Out of state investing. CA resident.

Starting Out
7yFollow

Out of state investing. CA resident.

Anthony Pascual
Los Angeles, CA · Member since 2019 · 3 posts · 4 votes

Hi everyone. I'm a new member here. I've been heavily considering investing out of state. I currently work in real estate sales here in CA but I also do some personal flips in the Inland Empire (San Bernardino County). I currently have about $500,000 to invest and originally I was looking to flip then buy and hold here in CA. I have had a couple of colleagues who invested in units out of state which is what got me interested in out of state investing. Prices here in CA are ridiculous! 

I have been looking into Texas but I would like to get opinions/suggestions from those of you who are investing out of state. What states/cities should I look into? Are you starting LLC or other corporations in that state? For those that invest in Texas, are the property taxes really that bad? Any pointers on what to prepare for those out of state investments?

I'm open to any and all suggestions/help.

Thank you.

3Reply
122 views

Most Popular Reply

Amy KendallBusiness Member
Real Estate Broker · Lehi, UT · Member since 2016 · 397 posts · 318 votes
7y

My husband and I are just about to close on our first out of state property in Arizona and we are under contract on a fourplex in Florida as well.  I would say to invest wherever you are comfortable with the numbers, and where you can find a team that will help you out.  I found comfort in calling property management companies in the areas I was considering to verify the rents were realistic and the area was good.  They were very helpful and have a lot of information to share.  A good realtor can be a great help as well.  For example, I often take walk through videos for clients of potential long distance investments, and even help them place tenants.  A realtor could also help answer your questions about property taxes as well.  For reference, I looked at a duplex in Houston and the taxes were $5689.42/year.  The tax rate was 2.53%.  Good luck!

3Reply
See this reply in the discussion

32 Replies

Jump to latestLatest
  • Amy KendallBusiness Member
    Real Estate Broker · Lehi, UT · Member since 2016 · 397 posts · 318 votes
    7y

    My husband and I are just about to close on our first out of state property in Arizona and we are under contract on a fourplex in Florida as well.  I would say to invest wherever you are comfortable with the numbers, and where you can find a team that will help you out.  I found comfort in calling property management companies in the areas I was considering to verify the rents were realistic and the area was good.  They were very helpful and have a lot of information to share.  A good realtor can be a great help as well.  For example, I often take walk through videos for clients of potential long distance investments, and even help them place tenants.  A realtor could also help answer your questions about property taxes as well.  For reference, I looked at a duplex in Houston and the taxes were $5689.42/year.  The tax rate was 2.53%.  Good luck!

    3Reply
  • Dani Beit-Or
    Investor · Irvine, CA · Member since 2009 · 259 posts · 183 votes
    7y

    These, and I'm sure you have more, questions are all good. 

    From my experience you should start w/ a "self assessment" because there are many options open to you and you can easily get dragged and join the wrong (for you) investment "herd".

    $500k can be used for a flip in S CA or maybe 4-8 rentals in other states or maybe 2-4 rentals locally.

    It all comes down to these:
    1. Are you an active or passive investor?
    2. How much time you have to put in? When buying? When holding?
    3. Would locally be better or out of state for you/your personalty? 
    4. Are you buying cash or w/ a mortgage?
    5. What's your experience level for flipping? for rentals? 

    As an example $500k can used towards both one $200K flip and 3-4 rentals (or more) - but do you have the bandwidth to do all at once? 

    Once you know better on which investment strategy to focus on than some of your questions will e better answered, such as the use of an LLC, or which state.

    I know sometimes we are looking for simple answers such as "open an LLC in TX and buy 2 rentals for cash" - while that could be the right answer for you, the question is "is it?"

    Hope this helps.

    3Reply
  • Account Closed
    Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes
    7y

    @Anthony Pascual I’m from So Cal too, and I’ve found North Carolina to be pretty appealing. The people there are pretty upbeat like CA, but prices can be found for a good amount less there. It’s good to understand the areas you invest in, so if you don’t have anywhere out of state that you’ve lived or understand, North Carolina might be a good place to look. There’s lots of folks on here to connect with in NC, however it will be important to find your nitch first and decide what sized multi family you want to get into, or if you want to invest in single family houses! I should be moving my business near the Asheville/ Charlotte areas in the next year or so and it’s pretty good growth out there.

