Starting out in out of state rentals properties

Starting Out
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Starting out in out of state rentals properties

Mike Chavan
Member since 2019 · 5 posts · 1 vote

I live in New Jersey and I am considering investing out of state in Alabama rather then in Jersey because I can see a higher ROI almost 10 times out of 10 over there. Had a few questions if anybody has experience in this area or just out of state investing in general...

- How do I go about taking out a mortgage in out of state properties
- Where can I find good property management companies 
- Should I purchase this property as an "investment property" or a "secondary property" (I do not own a home in NJ) 
- Where are the best places to form my team when looking out of state ( Contractors, handymen etc..) 


My overall goal is to purchase a home, rent it out, pay my mortgage off with my tenants money and make a little "passive" income monthly on top of it. Eventually I want to be able to (hopefully) own enough properties to rent out and match what I make at work with my rentals. Any advice or guidance would help. Thank you! 

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Joseph Crunkilton
Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
6y

@Mike Chavan

David Greene's book will tell you how to do this. If you'd like to get started with a bit less risk, I'd check out @Zach Lemaster over at Rent to Retirement. They provide turnkey rentals in AL. I purchased a rental through them and have been happy. 

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  • Christopher Parsons
    Edmonds, WA · Member since 2019 · 61 posts · 46 votes
    6y

    @Mike Chavan are you looking just for standard buy and hold or are you looking to BRRRR? If you're just looking to buy and hold, you'd just have to shop around with different lenders, probably local to that area. You'd also want to be honest in case you get into any sort of tax or legal issue, so you'll want to be upfront about it being an investment property. A 2nd home would be more of a personal vacation property. As for team, I'd start with a deal finder. In a lot of states property managers have to have their real estate license, so that would be a good bet. They might have deals for you, should know handy men, and might even have some contractors they'd recommend since they tend to work with investors more than your average real estate agent. They should also be able to refer you to a good lender for what your goals are.

    A great resource for this is David Greene's book "Long-Distance Real Estate Investing". He talking in depth on how to build a team and its information I've taken to heart. I got lucky and found a wholesaler with great character who has connected me to all my team members. Feel free to message me if you have other questions as well.

    1Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    6y

    - How do I go about taking out a mortgage in out of state properties

    Any lender can help you with that but make sure they work with investors and OOS investors. I can help with a couple referrals if you like.

    - Where can I find good property management companies 

    This is where you need a network of other passive investors. Build relationships with them and be careful on getting random referrals from marketers.

    - Should I purchase this property as an "investment property" or a "secondary property" (I do not own a home in NJ) 

    I know what you are thinking... Its kinda a newbie questions and shows you should keep absorbing info (next you are going to ask about legal and LLCs)... Answer to your question is just do as non owner occupied investment property.

    - Where are the best places to form my team when looking out of state ( Contractors, handymen etc..)

    See question 2. If you are a high paid professional I would not mess with BRRR.

    Check out my article about the Cons of BRRR.

    https://www.biggerpockets.com/...

    Note this is coming from an Accredited investors POV who used to do turnkey rentals.

    0Reply
  • Mike Chavan
    OP
    Member since 2019 · 5 posts · 1 vote
    6y

    @Lane Kawaoka 
    Hey Lane, Just to give you a breakdown of my situation, I'm looking to purchase my
    first investment property in Alabama. Im 24 years old with a credit score over 760, I make a little over 100k a year at my job and I can comfortably save about 40k each year. I don't plan on using the BRRRR strategy.

    My plan is to purchase a home with little to no repairs and rent them out. 
    I would like to continue applying this strategy one to two times each year and let my properties pay for themselves while paying off my loans and making a little money on the side in the meantime. Eventually building a second source of income for myself semi passively to supplement my current job.  

    I created this account to network, learn from the pros ( such as yourself ) and maybe get some good referrals along the way. 

    My questions for you would also be:

    - Should I shoot for a 15 year or 30 year mortgage and why?

    - After reading your article, I was curious why you stopped after 10 properties. Was it the headaches of being a landlord or was there another reason? 

