Buying rental real estate in other markets/out of state

[Jason V.]

I'm a recent addition to the community via the podcast - and like many of you here have the ambition of becoming financially independent (the sooner, the better!). Now, that I have a solid security fund on standby, and continuing to contribute as much as possible to my 401K and other retirement vehicles, I'm very serious about securing a rental property. I live in Los Angeles - as you can imagine this market is tapped for someone just starting out in real estate investing. I'm considering looking for properties out of the city/possibly out of state. Does anyone have experience with this? Would love to hear the positive/negatives, what you wish you would have known before buying property outside of your local area, overhead for having to hire someone local to manage the property, whether a long-term or short-term (airbnb) is the best approach, etc. A number of upfront concerns come to mind with a piece of real estate being elsewhere (don't want to bias anyone's feedback, so won't list them), however, seems like the best option in building some passive income given the steep prices in LA. Thanks in advance for your feedback - loving the forums. A lot of great info here, taking it one page at a time, so I don't get too overwhelmed. haha.

[Mike D'Arrigo]

@Jason V. We work with a lot of out of state investors and the biggest mistake I see people make is buying the wrong class of property in the wrong neighborhoods. Too often, people spend a huge amount of time researching the perfect market and not enough time understanding the micro markets within their market. Often times they someone will convince them that a neighborhood is one class when it's something entirely different. You can overcome any mistake except buying in a bad area. Even as an out of state investor, it's not that hard to get to know an area. Get familiar with the median prices and rents in your market. If median rents are say $1000 and you see areas renting for $700 that tells you something. Do your due diligence and get familiar with the neighborhoods. Next, make sure you have an excellent property manager that you can trust and rely on. If you have a good asset, in a good area and you have someone you can trust managing that asset, you can do very well in the right markets. I agree totally with @Aaron K. that short term rentals is not good for out of state. They are very management intensive and that can be your achilles heel.