Out of State Turnkey Rental Properties Using a H.E.L.O.C

Member since 2019 · 2 posts · 1 vote

I'm looking for 1, possibly 2 turnkey out of state properties to purchase. Looking to spend no more than $50K on each property. I also need a property manager to help me maintain the properties. I'm new to this, but ready to take massive action with someone interested in growing a relationship that could develop into more properties throughout the country.

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Nathan Williams

Member since 2019 · 172 posts · 93 votes

Originally posted by @Matt Everling:

@Nathan Williams so would you still consider Cleveland or Columbus or will you now focus on Indianapolis?

We still will keep an eye out for those markets but they likely would not be our first choice. We ultimately didnt choose Cleveland due to the high vacancy rates and overall population decline. Columbus seemed to be trending in the right direction but the overall rent return to property value ratio left alot to be desired.

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Caroline C.
Investor · Jacksonville Beach, FL | NYC | Tamarindo Costa Rica · Member since 2014 · 182 posts · 130 votes
7y
@Luis Velez since you are planning to buy with HELOC, make sure you set enough aside enough funds for reserves. When you buy a $50k property, you may encounter repairs needed or costly turnovers, and perhaps sooner than you would think. Cash flow on those properties are great, but poor or late rent collection and managing repairs can eat up all the cash flow and sometimes you have to dig back into your own pocket. You need to do a thorough due diligence on your property manager.
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Nathan Williams
Member since 2019 · 172 posts · 93 votes
7y
50K has been my budget as an out of stater. The cities we focused on for a variety of reasons were Houston, Cleveland,Columbus, Memphis, Indianapolis, Detroit. Our first option was Houston as we had success there with 2 previous properties but unfortunately the market for decent properties at 50K range there has pretty much dried up. We recently found our next property in Indianapolis.
a few things:
-try to find properties that are not necessarily "turn-key" as those often have a premium price tag attached to it, to ones that were simply very well maintained and pretty much rental ready.
-At this price range Ive yet to find someone who is going to hold my hand and take time to curate properties and deliver them to my wife and I.  We have to do the legwork and research ourselves. The best we have is a very responsive agent in the Texas area who will give what ever insight she knows of the area and will run some rough estimates for rent potential and take a look at the property if we like it
-seems like you have 100K total... have you considered doing a multi-family property? that can out-earn 2 50K properties
-as out of stater investor I suggest trying to stay in no worse than C class neighborhoods. Too many potential issues that even the most decent property managers wont be able to fully mitigate.
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Matt Everling
Rental Property Investor · Temecula, CA · Member since 2019 · 128 posts · 54 votes
7y
@Nathan Williams so would you still consider Cleveland or Columbus or will you now focus on Indianapolis?
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
When you say $50k per property, is that $50k total purchase price for the property or $50k to use towards a down payment and closing costs?
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Nathan Williams
Member since 2019 · 172 posts · 93 votes
7y
Originally posted by @Matt Everling:
@Nathan Williams so would you still consider Cleveland or Columbus or will you now focus on Indianapolis?

We still will keep an eye out for those markets but they likely would not be our first choice. We ultimately didnt choose Cleveland due to the high vacancy rates and overall population decline. Columbus seemed to be trending in the right direction but the overall rent return to property value ratio left alot to be desired.

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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
7y
@Nathan Williams Columbus, OH is an appreciating market. A lot of investors get discouraged with our cash flow compared to other markets. It seems like you are asking a lot with C neighborhoods, turnkey, increasing population, and $50K spending limit. Good luck! I would be interested to see how this works out for you.
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Nathan Williams
Member since 2019 · 172 posts · 93 votes
7y
Originally posted by @Remington Lyman:
@Nathan Williams Columbus, OH is an appreciating market. A lot of investors get discouraged with our cash flow compared to other markets. It seems like you are asking a lot with C neighborhoods, turnkey, increasing population, and $50K spending limit. Good luck! I would be interested to see how this works out for you.

definitely understood that about Columbus and can understand why many would want to invest there. But for me cash flow is a huge priority at this point in my real estate ventures where I'm trying to ramp up funds to help pay off loans and/or save for my next purchase. And yes Im aware Im asking for alot... took us months to search and research, about 8 unaccepted offers, and a property we had to walk away from in escrow until we found our latest purchase.

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Ric Ernst
Los Angeles, CA · Member since 2019 · 148 posts · 127 votes
7y
@Luis Velez...my 2 cents. A HELOC is a great resource. I've used mine to pay cash on properties in the same $50k range you are looking for. I am sure you realize that it needs to be paid back in a short amount of time (usually 10 years from the day you secured the HELOC) with compounding interest. Unless you are flush with cash, I would be concerned about using a HELOC to buy turnkey. The idea behind using a HELOC, borrowing against your 401k or IRA or even using a hard money lender, is that you'll refinance your investment and pay off that short term loan. Turnkey properties are generally priced at or even above retail so your refi (which won't be able to happen for 6 months) will only be for around 70 - 75% of what you put in leaving you with both a HELOC payment and a mortgage. You'll probably still make money in the long run but you will have negative cash flow for several years unless there is some big appreciation. You're in a good position to have that leverage to get in the game. However, at that price point, I would suggest looking for cheaper distressed properties that you can rehab and force equity into. There's obviously some work involved and a learning curve but the rewards are out there.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
7y
Originally posted by @Luis Velez:
I'm looking for 1, possibly 2 turnkey out of state properties to purchase. Looking to spend no more than $50K on each property. I also need a property manager to help me maintain the properties. I'm new to this, but ready to take massive action with someone interested in growing a relationship that could develop into more properties throughout the country.

Instead of using a HELOC you'd be better served to just get a mortgage on the out of state property directly. This way you'll have an additional safeguard in the appraisal process. Bank ain't letting you loose their money on a terd. If you look at big turnkey scams like the whole Clayton Morris (Morris Invest) dumpster fire, the common theme with all of those investors who got screwed was that they all paid cash.

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Forest Skufca
Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes
7y
@Luis Velez Ali had the same question I did. If you are looking to put 50k down on a house and finance the remainder, you can get a great property, or two, off of 50k that is a managed turnkey property.
I would also take some time to research your turnkey providers. Interview several to find the one that achieves your goals. I would also recommend choosing one that offers a rent and maintenance guarantee so you can have some peace of mind when investing out of state.
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Gary Carver
Realtor · Detroit, MI · Member since 2018 · 387 posts · 129 votes
7y
@Nathan Williams. Detroit meets a lot of the criteria you’re looking for
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