Newport Beach, CA · Member since 2017 · 29 posts · 8 votes
(accidentally posted in general)
So I would like to generate as much feedback as I can on this and I sincerely apologize if a lot of this has been covered in earlier posts. I am a newish investor in Southern California I have two Multi Family units out here and I want to expand my investments but the costs and cap rates here are prohibitive. Liquidity isn't really an issue as much as bang for my buck. I have done a lot of research into out of state markets but have held off due to some worries about management, lack of info, etc.
Could some of you with experience provide me with any feedback ranging from the best areas to look into, the best strategies (I am open to anything from more rentals to flips and beyond) and of course the possible pitfalls with out of state investing. Any insight on the best way to get started or turnkey companies you have used would also be greatly appreciated!
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
Pro: It is cheaper. Is this really a pro though? Does that necessarily mean the risk is lower? Does that necessarily mean you can make more money? Why exactly is it cheaper?
Pro: Higher day one cash faux.
Con: You need to hop on a plane (or long car drive) to visit your property, which leads to ...
Con: You are less familiar with the market.
Con: You are 100% dependent on complete strangers to make or break your investment for you and keep your best financial interests at heart above their own.
Con: Can't easily verify work is being completed in a quality or timely manner.
Con: If problems do arise, it will take you longer to find out and they will grow larger in that time.
Con: If something goes wrong that your team can't fix (or in all likelyhood caused) then it is harder to for you to step in to fix it, stabilize the asset, and recover.
Con: Lower appreciation and rent growth ... if you think this is speculative and not consistent, then review the last 50 years of price trends in the market you are in now vs the out of state market you are considering.
Con: Lower tenant quality. Typical tenants in SoCal have the finances such that in any other market they would likely be home owners ... I seriously doubt that this is the case in most out of state rental markets, unless perhaps you are looking in class A neighborhoods.
Con: You can't as easily or practically as a newbie buy under market value and force appreciation.
Con: You can't obtain favorable lending terms through house hacking.
Con: You have to pay everyone to do everything for you, which not only cuts into your profits but also robs you of learning the business hands on.
Con: Lots of cons ... con men and women telling you everything that you want to hear to sell you the dream and take your money. As an out of state investor, you put a huge target on your back for these kind of operators.
In summary, investing out of state is a fantastic idea ... you should totally do it.
Rental Property Investor · Temecula, CA · Member since 2016 · 151 posts · 63 votes
9y
Hey Robert,
Looks like we're neighbors! I live in Irvine half of the month, and spend time in Oklahoma working on deals out there.
Your concerns are legitimate. Living in Southern Cal, I knew the market back in Oklahoma (where I'm originally from) was perfect for various buy and hold strategies discussed on BP, but I couldn't do it from afar. So I changed my lifestyle. Started heading out to OK every other week.
Now, if that's not a possibility. I recommend getting serious here on the forums. There's a lot of great guys doing great deals looking for funding. Heck, we all are. Finding the deals isn't always the hard part, especially in good markets. Finding the best partners, in my short experience, is the problem.
Best of luck to you. Let's grab a cup of joe sometime!
Investor · Broken Arrow, OK · Member since 2016 · 210 posts · 314 votes
9y
Robert, I own twelve SFH in Tulsa area. Could not imagine a better market. Friends of mine in CA were salivating when I told them the ROI and pro-landlord laws we have out here. Left you a colleague request with my cell # so you can call me. Be more than happy to share my experiences with you.
Rental Property Investor · Broken Arrow, OK · Member since 2016 · 1k+ posts · 1k+ votes
9y
Business is very good in Oklahoma!! Your money goes so much further here. Even if I didn't live here, I'd invest here for sure. I'm like Jonathan and could invest in other markets, but the market here is so good. The median home price in Oklahoma is around $115K, which will buy you a lot of 3 bed/1-2 bath homes in good areas, that will rent for 1-2%. If you ever need help locating deals, let me know. I'm finding a lot more then I can buy myself.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y
Ooh, Newport, I love Newport! I'm north of you up in Venice.
I've always bought out-of-state and happy to share resources/turnkey companies, etc. anytime. A lot of it will depend on your preferred price range, SFR vs. MFR, etc. All my properties are turnkey, so can answer any questions you have on that route if you're definitely pondering it.
