So there are pros and cons to whatever decision you make, it all depends which con are you willing to deal with more than the other.
1. If you buy in your area, automatically you have lost any potential to invest again anytime soon because your money will be tied up in that one property. However, you will be living in that property and any hiccups that occur, you will quickly be able to handle and keep your tenants happy. Do your research on how much the average rent goes for in that area of Long Island and the potential expenses you will be covering (Water, Heat, etc.) if the cash flow is decent in your eyes then maybe being close to home is better.
2. If you buy in another market like NJ, CT or PA. You will be further away from your property and not readily available to your tenants when anything pops up. That is what a property manager is for, they will be the ones your tenants will be calling in the middle of the night and handling the hiccups. You just write checks to them to cover the cost and another 10% of rental payment per month for maintenance. However, you will be cash flowing so well with these properties it may not even phase you.
There are very decent Realtors and Property Managers in these other states that can help you acquire and maintain your property well. You just have to do your due diligence on them, BP has tons of advice in the blogs on what questions to ask Property Managers when vetting them.
I may seem like I am leaning towards one side but reality is, its still on you and what you are MOST comfortable with. If you are risk adverse, house-hacking in LI is your best bet. If you are willing to go out and take a little risk but cash-flow awesomely, then out of state investing is your game.
Hi @Eric Telese , Brian made a lot of great points in his post above. I am a realtor and property manager here in Connecticut, and let me tell you, you are not the first New Yorker that has considered other nearby markets for many of the same reasons you mentioned. Like Brian mentioned, it's critical to have boots on the ground.
If you have any questions about the CT market, or would like to chat regarding property management, give me a shout and I will do my best to answer any questions.
Thank you both for the advice. @Filipe Pereira what markets do you currently recommend in CT? I am looking for something under 150k for my first investment. Is this feasible in any CT markets or do I need to look further?
@Eric Telese Unlike some others, I don't think there's a "bad" option here. Most of it would depend on your personality type. If you want to control everything you literally can't get more "in control" than sharing walls with your tenants. You'll know if they're too loud, they can't "duck you" when it comes to rent collection, you see the condition of the property every day, etc. Juxtapose that against out-of-area (state) investing and it's a stark contrast. Then you could give yourself an ulcer wondering about all of those things. Typically it's never going to be feasible to visit a long-distance property more than a couple of times a year. You run the risk of having a contractor do shoddy work. You run the risk of a bad property manager. And some of those risk you just have to accept (give up control) and that's part of long distance investing. Sure, you can set up "systems" and "checks and balances" but that takes time, there will likely be bumps along the way, so you still have to almost accept giving up some of that control.
However, if you're like me and have zero interest in being a hands-on landlord so there's something a little bit freeing about investing out of state. I can't drive by the property every weekend. I have to focus on "big things" more than the cost of a lock change. I had to (to some degree) trust my property manager or it's just never going to work. Not that I chose to invest out of state BECAUSE of that but there are some mental advantages to it. Again, assuming you personality matches up with the strategy.
@Andrew Johnson thanks for the advice. I feel that I am definitely a control type of person. But, I believe that scale-able businesses can only be built on the ability of trusting others. I am going to have to learn to give up some of the hands-on things because I am definitely leaning towards long distance investing. Now I just need to find the market that best suits my needs!
Good morning Eric,
As @Andrew Johnson mentioned, this decision should be based on your personality and what you feel most comfortable handling, especially as a first investment.
Its always good to begin with the end in mind. Most people I work with want to eventually hold a large rental portfolio. Most people who aspire to own 100+ units in their lifetime also consider having their own maintenance company, construction company and property management company.
I enjoy working with early investors using the multi-family house-hacking strategy. I get to help them gain experience during the acquisition process to show them how deals get done from beginning to end. Once they're in, they gain hands-on property management experience. After all, if you want to eventually hire out for PM (or have an in-house PM company), you'll know what to expect from them since you've already done it yourself!
Feel free to reach out with any questions & best of luck to you!