    1Reply
  • Anthony Pascual
    OP
    Los Angeles, CA · Member since 2019 · 3 posts · 4 votes
    7y

    Thanks everyone for your response. I will look more into NC, Jonathan Greer, Thank you. 

    I had been looking into Texas, Arizona and Florida because I have some family there but I ended up taking an interest in Texas. I'll do some more research on these other states. Thank you Amy Kendall for suggesting the property management for rent comps. I had been using Zillow, etc. to run comps on rentals but a property management would know that area way more than me. 

    I understand there's no magic answer but I'm glad you all brought up some good point to look into.  

    Another question, how are you all finding these units/rental properties? Do you contact local agents once you decide on a state/city or are you doing your own searches via Zillow, Loopnet, etc?

    1Reply
  • Amy KendallBusiness Member
    Real Estate Broker · Lehi, UT · Member since 2016 · 397 posts · 318 votes
    7y

    I found my deal in Arizona through word of mouth from another realtor who knew a builder down there that was trying to sell two duplexes he is building.  My deal in Florida is a new fourplex being built that I found out about through Norada real estate.

    2Reply
  • Micki M.
    Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
    7y

    @Anthony Pascual When I was in Denver I did out of state investing and helped my coastal clients invest in Denver, so I understand where you're coming from. I'm in NC now so if I can help at all with local research or boots on the ground, don't hesitate to reach out.

    0Reply
  • Account Closed
    Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes
    7y

    @Anthony Pascual ZILLOW

    0Reply
  • Rhonda Blue
    Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes
    7y

    @Anthony Pascual

    Hi Anthony

    I recommend Gatlinburg, Pigeon Forge TN. We lived in Socal for past 15 years with husband working at Blizzard. We started Out of state investing here in E TN after being in St George UT market for 3 years. Great returns on Short Term rentals that leave Long term and multifamily in their wake even with Property management you can still earn a nice return.

    0Reply
  • Denise Roman
    Accountant · Santa Fe Springs, CA · Member since 2018 · 8 posts · 1 vote
    7y

    @Amy Kendall Hi what did you pay for the duplex’s? Sounds like I might be interested as well. Does he have anymore?

    0Reply
  • Randy Janoe
    Lender · Asheville, NC · Member since 2019 · 60 posts · 50 votes
    7y

    Asheville is certainly a fun place to live (particularly if you like beer). Real estate endeavors will be tough and market has really peaked. No where near the supply that there needs to be. However, coming from California, prices aren't such a shock as they are for locals outside of Asheville proper.

    0Reply
  • Matt Nusbaum
    Rental Property Investor · Annapolis, MD · Member since 2011 · 232 posts · 170 votes
    7y

    Hi @Anthony Pascual - TX, AZ, and FL are all good markets for the most part and if you have family there I would focus in on them. What type of properties are you looking to go after? Are you looking to be active or passive? With 500k you've got a lot of options.

    0Reply
  • Kevin Andrews
    Real Estate Broker · Denver, CO · Member since 2015 · 24 posts · 5 votes
    7y

    Anthony-

    As briefly mentioned above, answers to your questions are going to be heavily dependent on your financial goals and a term I like to call "CTR" (Capital, Time, Return).  I just finished writing a blog post on it.  Happy to chat further on the topic as I invest both in Colorado and the Midwest.  

    1Reply
  • Alvin Sylvain
    Los Angeles · Member since 2018 · 466 posts · 471 votes
    7y
    @Anthony Pascual I suggest you look up @Scott Smith regarding setting up a DST instead of a LLC for California. He says it gives you the protections of an LLC without being required to pay the $800 California franchise tax. I'm no expert though, just trying to impart some hopefully useful info.
    1Reply
  • Anthony Pascual
    OP
    Los Angeles, CA · Member since 2019 · 3 posts · 4 votes
    7y

    Thank you all. I'll be looking more into TX, AZ and NC. I'm looking to purchase more as a passive investment. Only because that was my original goal when I began flipping houses. I figured I'd flip until I can purchase income property and have passive income coming in. I'm more interested in 2+ units, Ideally i'd like to be able to have 20-25 doors this year or within the next 2 years. I would be financing, putting 25-30% down. I feel this would leverage my funds. 

