Out of state purchase rental property strategy?

17 Replies

Hi BP folks, has anyone bought property out of state, without having a close friend, family member or a business partner (boots on the ground) sort to say, to inspect, drive by, take pictures of that location? How did you go about finding and checking out the homes? Would cost a lot $$$ to constantly take trips out there by plane, hotel, etc... Any words of wisdom that you all could recommend? many thanks
I would look at the markets you plan to invest in first. Going on websites like city-data.com and crimereports.com can help you find what is good and bad in your area and what neighborhoods you should avoid. Since I assume you're a beginner, I would recommend purchasing properties from turnkey companies. All you have to do is buy one of their properties and they will manage it for you along with the tenants. However I would research the house, it's location, and also calculate the CoCROI that you may receive on the property since they will take roughly 10% of your rental income.
Originally posted by @John Chung :
Hi BP folks, has anyone bought property out of state, without having a close friend, family member or a business partner (boots on the ground) sort to say, to inspect, drive by, take pictures of that location?

How did you go about finding and checking out the homes? Would cost a lot $$$ to constantly take trips out there by plane, hotel, etc...

Any words of wisdom that you all could recommend?

many thanks

Many people who buy out of state use Turnkey Providers or someone very familiar with the market. Ideally, you should pick a market that fits your strategy and then look for professionals in that area. if you can't make it out there, which is understandable, ask for photos, VIDEOS, anything that can give you a sense of the home and the location. Make sure to do some research to see what kind of area it is and what they are trying to sell you. Also, before closing on the property, you should be able to get a third party home inspection. That should make everything clear about the property and what needs to be done.

Best of luck to you!

@John Chung Lots of people here on BP have done out of state investing, including myself for the past 5 years.  I started working with turnkey providers (which can be a complete team under one roof) and expanded into other realms from there.  Lots of additional risks when you are investing at a distance, at it can all come down to having the right team to work with.  There are some very passive ways to invest and some that are far less passive in terms of taking your attention.  Here on BP blog, I've written about Three Key Routes for Passive Real Estate Investing

All best in your REI

It completely depends on how you structure it. If you are trying to BRRRR or flip or something, that is much more intensive and you'd want to be more boots on the ground yourself rather than always trusting a team. The opposite end of the spectrum is buying turnkeys, where everything is done for you so at that point you wouldn't technically ever have to go out, but I'd recommend going out at least once initially and then during any big turnovers. But that's not many trips and can be done pretty easily. And then there's every level of intensive (or not intensive) inbetween.

I live in Venice and all of my properties are out-of-state. I spend maybe max a couple hours a year if all is going well on my properties. I went the turnkey route though. If you go non-turnkey, I do recommend spending a lot more time establishing your team and getting your ducks in a row.

Reach out anytime if you want to chat!

@John Chung - the first time I purchased an out of state property, I drove to visit the city, meet the team and inspected the houses prior to purchasing. Prior to going to the city complete your due diligence on the population, jobs, housing costs and city or state business environment and credit rating... let me know if you need more help!

Hank

Originally posted by @John Chung :
Hi BP folks, has anyone bought property out of state, without having a close friend, family member or a business partner (boots on the ground) sort to say, to inspect, drive by, take pictures of that location?

How did you go about finding and checking out the homes? Would cost a lot $$$ to constantly take trips out there by plane, hotel, etc...

Any words of wisdom that you all could recommend?

many thanks

 It can be as simple as hiring someone from fivvr to drive by and take pictures and text them to you. When I buy out of state I usually have joined up with a partner. That saves a lot of trouble. But, if you want to fly solo without a parachute, as someone previously stated look at city-data.com, have someone drive by take pics & send them to you, and look at the property with google earth.

I’ve done this in two different cities, Cleveland and Memphis and plan on continuing it in the future. Honestly the first one is the scariest and after that it’s much easier.

If you trust the people you work with you really probably only need to see them every couple years or so (but have inspections done more often than that)

the only way is to get yr rear end on a plane and see what you are buying.     Walk the streets @ 10-11pm will give you all the info you need about class of area.

A great way to start (or at anytime really) is to reach out to investors in that area on BP. Tell them you're considering their market and ask which neighborhoods are best, property manager recco's etc. Start building relationships first. It's a great way to get a feel for the area. Also great way to find managers, contractors, etc. You'll be surprised at how many doors this will open. A few years back I read about Grand Rapids on BP. Started reaching out to investors, eventually talked to a property manager and he had some off market properties. Didn't know the neighborhoods that well so sent them to a few investors I had built relationships with (but be careful you don't give away the deal), they gave me their opinions and it went from there. Wound up buying a few that are doing very well. I recommend you visit as well. And FYI - out of state investing is all about management. Find good ones. 

Most important thing to do is to get a 3rd party inspection on any property you buy. 

On top of that it"s nice you buy with leverage instead of cash. This is great for two reasons. 1. OPM is the best part of REI & 2. The bank will require an appraisal. Banks not gonna let you run loose with their money.

Thanks so much!

Yes I wish I had a partner in the vicinity of where I want to buy...but unfortunately, I don't know anyone there.  Trying to network amongst my friends to see if there is someone they know interested in partnering up.  Until then, ill have to see if I can give it a go myself with the tactics you mentioned.

many thanks!!

I’m currently looking for my first property out of state. The town/county I have my eyes on is about a 2-3 hour drive from where I live though. I reached out to other investors here on BP who live in the town and other investors. They gave me a ton of info and insight on how everything works. Went there myself a couple of times and spoke to the locals. I was lucky enough to find a realtor that lived in NY all her life and moved to the town I’m interested in. She’s an investor herself and this has helped me tremendously. Reach out to people on this site. What city/state are you looking at? People are here to help. Good luck.

@Joel Moran If I️ may ask, what area did you settle on that is only a 2-3 hour drive from “the city?”

@John Chung

As an active out of state investor myself, I would recommend attending local REI meetings. It's through these events you might come across someone who has invested out of state and you can work with them so that you build a proper foundation by learning the ropes before just going out there and buying. Feel free to keep in touch and best of luck!

@David Rosenberg  

Sure David,  I am looking at Lackawanna County in PA, more specifically Scranton and surrounding towns. The town itself has gone through some rough times since the coal industry left a long time ago. Unemployment is one of the highest in the state of PA but the town has 7 colleges,3 hospitals,  Wal Mart, triple A baseball team, Ski resort etc. Population is increasing so the demand for rentals is going up. If you are looking for appreciation than this might not be the place for you (at least for now) but I am looking to buy & hold and if I need to flip I can always look at the neighboring towns for a deal in the future. It seems the town has been mismanaged politically & financially for a long time. Not sure if that's going to change anytime soon but I'm willing to give the town and it's people a chance.

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