Would you buy your first rental locally or in a different state?

Question

I currently live in Orange County, California. I have around $50,000 to start investing. As you guys probably already know, southern California is very expensive. Could I start to invest with only 50k in California?  Am I rather off purchasing a few rental properties in a different state￼? Any advice is appreciated.

Brandon Carlson · Answer

@Gerardo Martinez

What’s up Gerardo. 50k is a great nest egg to begin investing, good for you!

I live in SoCal and started with a similar dollar  amount. I would recommend purchasing a single family and house hack.

Ned Carey · Answer

@Gerardo Martinez you get the best deals in the market you know best. It is a lot easier to learn a market close to you than it is long distance. Investing out of your area increases both risk and cost.

Alma Mills · Answer

I would start local, or at least a place you can drive to.  If your interested, you could look for some private lenders to help you get enough for a downpayment on a small multi family to live in.  Or buy a single family then build one or possibly 2 ADUs in the back.   Check the new state laws concerning those, pretty awesome opportunity for those who live in California.

When we bought our 4 plex in LA our goal was to pay less than $1000 a month on housing, fortunately we were able to live for free.  Of course, after a few years they were paying us to live there thanks to increased rents.  Opportunity exists here in Southern California but you have to find or create it, it doesn't just fall in your lap like in the midwest.

That said, we do invest in Ohio but it has been very challenging and might have been devastating if it weren't for our experience in our local market.  Good luck and God bless

Michael Carbonare · Answer

@Gerardo Martinez Go where the grass is greener or, in this case, where the market is more investor friendly.  You're fighting a rising tide in certain locations, such as LA, the Bay Area, and the like. If a homeowner can sell their house in 48 hours for asking price or above, what chance do we have as investors looking for bargains?  Work markets that have slowing sales and increasing inventories; price reductions and extended Days on Market.  I'm in south FL, another strong sellers market with strong seller attitude.  Rather than butt heads with these folks we do deals virtually throughout the US.  Learn to do that and you'll find the path to doing deals much less frustrating.

Account Closed · Answer

I would recommend starting out locally for many reasons, including those already mentioned.  Another benefit of starting locally is being your own property manager and learning what it takes to manage your properties.  While it may not be the long term goal (at some point, you want to outsource this to focus on the investing side of the business), I think the experience is beneficial if you plan on being in this business for the long term.  Additionally, you will save a little money as well in the early stages.

However, also be ready if you do move out of state.  I put a tenant in my first rental back in December of 2018 and six months later ended up moving out of state for my wife's new job. I wanted to  continue to invest locally, and I still plan in investing in the same market as my first.  It just happened sooner than I anticipated.  Life happens, so be prepared for it

Remington Lyman · Answer

@Gerardo Martinez I would recommend looking at Columbus, Ohio. You can use that $50,000 towards the 25% down payment and purchase a solid duplex in a C neighborhood for $100,000-$150,000.

Gerardo Martinez · Answer

@Matt McConkey thank you very much kind sir.

Matt McConkey · Answer

@Gerardo Martinez I bought my first rental property out of state, but there were some caveats behind that statement.

1. It was in my hometown, so I knew the area very well.

2. The realtor was a friend and fellow investor.

3. I had everything set up and had been looking for more than a year.

4. The property was turnkey.

If you can find an area and obsess over it, become familiar, fly out, drive around, meet everyone, focus on an area within the area and ONLY buy in that area, you can make it work, but it's still easier owning something in your own backyard.

David Ripplinger · Answer

I've decided to start out of state. Before you decide, I recommend you read Long Distance Real Estate Investing by David Greene. Then you'll have a better idea whether it's the right strategy for you.

Kiera Underwood · Answer

@Gerardo Martinez most of the investors that I see come to my market are from SoCal. With 50k here you can lock down 2 c+ class properties with 20% down conventional loans, pay for closing costs AND have cash reserves left over!

Would you buy your first rental locally or in a different state?

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