    Once again I'm open to any and all opinions.

    This is much more different than flipping houses. I help my father manage 30+ units but finding something like that in CA today would cost an arm and a leg. 

    0Reply
  • Scott SmithPro Member
    Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
    7y
    Originally posted by @Anthony Pascual:

    Hi everyone. I'm a new member here. I've been heavily considering investing out of state. I currently work in real estate sales here in CA but I also do some personal flips in the Inland Empire (San Bernardino County). I currently have about $500,000 to invest and originally I was looking to flip then buy and hold here in CA. I have had a couple of colleagues who invested in units out of state which is what got me interested in out of state investing. Prices here in CA are ridiculous! 

    I have been looking into Texas but I would like to get opinions/suggestions from those of you who are investing out of state. What states/cities should I look into? Are you starting LLC or other corporations in that state? For those that invest in Texas, are the property taxes really that bad? Any pointers on what to prepare for those out of state investments?

    I'm open to any and all suggestions/help.

    Thank you.

     Thanks for the mention @Alvin Sylvain!

    The great state of California! I work with many clients in California in regards to their asset protection and estate planning needs. My general recommendation across the other 49 states is to use a Series LLC, and for several reason I use Texas to establish the Series LLC. When it comes to California I will often recommend the Delaware Statutory Trust (DST.) They both fulfill nearly the same functions, but people investing in CA, and from CA, can avoid the annual franchise tax that will hit you for $800 per LLC or series. With the DST you get an entity that functions in the same capacity as a Series LLC, but due to it's filing status you are not required to pay that tax.

    While I personally hold investments in Texas, I also have investments spread out across other states, as well. Coming from California, the taxes aren't going to be that painful for you, but they are present in Texas and can impact your bottom line. It really just comes down to the particular investment and trying to keep your portfolio diversified - you can find great investments in every state. I usually just look for good partners and move forward from there. With the right team you can make money just about anywhere...

    Podcast Guest on Show #109
    2Reply
  • Chris De CellePro Member
    Rental Property Investor · Los Angeles, CA · Member since 2016 · 41 posts · 28 votes
    7y

    @Anthony Pascual

    I’ve had very good investments out of state while living in Southern California. I’ve invested in three properties, two in Texas and one in Jacksonville Florida. Those two states are very owner friendly. If you’d like I can send you some more information regarding a passive investment into the Jacksonville apartment complex if you’d like. Please let me know.

    Kind Regards,

    Chris De Celle

    0Reply
  • Michael Ealy
    Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Anthony Pascual:

    Thank you all. I'll be looking more into TX, AZ and NC. I'm looking to purchase more as a passive investment. Only because that was my original goal when I began flipping houses. I figured I'd flip until I can purchase income property and have passive income coming in. I'm more interested in 2+ units, Ideally i'd like to be able to have 20-25 doors this year or within the next 2 years. I would be financing, putting 25-30% down. I feel this would leverage my funds. 

    Once again I'm open to any and all opinions.

    This is much more different than flipping houses. I help my father manage 30+ units but finding something like that in CA today would cost an arm and a leg. 

    If you want to accumulate that many doors in 1-2 years, then I suggest the Midwest. Prices are low compared to rent and positive cashflow with the right property management (& right purchase price) is going to be there.

    Be careful though of "D" areas in the midwest. Sometimes on paper the return looks really really good but the actuals will not be or there will be too much hassles.

    I live and invest in the midwest. I am hands on and I have a team that can handle the "tenant-drama" and hassles. Like this this 48-unit I sold and made over $1M on:

    https://www.biggerpockets.com/forums/311/topics/64...

    1Reply
  • Ryan RomingerBusiness Member
    Real Estate Broker · Indianapolis, IN · Member since 2018 · 340 posts · 144 votes
    7y

    Hi @Anthony Pascual!

    I'd love to connect and see how I might be able to help. I'm actually originally from CA myself. I worked in the mountains east of San Bernardino (Big Bear area) a few summers during college. I wish you the best in your RE investment endeavors!

