New to investing- need help please!
Hi I am a new investor from souther California. I am looking to invest in a out of state market as southern california is very competetive with high property cost. Do you think its a smart idea to buy my first rental property out of state?
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Welcome to the site @Edrin Shamtob
I think it can be. You will need to do a different type of vetting of course but it can work as long as you are investing where you can have boots on the ground - that can even be your partner not just friends or family you know in the area. You may want to consider partnering with your boots on the ground not just from a checking in the property aspect but many lenders don't lend unless someone with equity is local. I think it is a good idea - I have one investor in the bay area and one on NJ so it can work but it has it's own challenges. PM me if you'd like to discuss further. Happy Hunting!!
@Edrin Shamtob I don't know why you would want to buy out of California when there are so many places in California which cash flow though house prices are stretching that a bit.
Here are the cites that I know about in SoCal where you can cash flow (and there may be others) parts of Bakersfield, Lancaster, Palmdale, Hemet, Yucca Valley and Joshua Tree.
I'm a wholesaler in the Inland Empire and occasionally run across cash flowing properties in Hemet, Yucca Valley and Joshua Tree. Let me know if you're interested. I can put you on my buyer's list.
Uh, no.
There are so much to learn about REI, I would recommend investing close to home where you can be hands-on for your first few deals. Once you are comfortable, then expand to other markets.
@Edrin Shamtob investing out of state can be successful but there are pitfalls to be aware of. Educate yourself of the different avenues, determine your investment goals, and look for proven, viable, trustworthy and transparent teams. That's the beginning and too much to get into a single post. There are some shady business operators out there so make sure you vet everything and everyone. Turnkey investing, Fix and Flip, syndicates, etc., many different opportunities to get involved. Happy to assist if you need further detail.
@Edrin Shamtob Welcome to BP! I'm also in the same situation of being in California with insane home prices. I'd recommend to look further out (2~ hour drive) from your area and going from there. If you haven't already check out the BiggerPockets Ultimate Beginner's Guide to Real Estate Investing.
A lot of people base their decisions on fear. Don't let that be you. Yes, you can flip properties and hold rentals anywhere in the country, without ever seeing them. Best of luck to you!
@Edrin Shamtob Welcome to the club! The answer to your question, at it's most basic, is yes. But out of state investing does present some additional hurdles. It can absolutely be worth it, but you have to commit to your due diligence. The specifics of what you need to look out for will depend a lot on what type of rental investment you pursue. Obviously, most of my experience is in turnkey, but a more DIY approach is also possible. However, I would really recommend hiring a PM (either via the turnkey route where they take care of everything in house or by selecting a PM-only company yourself as part of a self-assembled team). Trying to manage an out-of-state rental can be tricky even for experienced investors, so I wouldn't recommend tossing yourself so fully into the deep end right away.
Jeff has already rightly noted that a successful out-of-state investment is largely dependent on finding a trustworthy team. I consider this an even more important factor than market. There are great REI opps all over the country, but even an amazing investment can go really bad, really quickly, if the people managing it drop the ball.
My general rule is "People first, property second."
This question comes up a lot here on BP, especially from people in CA, NY, and HI. Here's a link to another thread that might answer some of your questions: https://www.biggerpockets.com/forums/55/topics/361...
Hope that's helpful! If you have any questions about turnkey in general or the Birmingham market, you can shoot me a DM any time.
Best of luck,
Clayton
I help many out of state investors with their properties in Kansas City. I believe the most important thing is the property management they have in place In house property management is a vital piece to the puzzle, especially an out of state investment!
@Edrin Shamtob Some people will always tell you that you should only invest in your own back yard but unless your own back yard is compatible with your investment goals, then you have no choice but to go oout of state. I always say that you don't buy a stock because the companies headquarters is in your home town and you can drive buy and make sure the employee's aren't trashing the building. Real investors focus on the financial return on the asset regardless of where it's locate and real investors don't spend time driving around looking at their properties. They hire the best property managers to do that for them. Good property management is key to making out of state investing work but know the areas you're investing in. The biggest mistake people make is getting lured in by the promise of phony returns in low end neighborhoods. No matter how good your PM is, they can't convince good tenants to live in bad neighborhoods. We work with a lot of out of state investors in the Indianapolis and Kansas City markets. These can be great cash flow markets but you have to know which areas perform and which don't. I wrote a report on how to invest out of state which you can find on my website if you want to check it out.
@Mike D'Arrigo wow, that help me with the same question. I see you also work with Investor in the Indianapolis area which is where I am. I would like to connect with you on the Indianapolis market.
@Account Closed: Mackaylee...please send me any property listings you have. I am mostly interested in apt's up to 50 doors...thank you!
