until a few months ago I was investing in the Las Vegas area.  I own several homes in Henderson.  I actually just put my first offer in on a home in Indiana.

Being an out of state investor isn't the same as investing in your own market.  Always keep in mind that you aren't going to be around to take care of maintenance, tenant complaints, problems, etc.  I personally try to invest in ways that reduce my risk.  Sometimes that can mean accepting a lower return in exchange for less stress.  I generally invest in single family homes because I've found its easier to deal with a single tenant than multiple tenants.  I've also noticed that the quality of tenants are usually better with single family homes.  I try to always invest in homes located in excellent neighborhoods.  I buy newer homes, built after 2000, because they usually don't require much maintenance.  I always buy in high income areas with good schools because once again I find better quality tenants. 

I'm sure there are plenty of investors who will argue with my investment style and say that the returns are far better in some of the more mediocre areas.  However I learned the hard way that you can't always chase returns, especially when you are located out of state. 

From my experience I would say be careful where you invest, and who you take advice from.  Good Luck

 Awesome Raj. Great post. Would you care to share your experince in Vegas so a newbie like myself can learn more. Thanks, Matt

@Matt R.  I've bought a few properties in the Las Vegas area, mainly Henderson.  Not too long ago I was able to find homes for around $100k-$120k that were rented for around $1000 a month.  Prices have gone up a lot since then.  Now you can expect to pay $150k-$170k for the same homes and rents have pretty much stabilized around $1000-$1100 a month.  Its tough to make money in the Las Vegas area if you are going to buy and hold.  There are still some deals out there but they are hard to find.  Once again the numbers I'm providing are in the neighborhoods I invest in, mainly Henderson.

Originally posted by @Raj S. :

@Matt Rosas I've bought a few properties in the Las Vegas area, mainly Henderson.  Not too long ago I was able to find homes for around $100k-$120k that were rented for around $1000 a month.  Prices have gone up a lot since then.  Now you can expect to pay $150k-$170k for the same homes and rents have pretty much stabilized around $1000-$1100 a month.  Its tough to make money in the Las Vegas area if you are going to buy and hold.  There are still some deals out there but they are hard to find.  Once again the numbers I'm providing are in the neighborhoods I invest in, mainly Henderson.

 Cool. Henderson looks solid. Did you do any near the strip?

@Eric T.  

I would suggest doing your own research.  Start by reading some good books on real estate investing and real estate market research... Then conduct your own market research.  The variables you consider will likely be similar, but will differ from other investors.  There are many ways to make money with real estate.  Choose tue way that works for you.  

FYI: to put you on the right track, the main determinants of demand and real estate value are population growth and job growth.   If you're looking for cash flow, research price to rent ratios in the different markets you're considering.

@Matt R.  

Personally, I would not invest in Vegas for several reasons, the main one being lack of industry/job diversity and a information services sector.  When people aren't vacationing, Vegas will be hurting and your rental income likely will aswell.  Too much risk for me personally.

Michigan.  Low cost, low taxes, high rents, high CF

Joe Villeneuve
REcapSystem
A2REIC

Understood. Vegas is unique. It has a 60% dominate industry. However it is not like a lone steel plant closing in a small town when it comes down to its core economy health. I am expecting its non core economy to grow overtime with companies like Zappos investing in downtown etc...but agreed there is room for improvement. For my thinking it is more of a future vrbo deal but I need optional regular buy hold options. Thanks, matt