    Cheers!

    Ryan Rominger | Indianapolis, IN | Property Manager, RE Broker

    [email protected]317-935-0075
    Intrigue Real Estate & Property Management4.6285 Reviews
    WebsiteView Page
    1Reply
  • Robert Whitfield
    Real Estate Broker · Atlanta, GA · Member since 2019 · 17 posts · 7 votes
    7y

    @Scott Smith, interesting info about the Series LLC - I was not familiar with that and will keep it in mind.

    0Reply
  • Robert Whitfield
    Real Estate Broker · Atlanta, GA · Member since 2019 · 17 posts · 7 votes
    7y

    @Anthony Pascual, I would definitely seek out a really skilled Broker and or Property Manager in the areas you're interested in - they will know more about the market and have more access to on and off market properties than you will find on Zillow and even Loopnet. There is nothing like having a skilled set of eyes to go see properties for you. You aren't likely to find many Brokers or PM's who are qualified to go do an assessment of the structure and major systems like we do for in and out of state clients, but you can ask your on the ground team to do walk through videos and set up inspections for you. 

    1Reply
  • Mihir Bhimaraju
    Investor · Indianapolis, IN · Member since 2016 · 232 posts · 133 votes
    7y

    @Anthony Pascual It's a smart move to look for markets that stretch your dollar the furthest. While there are numerous national markets nationwide that will give you better returns over CA deals, I highly recommend connecting with your local REIA groups and investor meetups. I was on a trip to CA couple of weeks back and I met quite a few folks in your city who invest in different markets. They're really successful and they have systems and teams in place that you can benefit from. This interaction will also help you in recognize who to work with and who to stay away from. Can't stress that enough. Feel free to reach out if you have any other questions. Good luck!

    1Reply
  • Jerry Tice
    Rental Property Investor · Asheville, NC · Member since 2018 · 2 posts · 4 votes
    7y

    @Anthony Pascual Hey Anthony, NC is pretty good overall. I'm in Asheville and like was stated above good rehab property is a bit tight. I've got my eye on a couple right now though. I am also investing in Indianapolis where inventory is high and relatively cheap but rental rates are good.  Hit me up if you are interested in anything there. I travel every week so I see a lot of cities. Next week Chicago, Milwaukee in a couple weeks, down to Florida after that, etc. So if there is a specific region you are interested in let me know and if I get there I will look around for you. 

    1Reply
  • Account Closed
    Contractor · Los Angeles, CA · Member since 2015 · 887 posts · 323 votes
    7y

    @Anthony Pascual

    There’s a really good book called Long Distance Real Estate Investing by @David Greene 

    You’ll find some great content in there that will help. 

    All the best....

    1Reply
  • Ernesto Garcia
    Lender · Long Beach, CA · Member since 2019 · 66 posts · 15 votes
    7y

    @Anthony Pascual

    Hey Anthony hope all is going well! I'm glad to hear that you're an active investor and you're looking to grow your portfolio. I'm with New Western Acquisitions ( largest real estate investment firm in the country,) & I have an army behind me that works relentlessly to acquire properties at a DEEP DEEP DISCOUNT! Even in CA's market you can see a beautiful ROI with the properties we provide. You're obviously a seasoned investor and want your money out in the market ASAP making you fabulous returns. Please don't hesitate to contact me to see what we can do to get you closer to your goals. To Success 🥂!!

    2Reply
  • Craig Bellot
    Property Manager · CT · Member since 2014 · 687 posts · 329 votes
    7y

    As an investor, you need to know your numbers, cold.

    Whether you hire out everything or are more involved, plan from the beginning to be able to step away from the business if you need to.

    That requires careful analysis of the property BEFORE you buy, to determine if it meets your financial goals AFTER including all expenses.

    If any turn key company sends you a cashflow analysis without at least TIMMUR:

    1. Taxes,

    2. Insurance,

    3. Management,

    4. Maintenance,

    5. Utilities,

    5. Repairs

    Then run for the hills.

    In Bridgeport, Connecticut and many North East regions we also include Snow Removal and Pest control.

    Explore all markets but do your research, as to where net migration and jobs are heading.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free