Buying first investment property while renting in another city

19 Replies

Hi all,

First discussion post! I have been studying real estate and investment properties for years now and I'm on the brink of buying. I currently live in an expensive area that I don't see myself living in two years from now (job, lifestyle). SO I have looked at other areas in-state and out-of-state to buy that are way more affordable and possible homes for me and my future fam. My goal is to own multiple investment properties in up and coming areas that have character.

After looking at the numbers, my monthly rent and mortgage would be about 75% of my take-home pay which I don't think is that bad. I of course plan to get tenants and use a property management company. With the rent checks, I should at the least break-even or make a couple hundred a month on the out-of-state property. Then my normal monthly rent would be the same as always and I could start saving again . . . rinse and repeat.

Has anyone done this? I can't find too much on buying an investment property at the same time as being a renter in another city. Send me some advice too. I'm sure a lot of people will not suggest buying my first investment property far away but I'm ready to make some big moves! 

Thanks!

Hey @Kacie Benson

I did something very similar.  I did a few house hacks and then got pushed out of my market due to prices increasing rapidly and comprising the returns that I want to get for an investment property.  So last year I took the leap and bought out of state.  The numbers hit my requirements but there were some serious headaches due to me being so far away.  But now that I am over a year in I have stabilized the property and increased the rents.  It was a great decision.  If you find a good property and you are committed, I would say go for it!!

You will sure learn a ton.  I would recommend not maxing out what you can afford if it goes sideways you won't be wiped out.

Thank you, Derek! 

Yes I'm starting to think the best thing to do is to start house hacking and continue to save for my first rental property. Its hard to know when you aren't sure where you may be living for the rest of your life. but if you have a property management company then it should be fine to be farther from your rentals. 

@Kacie Benson I hear you on that one! I'm currently looking at house hacking in Nashville and it's difficult, but not impossible to find a house that is desirable, but there is some margin if things go sideways. 

@Kacie Benson - I have many friends who do this! You can definitely be a real estate investor, yet still rent your primary residence. 

In fact, I think renting the place you live is BETTER than owning unless you are house hacking of course. House hacking trumps all... but if you are just owning a place and paying the full mortgage yourself, I would bet you can get a much nicer place for the same price except that you don't have to put a large amount down, deal with maintenance, etc. 

@Kacie Benson

I'm thinking about doing the same thing. I also am renting in an expensive area (Seattle) and am highly interested in investing out of state. I'm still trying to figure out which market I want to get into but I do know I want to get into a SFH sub $150k for my first ever property just to get some skin in the game and expand from there. Just like you, I'm just trying to learn as much as I can from awesome people here on BP. Good luck on your REI venture!

@John Lim

Yes! Exactly. I want to just get into the game! I've been looking at 200k and lower in palm desert since it is still close by. High HOA's though. I can't seem to get away from HOA's here.


The only thing is it takes away from your savings for your own home. So I might buy my own condo first with an FHA loan and then look at investment property.

@Kacie Benson

I know what you mean regarding HOA's. However, there are still several desirable areas in Palm Desert w/o those pesky HOA's. 200k and under are a very rare find in said area...

If you can spend a little more, house hacking is the way to go!

@Mark Gliebe

Hi Mark, 

I currently live in Little Italy in San Diego and love it. It's been a neighborhood I've wanted to live in for years. Super expensive to buy but my rent price is below the average and I get great amenities in my spot so it would be hard to leave. 

I am looking at areas in SD, Palm Dessert, Temecula. I also looked at places that are up and coming like Nashville (I'm a little late), Reno and Raleigh. All far away. 

@Kacie Benson Little Italy is the best. My wife lived right on Kettner when I met her, was really hard to cancel that lease and move her out. Such a rad place to live. I think she's going down there tomorrow night with some GF's to Prepkitchen.