Real Estate Agent · Killeen, TX · Member since 2016 · 71 posts · 25 votes
9y
It honestly depends on what type of criteria you have for example here in Killeen the multi family market is doing really well as buy and holds but at the same time some of our sf homes stay on market because of the amount of new construction.
Every market is different I advise you pick a state and area you are interested in and speak to agents and investors in the area to get feedback.
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
Pro: It is cheaper. Is this really a pro though? Does that necessarily mean the risk is lower? Does that necessarily mean you can make more money? Why exactly is it cheaper?
Pro: Higher day one cash faux.
Con: You need to hop on a plane (or long car drive) to visit your property, which leads to ...
Con: You are less familiar with the market.
Con: You are 100% dependent on complete strangers to make or break your investment for you and keep your best financial interests at heart above their own.
Con: Can't easily verify work is being completed in a quality or timely manner.
Con: If problems do arise, it will take you longer to find out and they will grow larger in that time.
Con: If something goes wrong that your team can't fix (or in all likelyhood caused) then it is harder to for you to step in to fix it, stabilize the asset, and recover.
Con: Lower appreciation and rent growth ... if you think this is speculative and not consistent, then review the last 50 years of price trends in the market you are in now vs the out of state market you are considering.
Con: Lower tenant quality. Typical tenants in SoCal have the finances such that in any other market they would likely be home owners ... I seriously doubt that this is the case in most out of state rental markets, unless perhaps you are looking in class A neighborhoods.
Con: You can't as easily or practically as a newbie buy under market value and force appreciation.
Con: You can't obtain favorable lending terms through house hacking.
Con: You have to pay everyone to do everything for you, which not only cuts into your profits but also robs you of learning the business hands on.
Con: Lots of cons ... con men and women telling you everything that you want to hear to sell you the dream and take your money. As an out of state investor, you put a huge target on your back for these kind of operators.
In summary, investing out of state is a fantastic idea ... you should totally do it.
Newport Beach, CA · Member since 2017 · 29 posts · 8 votes
9y
David Faulkner tell me how you really feel man haha. No really I appreciate the insight! So as a fellow OC investor what are some of your favorite areas to invest in, in SoCal because you are making a lot of sense
David Faulkner tell me how you really feel man haha. No really I appreciate the insight! So as a fellow OC investor what are some of your favorite areas to invest in, in SoCal because you are making a lot of sense
Wherever I can find the best deal that I can reasonably assess and control my risks all the way through on ... my ability to do that drops exponentially as the radius from my front door increases.
Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
9y
@David Faulkner lots of good points although not always the reality.
I think I finally found someone that is a bit more of a pessimist than I am lol.
I only invest in the market I live in (I used to live and invest in LA) so I think you have some great points but I do see lots (like 100's) of folks make it work long distance though so it can be done you just have to be cautious.
I would also differ a bit on your assessment of SoCal finances. The tenants in SoCal would be a homeowner in another market if still making SoCal incomes in the new market but that is not how it works in reality as we all know. We have a very low median home price in OKC so lots of folks that can and do afford to buy a home here, much higher percentage actually in my personal experience than I ever saw in LA from 99 till 06 when I left.
@David Faulkner lots of good points although not always the reality.
I think I finally found someone that is a bit more of a pessimist than I am lol.
I only invest in the market I live in (I used to live and invest in LA) so I think you have some great points but I do see lots (like 100's) of folks make it work long distance though so it can be done you just have to be cautious.
I would also differ a bit on your assessment of SoCal finances. The tenants in SoCal would be a homeowner in another market if still making SoCal incomes in the new market but that is not how it works in reality as we all know. We have a very low median home price in OKC so lots of folks that can and do afford to buy a home here, much higher percentage actually in my personal experience than I ever saw in LA from 99 till 06 when I left.
100's make it work short term ... 1000's try and fail in the long term (including many of the first 100's category) ... guess which ones we are more than likely to hear from on BP? Yes, Murphy and I are both optimists :)
Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
9y
@David Faulkner actually seen quite a few make it work long term (of the 100's I work with personally).
