Advice regarding out of state investing

16 Replies

There are several good markets for out of state investing. Most likely you will be looking at turnkey providers. Once you identify a few markets, narrow it down to the market and then start looking at the many TK providers in that market. Get feedback from others, check them out. If you can make a trip to that market and meet several providers and see who you like.

Good luck!!

@Kyle Bear Agree with Ali Boone, it depends on what kind of investing you are looking at. I would suggest you educate yourself through books, podcasts, BP first to get an idea of the different niches and asset classes you can invest in. Then select a market and make sure you visit the market to get a feel for it, purchasing sight unseen (like many turnkey investors do) is not a good idea. In my opinion, turnkey is the least attractive option, you lose all of your equity on day 1 as the turnkey provider and others involved are taking that equity for themselves. Best of luck!

Thank you so much for responding.   A few more questions and details.  I’m focusing on single/multi family rentals in low income areas.  I have targeted a few areas like Lubbock Tx, Memphis Tn, Baltimore Md, and Cleveland Oh.  Some questions I have are:

Can my local agent broker a out of state deal or best to work with in state agents?

I will be potential buying sight unseen with current tenants.  What all info should I ask current owner for?

What is the biggest potential risk in buying out of state sight unseen?


Thank you all for your time!

@Kyle Bear Memphis is a great market but that being said we’ve found that there are some very dishonest organizations in Memphis! We had an absolutely horrible experience working with CrestCore in Memphis to manage our homes. We wouldn’t recommend CrestCore whatsoever if you decide to pick the Memphis market but that’s just our opinion.

As a turnkey operator in Indy, I am amazed at how few investors come to see us.  We welcome investors to come see what we're doing, see our rehab processes, meet our team, see some properties, and learn about the neighborhoods we're investing in and why.  

Oh, and contrary to @Kyle Mitchell 's blanket statement, there are some providers who are sharp enough, and have enough economies of scale, that there IS equity in the deal.  That said, a good TK provider's job is to put the odds in your favor... to maximize your rental return, and minimize your exposure in doing so.

Originally posted by @Kyle Bear :

Newbie to investing. Looking to invest out of state and looking for any advice.  My name is Kyle. 

Thanks!

Kyle, welcome aboard my man. 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.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • 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.
Originally posted by @Kyle Bear :

Newbie to investing. Looking to invest out of state and looking for any advice.  My name is Kyle. 

Thanks!

A great way to invest OOS is by going with a Turnkey Provider. Ideally, they will own the property first, renovate it in-house, place a tenant PRIOR to closing and then handle the management in-house after closing. They should not use any third parties for this. The only third-party should be your home inspection.

@Kyle Bear Baltimore is a D class area stay away. Don't just look at the Rent-to-Value Ratio. Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1% and you won't die collecting rent.

Originally posted by @Kyle Bear :

Newbie to investing. Looking to invest out of state and looking for any advice.  My name is Kyle. 

Thanks!

 My advice is to invest in state first. 

@Kyle Bear Investing out of state / out of area or out of the country like i do is totally possible.

At the end of the day it comes down to your commitment and ability t build teams.

In saying that, it is not for everyone. if you dont have the time or / expertise you can start with educating yourself.

Some go with Turn key, which is good fr some, but its mainly retail product with not much value add. 

@Kyle Bear There are a lot of markets that will cash flow in the Midwest and Southeast but you want to invest on one that not only cash flows well but also has strong economic and demographic trends. Check out population growth, job growth and incomes. Some of the popular cash flow markets actually have declining populations and stagnant job growth. Although they may cash flow today, that doesn't bode well for the long term value of the asset. Once you choose a market, drill down and understand the neighborhoods. Don't buy in cheap neighborhoods, The biggest mistake new out of state investors make is not knowing the market at the ground level and buying in bad areas. Any other mistake that you might make can be fixed but you can't move a house from a bad neighborhood.