I live in venture California. Prices were already pretty ugh and will likely be overinflated for a while due to the big fire we had in December. I have been pondering if investing out of state makes more sense. What are people’s thoughts on doing that as a new investor?
What are good areas to do that in?
I’m hesitant to buy something far away. And might feel better buying somewhere near family or friends which put Phoenix Arizona and Evansville Indiana on my radar of places to try to learn about.
Hello and welcome to this site and asking that question Eric! If you are considering investing out of your own "back yard" when starting with investments there are only a couple things I would do. One is with Turnkey properties that do the purchasing, the renovations, and the managing and they can be trustworthy and reduce your travel expenses. The return may not be very high but is a bit easier. The second recommendation would be to do a house flip with a special and your able to move there and be a "house hacker" and take advantage of the lower down payment.
The only other way away from home is to buy an apartment complex that had a minimum of 30 units so that project could afford property management company from that local area, they need to be experienced and understand what you expect in reporting and current operation with phone talking. You need all of your business obligations from local vendors, contractors, and certain Team members.
With regards to a location be is the southern United States around fairly large cities that are devirsably economically, has growing population, job growth, and to invest in a growing area. I do not blame you to invest out of California. It has been some time that I heard any good things about it. Otherwise, to invest locally I would be very careful and use those things I have mentioned about out of state investments. To be more detailed about out of state investments I would look in Dallas, Houston, Miami, Phoenix, Atlanta, Nashville, Chicago which is a northern location.
There are a few other cities to consider like Fort Worth, Austin, Mobile, Tallahasse, Albaquerkee, Oklahoma City, Memphis, etc.. Please that I might have mis-spelled some of those names, the bottom line is to be in well known city. Good luck to you!
Investing in a place where you have 'boots on the ground' (family and / or friends) is a great place to start. If I lived in an expensive area, it'd be a no-brainer to invest Out of State. Before diving in, I'd start with David Greene's book on 'Long Distance Real Estate Investing'. There he talks about the core 4. Here's a post on it (made by Greene) :
You can get a-lot of your questions answered in that book, and if you're seriously thinking about it I would use that as a foundation. Hope everything works out!
Hi Erin, I’m from, live in and invest in Evansville. Happy to help put you in touch with service providers or provide info as needed. Feel free to reach out.
Congratulations on your big step into Real Estate Investing! Investing out of state should not be difficult as long as you have family in the area. You could pay them to check out the property and the area for you.
I'm from Detroit, Mi which is great area to start investing. You just have to find the right people. However, I moved to Tulsa, OK last July. It appears to be a pretty strong market here.
I I live in Oklahoma City and have been on the hunt for a hundred unit apartment building for the last 2 years but the market has been so over inflated from out-of-state investors it does not make sense to buy anything here in my humble opinion. Tulsa looks like a better fit if you're looking for out of state as it returns will be much better
Some great advice is posted above. You're not the only person in California with your problem... especially in Southern California.
If you're a beginner investor, you'll probably feel a lot more comfortable if you can quickly get to the property in the case of an emergency. I usually recommend the two hour rule -- either a two hour drive or a two hour flight.
Anything more than that may be too much of a hassle and could cause serious problems with your job should the property catch on fire or have some other grave emergency that would require your attention.
For California investors, I recommend looking into the Sacramento / Stockton central valley area (homes are half the price of southern California) or Phoenix Metro, Arizona and Las Vegas / Henderson Nevada. Both are super quick trips by flight, and not too long by car if you're on a budget or need to leave on short notice.
Another option may be further east if you have friends and family in the area ("boots on the ground") that can keep eyes on the property for you, meet contractors, property managers, etc. for you.
Or if you're a pretty savvy investor, feel free to buy wherever you like, but don't get stuck in the trap of analysis paralysis. Once you open up the potential market to the entire country, it's a whoooooole lot to consider as you compare markets against each other.
Should you decide to look into Northern California (Sacramento / Stockton) or the Phoenix Metro area let me know and I'll try to get you pointed in the right direction. Best of luck!
Hi @Erin Schenk ,
I'm in a similar situation. I live in Los Angeles county and I've been investing out of state in Oklahoma City. There are certainly many advantages for investing in your own backyard in terms of existing relationships, understanding the market and extra peace of mind especially when just starting out. And if LA made sense for my strategy and goals right now, I would still be investing here. And if the market conditions change around here again, I'll be ready.
But with technology today why not take advantage of opportunities in other markets that make more sense for your strategy, goals, available capital etc... It is very feasible to put together a team and system that would function the same whether you are investing down the street or across the country. You could also make an argument that out of state investing forces you to develop the system and network from Day 1 that will move you closer to passive investing than if you invested down the street.
I agree with @Naftali Tolibas . A reasonable compromise is to invest in a good out of state market where you have some existing connections that can help you jump start the networking process. Either way, David Greene's book on long distance real estate is a great starting point to learn more about how to leverage systems, relationships, and technology to allow you to invest wherever the best investment opportunities are. And from there you'll have a pretty good idea if it's within your comfort zone.
@Erin Schenk Fresno is certainly a good option for you being that you are in Ventura. It's a bit over 2 hours but still pretty accessible. I have a number of clients from the bay area that have found success in Fresno. Bakersfield, which is 2 hours closer than Fresno to you could be a good option as well. A highly rentable SFH in a great school district may go for 250k and up with rents starting around $1500. MFH's in a B class area go for about 65-80k/unit depending on the level of work it needs. There are a lot more details to all this.
If you would like to discuss Fresno at all feel free to message me, have a great one.
Erin, I work with several investors from California, who are investing here in Tulsa because of the challenges of the California market. As an investor myself, I agree it is scary to invest in areas you don't really know, but having family in a market is a giant plus for you. I own property in south Texas, and don't have friends or family there, but we visit there frequently so have learned a lot about that market. Find someone you trust and they can be your eyes, whether it is a family member or a realtor.
@Erin Schenk I am an investor and real estate agent in Bakersfield and have considered out of state as well, but for me, I prefer Bakersfield becuase I manage my properties myself which increases my cash flow and cuts down on vacancies and repair costs.
Are you looking at buy and hold, single family, multi unit or fix and flip? Id be happy to answer any questions about the kern county area and where you can get the most for your money. There are still great deals if you know where to look!
Most of my customers are out of state investors. My advice, get your team of trusted local advisers lined up before you buy (agent, manager, contractor, etc). Treat them like your cabinet and run opportunities across them for multiple perspectives.
When their perspectives align and the opportunity's numbers meet your investment criteria, you might have a winner!
@Erin Schenk I started out of state and like the whole 2 hour flight idea.
It’s challenging at the beginning as you network and find good providers. Once you do that it’s much easier.
My latest purchase is 55k, rent 800. B neighborhood. Hard to beat that in most markets
Buy anywhere you can make money, hire a good PM team and let them handle the rest. I would sacrifice some cash flow for a good PM team that knows how to minimize expenses and increase bottom line profits.
Almost anywhere in Texas right now is a safe bet in the 4 major markets.