I am not saying it is for everyone and I see many people jump in before they know what they are doing but it can be done. I have talked many potential buyers out of buying here just because they were not ready or had unrealistic expectations.
I am a realist if nothing else and always share the worst case scenarios with anyone looking to jump in here local or otherwise. I hate it when all these folks talk about getting rich in real estate quick or Property Management.
You can make money in this biz but it is far from easy it takes work and research and many ups and probably more downs before you get the hang of it.
@David Faulkner actually seen quite a few make it work long term (of the 100's I work with personally).
I am not saying it is for everyone and I see many people jump in before they know what they are doing but it can be done. I have talked many potential buyers out of buying here just because they were not ready or had unrealistic expectations.
I am a realist if nothing else and always share the worst case scenarios with anyone looking to jump in here local or otherwise. I hate it when all these folks talk about getting rich in real estate quick or Property Management.
You can make money in this biz but it is far from easy it takes work and research and many ups and probably more downs before you get the hang of it.
Driving a car with your feet can also be done ... it is not for everyone, but perhaps 100s succeed in doing it ... doesn't mean it is a good idea, especially for somebody who just got their learner's permit. There are many cons and very few pros. Peace out.
Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
9y
lol, interesting comparison I would draw the same one for buying stock but that's just me. The draw to me for real estate is having a hard asset that i can touch and feel but some folks don't place value in that. There are pros and cons in all types of real estate whether in state or out of state guess you just have to decide which ones you can live with. In reality if you want a safe investment a CD might be the best way to go.
So I would like to generate as much feedback as I can on this and I sincerely apologize if a lot of this has been covered in earlier posts. I am a newish investor in Southern California I have two Multi Family units out here and I want to expand my investments but the costs and cap rates here are prohibitive. Liquidity isn't really an issue as much as bang for my buck. I have done a lot of research into out of state markets but have held off due to some worries about management, lack of info, etc.
Could some of you with experience provide me with any feedback ranging from the best areas to look into, the best strategies (I am open to anything from more rentals to flips and beyond) and of course the possible pitfalls with out of state investing. Any insight on the best way to get started or turnkey companies you have used would also be greatly appreciated!
The majority for it... will have something to sell you or are new so that makes sense. The majority against have done it or are experienced enough not to have to. The advantages of local are numerous and the disadvantages of far away are numerous. Perhaps the question is...will it be more profitable longterm than OC? 99% of the time absolutely not.
With that I do know some who invest out of state and kill it lottery style....and they invest in Cali.
Investor · Allentown, PA · Member since 2015 · 101 posts · 69 votes
9y
My nephew (Denver, CO) just did his first turnkey deal in Quad Cities, Iowa with the Jason Hartman properties organization. Everything went perfectly (he bought it pre-rehab) and it was tenanted immediately. Everything was as promised and as scheduled. House value of 85k 3/2 no garage.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
Just wait when these out of state investors try to sell...any cash flow will likely be wiped out and many are stuck with that reality of taking a loss eventually. I recently had a little convo with a popular Tk company. He was accounting for 40% expenses, the average for the area was 53%. He was claiming 15% returns for his investors. I pointed out that after factoring for the real vacancy rate and real PM cost (13.8%) with lease up fees and etc, those investments were nearly cemented in stone negative after accounting for inflation and the known averages of no appreciation. He did not disagree.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
9y
I should mentioned the TK company said well we ( our investors) never sell. I know that is not realistic but I left him off the hook with that one. Realistically, those investments are on a slow path to zero returns and you better sell before your kids grow up or you might be left with worthless dirt as far as investments go.
Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
9y
From what I see if you look at historical appreciation rates it seems california is about on par with oklahoma as far as percentages go but I know some areas are different than others. In the short term I know cali has been better but if you are only looking short term I think you may be sorry, I survived the big drop when I lived in Pasadena California by the skin of my teeth. I certainly don't sell/push out of state investing but do have folks call me about it frequently and share with them the realities (good and bad) of our market here. They make the call. If you are able to do local I highly recommend it but in some cities the numbers just don't work for the goals that some of us have. I would question the claims of alot of TurnKey groups as they are often eating up alot of the profit i would think but not sure I have not been a party to those groups in my area.