I am also looking at Palm Springs / Desert. Not a lot under 200k unless you're talking very small basic condos, which with HOA and prop manager fees will be tough to cash flow unless it's a short term rental in a desirable location that gets booked a lot. I am looking more on the PS side, but they have some incredible vacation rental restrictions that make it tougher to pencil out. Not many condo complexes allow STR, and SFH can only rent 36 "contracts" per year. You need a $900 annual VR certificate plus high TOT taxes for every rental. Really have to do your homework. But, it is a great year-round town and rental market, easy to drive from SD, and tons to do. Lots of upside! Do a search on Palm Desert, @John D. does very well there. 


@TJ Watson

Yep! I looked at a couple of 2bed/2bath condos with HOA's up to $500. I need to find an area not too far away that still has low HOA's so that I can cash flow more. If you know of any area's? Hemet? I'm just seeing 55+

I can always look at 300k places but think it would be best to use that down payment for a house hacking condo of my own. 
 I just resigned my lease since I cant figure out which direction to go. 

Thank you 

@Kacie Benson just be sure to have question #1 to any seller/agent in PS proper be "does this complex/HOA allow STR's" because so far I have found 97% don't. Some really nice units in Smoke Tree came up recently for under $200k, but the HOA no longer allows <30 day rentals. Boom. Dead for Airbnb unless you want to try and do monthly rentals, which is much tougher. Most listings do not call this out.

I have no interest in Hemet or any of those neighboring hoods, just not attractive to me as an owner or user. I want to use my vacation rental too. Hence my radius is very small in proper PS walkable to all the shops and restaurants. But many folks do very well in Palm Desert or Indian Wells or Coachella, like John I tagged above, but he goes with big party houses, a different approach. I have no idea if a sub $200k condo in those areas will have any success at all. I recommend you reach out to him if you want to focus on those areas.

It really depends on your goal and your budget. Often the bigger more expensive properties can pencil out easier than the small ones, but that requires a lot more capital up front. 

@TJ Watson  

Thanks for the reply and info! Super important to check for Airbnb status. I am looking for long-term renters since this seems to be more consistent. For a regular 2br/2ba, you can still get cash flow for long term renters but the place may not be in the vacation spots or it doesn't have the same feel. The airbnb would be great but yes more upfront costs for a better place, furniture and the risks of the laws. 

@Kacie Benson

I'm doing something similar to this. Since I'm self employed and need 2 years verified tax returns to qualify for FHA I'm using an investor loan to qualify and purchase my first property that will be a Cabin in vacation rental city. So I"m still renting my primary home but will close Monday on my first STR property in Pigeon Forge TN. I've already got my Airbnb listing up and ready to publish.

@Ruth Blue

First of all congrats!! I would love to own a vacation cabin in TN. So you are renting where you live and then you bought for Airbnb. How did you figure out the numbers? Also, will you be able to use the FHA loan in the future?

@Kacie Benson I started buying an investment property first while still renting (in the same city). The investment property started making me money that I could put to work so it didn’t make sense for me to live in the same house. If you can move to a smaller / cheaper place and save money that way, it will only speed up your process. Good luck!

@Sofia Sharkey so the rents from your tenets were enough to pay for your rent? Or it was just a good enough cash flow to help continue to save? That's great! That's exactly what I want to do.  I would love to hear more about the process and how you found the right spot. 

@Kacie Benson kacie, it did cover it because my house is a short term rental (on Airbnb) in a great location. At that time my husband and I moved into a room and paid $600 a month. Our house was grossing an average of $2500 which paid for the mortgage, our room rent, and then some. As the house made money, repeated the process. Now we have over 10 units, some we own, some we manage for others. It’s not for everyone as it requires discipline and a lot of work but it’s what worked for us!

@Sofia Sharkey Congrats on your first Investment Property , As long as your CashFlowing &Net Positive while building Equity no need to own your own place . Some people are able to purchase Investment properties only due to the fact they don't have money tied in their own pad. @Grant Cardone is a big proponent of renting your own place for flexibility & living in place you really want.

A home is not an investment, for many it can work out as one , but real money is made " Owning  Properties With Other Peoples Money."    That said,  I help people obtain loans on any type of property . Considering Rates are so all times lows - it may be the best time to see if a multifamily / house hack or personal  home  will work for you today without restricting you from further investment properties. 

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