Probably stay close to home with your first few. I work a lot with first time out of state investors. Hard money rates are higher for first timers, but that is true everywhere. Out of state requires a good local team: Wholesalers, project manager, contractor, exit realtor, lender. If you go ahead and do it - you need to find someone who can run point on those aspects that are local. You also have to be very involved, don't just turn everything over. Use technology to stay up-to-date on a daily basis and you need to keep the ability to jump on a plane and get there if need be. When there are systems in place this all works great. Problems arise when the systems aren't there and and when you have shady contractors. Mike D'Arrigo always gives great advice, I would pay attention to his comments.
@Edrin Shamtob Kansas City would be a great spot to consider that's out of state. Feel free to PM me.
The Kansas City market is great right now. I was lucky to find a management team that knows the neighborhoods, finds me great deals, understands the market and rents. They really do it all. Buy, sell, manage, repair and provide advice. I couldn't do it without them as I am not overly familiar with Kansas City. Reach out if you'd like me to connect you with my pm. Good luck!
@Edrin Shamtob, welcome to REI and BP! As many folks here have said, a lot depends on how much research and due diligence you do and how good your team is. We are a military family and have out of state properties. We were managing west coast properties from the east coast and Italy at one point and it taught us a lot about what to do and what not to do. Long distance investments come with their challenges.
I would highly recommend looking at areas where you do have someone you trust to be your boots on the ground. Also, look at areas that are within a short flight or drive because you are going to want to travel to that property at least once a year. No eyes are as good as your own. I would also say invest somewhere you want to travel to because then you could mix a little business and pleasure.
Relying solely on your property managers can be rough. Good ones do exist but they seem to be few and far between. We ended up firing our property managers and began self managing and what a difference that made. I spend less time managing the properties directly than I did managing the managers and it has allowed us to build great relationships with our tenants.
Best of luck! Hope this helps! I'd be happy to answer any more questions you might have!
Hello and welcome to BP! I thought you needed some kind of an answer on a problem but all I read was you giving advice. I do not know how you made it as a new members questionnaire about something but obviously you just need to have is notice and answering questions from other people. I would not invest out of town unless it was managed by a turnkey company that has experience. Otherwise you might could do it with a partner. Since flying now-a-days is difficult and not worth anything unless, for some reason, you liked it. I would just try to within an hour.s drive within your home or office depending on where you ate leaving from. Your home or your office. To me it is a way to keep control of others. I would still recommend a property manage company for rental properties. So you can go to sleep by letting someone else cover your time.
Good luck to you!
Originally posted by @Edrin Shamtob:
Hi I am a new investor from souther California. I am looking to invest in a out of state market as southern california is very competetive with high property cost. Do you think its a smart idea to buy my first rental property out of state?
Hello and welcome!
I know many investors from CA that invest elsewhere. With the rising costs out there it is much easier to invest in places like the Midwest where home prices are still very affordable. Please feel free to send me a message with any questions. I would be happy to assist.
It's certainly not un-smart in my opinion. I live in SoCal as well and none of my first (or any) investments have been in CA. Out-of-state is smart for cash flow and easier entry prices, it's just a matter of what kind of investing you are doing and the teams you put in place to work on the properties for you. So I do think investing out of state is smart, but then you just want to make sure you are smart in how you do it.
If you're interested we're doing hundreds of rehabs in Michigan. We have been doing this for 35 years so what we're doing something a little bit unique selling the property fully rehabbed with new mechanicals, fully upgraded kitchen w/ granite tops and fully upgraded bathrooms w/ ceramic tiles and putting a quality tenant and the selling the house as an investment we manage the property for three years and we warranty the house for a year houses and guarantee 8% minimum for 3 yrs for around 95k u getting 1k in rent and taxes and insurance around $2500 so around 10% per year. And the way we remodel houses there won't be much of any maintenance cost for 5 to 10 years. Where one of the top companies in Michigan our tenants typically stick with us on average from 2 to 5 years.
Anyone interested in off market deals in Hemet Ca?? let me know please
Originally posted by @Mike D'Arrigo:@Edrin Shamtob Some people will always tell you that you should only invest in your own back yard but unless your own back yard is compatible with your investment goals, then you have no choice but to go out of state. I always say that you don't buy a stock because the companies headquarters is in your home town and you can drive buy and make sure the employee's aren't trashing the building.
Comparing buying stock to buying real estate is, at the best, an extremely poor comparison. In Psychology, I believe this would be considered a logical fallacy. (That might not be the exact term. It's been a long time, but I'm sure it's in the ballpark.) This is the exact type of marketing shenanigans people who sell turnkey rentals use to dupe naive investors into thinking they are making a wise decision. You are comparing two things that have no connection whatsoever other than being classified under the very large umbrella of "investments."
I do agree with the statement that successful investors don't spend time driving around looking at properties. The most successful California investors I know don't farm out their management to PM companies either. That's a losing proposition no matter how you slice it. Successful investors mind their investments. They have in-house people managing their assets - when they have enough assets to justify bringing someone on-board. They leverage people who are willing to trade their time for dollars. They don't turn over their assets to someone else and pray it all works out because someone selling them the house said it would.