@Account Closed  I'm not worried about Las Vegas declining.  What a lot of don't understand is that Las Vegas has greatly diversified its economy.  It is no longer a destination solely built on casino gambling.  Since 1999 non-gaming revenues have exceeded gaming revenues.  The share of non-gaming revenues has been growing year after year.  The casino market nationwide is now fully saturated, which is why most casino gambling destinations such as Atlantic City have been in decline.  Las Vegas on the other hand has been thriving by diversifying away from gambling and focusing more on entertainment, dining, shopping, etc.  It is now the entertainment capital of the world.  Last year a record number of tourists visited Las Vegas (over 40 million).  Huge amounts of capital continue to pour into the city with all of the new major development projects.  If Las Vegas didn't collapse during the financial crisis of 2008-2009, then what makes you think it will collapse in the future?  If you believe Las Vegas will decline in the future, then you have to also believe that tourism will decline, and people will stop travelling, and taking vacations, and enjoying themselves.  Also just to be clear even when the housing bubble popped in Las Vegas, and the unemployment rate crossed 15%, rents never really came down.  I would not be investing in Las Vegas today only because home prices have risen to the point where properties barely cash flow.  Two or three years ago prices were so low that it made a lot of sense.  Not only are my properties producing positive cash flow, but they have appreciated in value by a minimum of 30-40%.  I can't see how anybody could argue with that.

Indianapolis has good consistency and job growth.  The area offers a wide range of options to investors.  It is more like a big small town to me than a massive metropolitan area.  I work the city as well as the surrounding smaller towns personally.  Both have their pros and cons.  Fort Wayne is also a big small town in my view.  Not sure of the current employment situation there has fared as well as Indianapolis, but it is a nice town.  No matter the town you pick, I would echo the need to have your PM selected in advance.  Good luck with your venture!

I have a 1 bedroom condo in Vegas for $50k that will rent for $600 mo. Expenses are $250 mo. Completed rehabbed and ready for tenant move in. I can also help you get a tenant in the unit. You should get around 8.5% CAP rate which is good for Vegas right now as most CAP rates have dropped to around 4%-5%. Let me know if you are interested.

Originally posted by @Matt R. :

Understood. Vegas is unique. It has a 60% dominate industry. However it is not like a lone steel plant closing in a small town when it comes down to its core economy health. I am expecting its non core economy to grow overtime with companies like Zappos investing in downtown etc...but agreed there is room for improvement. For my thinking it is more of a future vrbo deal but I need optional regular buy hold options. Thanks, matt

 Vegas also just signed a deal with Tesla that should be huge for the city in future years.

NB: Tesla is moving to Reno, not LV. It was announced September 4 in Carson City.

http://www.reviewjournal.com/news/sorry-las-vegas-...

In addition, the number of jobs is estimated to be 5500-6500... by 2020. They just started hiring, and 14 jobs have been posted. It'll take a while for it to contribute much to upward pressure on housing prices. Reno is only 225k population so the impact should be noticeable.

http://www.rgj.com/story/money/reno-rebirth/2014/1...

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Hey @Eric Fernwood ! Great info! I would love to talk to you more and get those interview questions.

@Eric T.  Unless your are an experienced investor, I would not even try to invest anywhere more than 40 miles from where I live. I live in Riverside, and I only travel to Los Angeles to buy a property if I can net $60,000. MY time is worth $1,000 per mile and I have done over 400 deals. So stay close to home my friend.

Coming from CA originally I invested my money out east.  I made it in CA but buy and holds don't make sense where you are upside down.  Appreciation is CA's foot hold.  Georgia is where I settled and is the #1 investment market in the US right now.  GA has very landlord friendly laws, quick eviction processes if you get non payers which is key.  I sold my last rental in CA when the judge gave the tenant 75 days for free and made me give her back her security deposit before she ever moved out of the property!  No thanks!

Originally posted by @Kelly Eads :

 I sold my last rental in CA when the judge gave the tenant 75 days for free and made me give her back her security deposit before she ever moved out of the property!  No thanks!

 75 days free and a full security deposit before move out?  What was the thought process there?!?

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Investing out of state is possible, but challenging. The main challenge comes from the fact that you can't feasibly always be on site at the property and with the people involved in managing your property. It definitely requires more effort on your part.

@Eric Fernwood it's great info for a newbie like me. I'm just starting to learn and get more information from BP.

I'd love to get a copy of your interview questions.

Thanks.

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