Rental Property Investor · San Francisco, CA · Member since 2015 · 26 posts · 32 votes
I'm thinking about making my first real estate purchase, an out of state rental property, and wondering the best way to go about finding and analyzing a property.
Do people who are investing out of state typically pick one area, learn it well, and buy in that area? Or is it more common to do a more general search and focus on the math of a property?
I'm wondering if it's better to spend my time learning about one specific state/city/neighborhood or if that's less important.
I would figure out if you want to focus on cash flow or appreciation. Here in the Bay Area we are used to appreciation so it’s easy to get jaded.
Pick an area and focus on it. That’s what I’m doing. I’ve picked Cleveland, mainly for cash flow... and have been doing it slowly. There are plenty of people here in BP that have done 100’s of deals and/or own several hundred units. I own 2 here in the Bay Area and will be closing on my 6th (For a grand total of 8 units) unit in Cleveland next Friday.
The 6 in Cleveland have all been acquired since November of last year. All are between the 2% and 3% rule and are in C neighborhoods.
Do your due diligence, fly out to the area if you’re not familiar with it. I did.... twice. Meet some PMs and agents while you’re there..., and literally “own” it.
As many have mentioned set your goals first. What type of strategy you are looking for, what type of properties, how much do you want to invest? Then pick one area and do your due diligence. Connect with local investors,agents,lenders,pm over here on BP and start building your team. Fly over and get a feel for the location you are targetting. Finally just go and hunt for the good deals.
I decided to research markets, narrowed it to 3, then researched PMs
I'm curious - how did you initially narrow all the possible markets to your list of 3? And then what led you to choose Indy over the others?
So I was looking at taxes, land lord laws, elemental considerations (don't like heavy snow), growth of the city, but most importantly teams I could work with when starting my portfolio.
I am happy with the duplex so far, a few bumps but I'm glad I did it. Looking for my next SFR or duplex now.
Good luck finding a market! Can't wait to hear about the first deal you close.
@Travis Raila Lots of good advice in this thread. Let me know if Nashville, TN (and surrounding area) makes your list. I’d be more than happy to help you in your search.
@Renee Shifris
I’ve gotten various inputs from REIs and they are pulling out due to decreasing population. I know Cleveland Clinic and Universty Circle and Heights seem to have potential? But that goes back to one employer issue. Do you have any recent information about the city implementing plans to support growth and potentially invest in the growing BioTech sector? I’ve googled and everything came up empty.
Thanks
@Renee Harris city-data.com is a great place for research on a lot of these factors another good resource are the various school rating sites to check school districts.
@Travis Raila Lots of good advice in this thread. Let me know if Nashville, TN (and surrounding area) makes your list. I’d be more than happy to help you in your search.
Appreciate the offer, Jason. Let me do some more research and circle back with you if Nashville makes the short list.
@Travis Raila one thing I learned about getting management for my SFR's, after you hone down your short list of PM's, go visit their premises, do they have posh offices? Is it comprised mostly of RE agents? Principals don't own anything themselves? if yes, those are minuses in my book. If they have a warehouse with supplies, or own investment property themselves, have long term handyman and contractor relationships, can vet workers for their own property first for instance, can quickly give HVAC or Roof replacement est. without calling anyone, then those are all pluses. Seems silly but I want to see a Truck or two on their premises, it shows engagement with workers. Now that I moved to another State, and can't go to my properties on a moment's notice, I see how easy it is to eventually lose my gains on capex if my PM doesn't stick to procedures, can't/won't go themselves to see important issues as they arise, and after they are fixed. Keeping Contractors on course is a constant task. When PM's stop getting their hands dirty, you can start losing money.
@Renee Shifris
Hi Renee, I am currently looking at the Cleveland area. Can I contact you wITH some questions about certain areas and if they are worth my time looking at? I am located in Southern California and very very new to this. Any help would be great.
And if anyone sees this and has info on Cleveland area and that would be willing to share would be appreciated.
@James Wise
Hi James,
I am very interested in the Cleveland area more specific East Cleveland. Is there a chance we could talk and go over some things about this area. I am very new to this and I am working with someone but we are both from California and don’t know a lot about the area.
Thank you
John
@Brian Garlington
Hi Brian,
I am current looking in Cleveland area and would like to pick your brain on some of the areas I have found. Thank you in advance. I am very very new to this and working with a partner but we are both located in Southern California.
@James Wise
Hi James,
I am very interested in the Cleveland area more specific East Cleveland. Is there a chance we could talk and go over some things about this area. I am very new to this and I am working with someone but we are both from California and don’t know a lot about the area.
Thank you
John
Congratulations on taking the plunge into REI! I just closed on my first "real" investment property myself and finding a market was definitely a difficult choice and I'm happy to share my experience with you directly, so shoot me a message.
Most people tend to choose large cities, but I felt like a lot of urban markets were oversaturated and there was a lot of competition, so I decided on a property in Pell City, AL. I guess what I'm stating is to not be afraid to look outside city lines for deals. I would recommend staying within the same state for your first couple of properties though, just to make it easier come tax time.
As many people have posted, you should define a strategy early on. It looks like you're doing a BRRR which I don't have experience with, BUT if you're holding onto the property after the refinance, find a good property manager. If they charge a lease renewal fee, factor that into your numbers (since it will likely be more than just the 10% cut you'll be paying them annually). Also, since you'll be renting the home, I'd recommend a landlord-friendly state. From what I was told, red states usual favor landlords and blue states normally favor tenants.
Oh, and if you're married, think about whether you want to have your wife included on the deed and if she wants to partake in all of this, given the paperwork that's involved. Some states (like Alabama) allow you to have the title deeded under your name alone which made things easier for me and made my wife happy.
@Renee Shifris
Hi Renee, I am currently looking at the Cleveland area. Can I contact you wITH some questions about certain areas and if they are worth my time looking at? I am located in Southern California and very very new to this. Any help would be great.
And if anyone sees this and has info on Cleveland area and that would be willing to share would be appreciated.
Hi John,
Absolutely!!! I am sending you an email to schedule a call.
@John McCord First thing to do is get pre-approved with a lender first. No Realtor will take you serious when you call them from out of state to get some ideas about properties when you can't tell them you are already pre-approved.
@John McCord Hi John, I'm an investor in Cleveland and located in So Cal as well. I'd be happy to discuss my experience with you. Feel free to text or email me.
Hello BP! I'm also new to this forum and looking to invest out-of-state in SFR. Thanks to everyone for all the advice and guidance in this thread, it's extremely helpful. When I run the numbers for some of the areas around Cleveland, for example Parma, cash flow is very slim at $150/mo. And I haven't even included vacancy cost or the cost of a landlord policy. I'm using Zillow's estimates of average home price of $125,000 and average rent of $1,120 which seems to line up with the listings I've looked at. At nearly 2.3%, the property tax is a significant expense. Am I missing something? Any feedback would be greatly appreciated.
@Grant Rothenburger You dont want any 1 company providing 20% or more of the jobs? What about growing college towns, wouldn't that be an exception?
Sorry, I meant 1 industry. No, that would not be an exception for me, but it can be an exception for others. There is not a right or wrong here, that's just a guideline I believe in.