From what I see if you look at historical appreciation rates it seems california is about on par with oklahoma as far as percentages go but I know some areas are different than others. In the short term I know cali has been better but if you are only looking short term I think you may be sorry, I survived the big drop when I lived in Pasadena California by the skin of my teeth. I certainly don't sell/push out of state investing but do have folks call me about it frequently and share with them the realities (good and bad) of our market here. They make the call. If you are able to do local I highly recommend it but in some cities the numbers just don't work for the goals that some of us have. I would question the claims of alot of TurnKey groups as they are often eating up alot of the profit i would think but not sure I have not been a party to those groups in my area.
I am sure OK is awesome for locals. If you are a really longterm buy and holder (20 years) historically Pasadena out earns average OK we can understand. If one is comparing monthly short term time frames OK vs Pasa...OK wins hands down!
Investor · Pasadena, CA · Member since 2015 · 50 posts · 29 votes
9y
Robert,
Hi. I invest out of state and live in Southern CA. I have two duplex's in the Pittsburgh PA area and will buy more out of state over the next few years. I think that buying out of sate is a completely viable way to invest in real estate especially if you are unable to unwilling to work with CA numbers. Sure, it has different challenges and the potential for different mistakes but that doesn't mean its not realistic or viable.
The number one thing that can help you avoid the mistakes is the analysis and evaluation. For example, in order to choose my property management company, I called and interviewed 10 different companies. I had a set of criteria that were critical to me for a management company.
I also make sure to run my numbers carefully and then revise as I learn and adapt. For example, I was using a conservative % for expenses but after my first year realized that my estimate was off a bit. I revised and now will evaluate my next property in that market differently. In this case I underestimated the PA school taxes. It wasn't a deal breaker but definitely made things tighter.
That learning process would have happened no matter where I invested. I am willing to take the risk that comes with out of state investing as it will allow me to build my portfolio faster, diversify across markets (mitigating risk) and also will provide more insulation or stability if you will as markets change. I chose a market that is way less volatile than Southern California on purpose.
I think your individual evaluation of risk tolerance will very much depend on your personal perspective, your age, the level of capital you have access to, etc. Out of state investing works for a lot of people. You just have to look at it very carefully and decide if it could work for you.
Hi. I invest out of state and live in Southern CA. I have two duplex's in the Pittsburgh PA area and will buy more out of state over the next few years. I think that buying out of sate is a completely viable way to invest in real estate especially if you are unable to unwilling to work with CA numbers. Sure, it has different challenges and the potential for different mistakes but that doesn't mean its not realistic or viable.
The number one thing that can help you avoid the mistakes is the analysis and evaluation. For example, in order to choose my property management company, I called and interviewed 10 different companies. I had a set of criteria that were critical to me for a management company.
I also make sure to run my numbers carefully and then revise as I learn and adapt. For example, I was using a conservative % for expenses but after my first year realized that my estimate was off a bit. I revised and now will evaluate my next property in that market differently. In this case I underestimated the PA school taxes. It wasn't a deal breaker but definitely made things tighter.
That learning process would have happened no matter where I invested. I am willing to take the risk that comes with out of state investing as it will allow me to build my portfolio faster, diversify across markets (mitigating risk) and also will provide more insulation or stability if you will as markets change. I chose a market that is way less volatile than Southern California on purpose.
I think your individual evaluation of risk tolerance will very much depend on your personal perspective, your age, the level of capital you have access to, etc. Out of state investing works for a lot of people. You just have to look at it very carefully and decide if it could work for you.
I think that is great. Invest where it works for you personally. If future investors think Pitt can out earn Pasadena longterm sweet. Historically averaging that has never been the case last 100 years. My grandparents sold Pitt property for 1 mil in the 60s. That same size in Pasadena acerage was worth multi millions more same timeframe and yet not a big difference in original prices.
Investor · Pasadena, CA · Member since 2015 · 50 posts · 29 votes
9y
Matt R. That may be the case but to assume that everyone can invest in Pasadena or Southern California is a bit extreme or to assume that they can take the negative cash flow while waiting on the appreciation. I don't disagree with you that if your game is appreciation and you have the capital on hand to buy in Southern California then some of the smaller markets would not make sense. But luckily there is room for everyone in real estate and there is no one way to accomplish your goals!
