Investing out of state

45 Replies

Hi everyone,

I am new here and new to real estate investing. I live in the San Diego Area in California and won't be investing in real estate in California because it is too expensive. I would like to buy a rental investment property in the midwest, but don't know where to start because it is out of state. Any advice on how to start finding properties out-of-state would be great! 

Thanks!

Jumping into buying out of state without initial expertise can be a setup for disaster. I'd recommend learning locally first then branching out. It can be hard enough managing a project across the street from you, and much harder across the country.

@Kevin Hoff

Obviously you need to be able to vet your deal and perform due diligence.

That said, you need:

  • Boots on the ground
  • Someone that will look for properties that fit YOUR criteria.
  • Have your financing in line to move quickly. The good deals don't last long. 
  • If you're all cash or mainly cash. You can purchase off market. Traditional finance works OK for properties that are listed MLS/BLC.
  • You need patience.  Learn the market so you have the ability to act quickly. Being uninformed and trying to make quick moves can cause major problems very quickly.  
  • Then there are the questions of strategy.  Distressed property, rent ready, etc. what are you looking for.

Hope that helps.

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Originally posted by @Kevin Hoff:

Hi everyone,

I am new here and new to real estate investing. I live in the San Diego Area in California and won't be investing in real estate in California because it is too expensive. I would like to buy a rental investment property in the midwest, but don't know where to start because it is out of state. Any advice on how to start finding properties out-of-state would be great! 

Thanks!

Do you have any state or markets in mind? I would start there and search for any professionals who work there. Many who invest OOS go with a Turnkey Provider so everything is done when you purchase the property. 

I’m also “newbie” in San Diego but things I’ve found helpful are leveraging connections you have out of state (relationships are everything) and committing to spending a year or two researching-reading, podcasting, etc. whatever works with your life and allows you to absorb information. BP has tons of books and a podcast. 

At some point then you have to take action when opportunity stares in the face.

Investing is extremely complex and requires tons of research and knowledge. 


You’re on the right track!

@Kevin Hoff

Just a heads up - you ought to find some boots on the ground. Since you're OOS, you're prime for two big problems:

1. Overcharged services/mismanagement from a property management company; and

2. Buying a property in a bad area

Local boots on the ground lowers your chance of buying a losing house and increases your chance of accountability from the property manager.

Anyways, good luck.

@Kevin Hoff whichever market you choose, St. Lous, KC, Indy I highly suggest jumping on a plane and surveying the neighborhoods yourself. Set up some meetings with Turnkey providers and interview them. Go view their listings with and without them. Go at night to get a real sense of whats going on. Thats what I did when I decided to get into the KC market and Im glad I did. Some properties showed well during the day but the neighborhood was sketchy at night!  This is the best $500 you can spend if you're really serious about doing this 

Hey Kevin, 

I found myself in the same situation abut a year ago when i first started investing. My actions that lead me to my first deal went like this: 

1. What's your budget? How much liquid cash do you have to purchase your first or first few rentals? 

2. How will you pay for that rental or rentals? If you have a lot of liquidity, it might make more sense to buy cheaper properties with 20% down that still cashflow. Will you be using conventional financing or private portfolio lender? Will you be buying cash? 

3. Filter your property search: Do you want to buy single family houses? If so how many b/b minimum? For SFH I suggest you only look at properties with 3/2 or more, they'll rent faster and for more $$$. Do you prefer small multi-family (2-4)? Or maybe you want to look for larger units (5+)?

4. What price point do you want? I put this one here because depending on #3 you'll automatically filter your markets. For example, let's say you choose small multifamily and plan to purchase with 20% down and only have 20k, that means you'll have to find a property at 100k or under. You'll only see that in very specific markets for example, Cleveland, Detroit, Texas (rural towns), & more small rural towns. Thus, when you put the specifics into Zillow or whatever other search engine you choose and zoom out to see other states you'll get very few hits focusing your search on specific markets. 

5. From your results i would then filter was areas work and which ones don't. Maybe South Carolina is too far. But maybe another market closer to you will be a class D were you might run into a lot of issues with the management. What are you willing to deal with for a long term investment? 

Hope this helps & good luck !! 

Thanks everyone for the responses and help! @Martin Sterling @Ritch Bonisa @Ryan Knapp @Angelica M Garzon

Any suggestions for getting boots on the ground remotely? I will definitely plan a trip to the market of choice, but would obviously like to avoid doing that multiple times. 

What are some pros and cons of turn key providers? @Jabari Long @Nic S.

For markets, I am thinking of Memphis (a friend in the area), Minneapolis (I have very extended family in the area), Kansas City, Nashville (a friend in the area), Columbus (family in the area). @Tom Ott

Anyone know of any good markets near Southern California? 

Thanks again everyone, much appreciated.

Kevin I would reach out to @Amber Gonion she is an incredible property manager that does not overcharge OOS investors.  Her husband Rick is an investment only Realtor who is good an uncovering deals. 

@Kevin Hoff

There a meet up in San Diego Wen Oct 23 rd at 6 pm on this exact topic.

Pm me for more info or search on meet up .com

1 focus on only 1 or 2 markets , I like KS MO

2 look on LoopNet.com and call the brokers who’s name you see often

3 only buy in b areas and buy b assets to start

4 the key is finding a great property mgr. get referral from the locals

I’m purchased 83 units in last 18 months while having a full time j.o.b ( just over broke)

@Kevin Hoff I have a team in place in Ohio, my brother runs an awesome remodeling company that specializes in Flips. I’ll send you a pm!

@Kevin Hoff

Underwrite every deal that you come across. Only by seeing everything can you establish a baseline.

Discuss the market with brokers and managers.

And there’s no substitute for packing a suitcase and visiting the market yourself. You need to do the upfront work.

As an alternative, our firm is moving into the Midwest and would welcome a discussion with you regarding your interest in working with us if that’s what you’d prefer to do.

@Kevin Hoff Columbus is a great market to invest in. I have been buying properties here for 2 years now. Our small multifamily market is strong and there are plenty of renters. The city is also fun to visit, especially if you enjoy college football!

@Kevin Hoff I'm from California and invest in Indianapolis. I own 24 doors. My suggestion based on experience, have a criteria of property you're looking for such as how many units, building class, neighborhoods and etc. Then call as many property management companies as you can to interview them and get feedback back on areas you'd be investing in. Your PM can make or break your investment. I've had to fire a few.

A trusting PM will become your boots on the ground and allow you to be more profitable in your investment.

Thanks

Originally posted by @Kevin Hoff:

Hi everyone,

I am new here and new to real estate investing. I live in the San Diego Area in California and won't be investing in real estate in California because it is too expensive. I would like to buy a rental investment property in the midwest, but don't know where to start because it is out of state. Any advice on how to start finding properties out-of-state would be great! 

Thanks!

What we see when someone is in your situation is investment in the turnkey markets. Tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cleveland, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Birmingham, Alabama
  • Kansas City, Missouri
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Kevin - Nashville is the best place to invest in the Midwest/South in my opinion (totally biased though).  I know you don't have boots on the ground here, but I can be a tremendous resource to investment properties to you.  Send me a DM, would love to talk more.

@Kevin Hoff Hi Kevin, thanks for this question, you received some really helpful responses. I would also suggest that you factor in the cost of an airline flight to your potential investment property. It’s much better financially and emotionally if you know you can hop on an inexpensive direct flight if necessary.