    - When you say invest in turnkey properties, are you referring to properties with tenants already in place, or properties that don't require many repairs that you can purchase and immediately place a tenant in?

    Thank you for the insight and taking the time to help the newbie! Any resources and articles/information are always much appreciated! 


    0Reply
  • Greg Koszkul
    Member since 2020 · 72 posts · 17 votes
    6y
    Originally posted by @Lane Kawaoka:

    - How do I go about taking out a mortgage in out of state properties

    Any lender can help you with that but make sure they work with investors and OOS investors. I can help with a couple referrals if you like.

    - Where can I find good property management companies 

    This is where you need a network of other passive investors. Build relationships with them and be careful on getting random referrals from marketers.

    - Should I purchase this property as an "investment property" or a "secondary property" (I do not own a home in NJ) 

    I know what you are thinking... Its kinda a newbie questions and shows you should keep absorbing info (next you are going to ask about legal and LLCs)... Answer to your question is just do as non owner occupied investment property.

    - Where are the best places to form my team when looking out of state ( Contractors, handymen etc..)

    See question 2. If you are a high paid professional I would not mess with BRRR.

    Check out my article about the Cons of BRRR.

    https://www.biggerpockets.com/...

    Note this is coming from an Accredited investors POV who used to do turnkey rentals.

     Hey Lane! What do you think makes OOS investing more difficult for people starting out than investing in your own backyard? It seems that having the right systems in place and relationships with people in that area tends to be one of the most important points.

    0Reply
  • Joseph Crunkilton
    Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
    6y

    @Mike Chavan

    David Greene's book will tell you how to do this. If you'd like to get started with a bit less risk, I'd check out @Zach Lemaster over at Rent to Retirement. They provide turnkey rentals in AL. I purchased a rental through them and have been happy. 

    6Reply
  • Gaspare U.
    Rental Property Investor · Cranford, NJ · Member since 2019 · 245 posts · 148 votes
    6y

    @Mike Chavan hey I'm in NJ as well and looking to begin a NJ out of state networking group. PM if you have any interest.

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    6y

    @Mike Chavan

    Please see my brief answers to your questions below, and please let me know if you would like me to expand further on any of these topics.

    - How do I go about taking out a mortgage in out of state properties

    Same as you would locally, but you need a lender that is licensed in the states you are looking to invest in.

    - Where can I find good property management companies 

    This is a harder question to quickly answer, but having local contacts that have had first hand experience with a mngt team in the area is probably the best route.

    - Should I purchase this property as an "investment property" or a "secondary property" (I do not own a home in NJ) 

    You should purchase as a rental property if you do not plan to live in the property at least part of the year.  Meaning you will have to put 20% down.

    - Where are the best places to form my team when looking out of state ( Contractors, handymen etc..)

    This is all a networking business, and having local contacts that can help guide you would be the best approach.  We operate in over 12 different states, and can help guide you on connecting with the right people depending on the market.

    We've helped many investors just like yourself build a successful rental portfolio across numerous cash flow markets. It's all a numbers game, and the most successful investors invest in the markets where they get the best returns!

    Please let me know if you have any questions on anything. I typically like to start with an initial phone call to discuss your investment goals/experiences, answer any questions you have, and tell you all about what our company has to offer. Please let me know if this is something you would like to schedule.

    Also for your reference, here are some other forum discussions from investors that have worked with us in the past. I'm sure you'll find this informative. Looking forward to hopefully connecting in the near future!

    https://www.biggerpockets.com/users/ZacharyCole/references

    https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster

    https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

    https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences

    https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

    https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

    https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

    https://www.biggerpockets.com/users/ZacharyCole/references

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    2Reply
  • Mark S.Pro Member
    Rental Property Investor · KY · Member since 2013 · 1k+ posts · 539 votes
    6y

    @Mike Chavan, to your question on the 15 vs 30, I would almost always choose the 30.  Check out @Keith Weinhold’s Get Rich Education podcast.  You may have to search through some episodes, but he goes through this on several of his shows.  One of my favorite episodes (I believe it’s episode 6 or 7) is Why You’re Not Financially Free (or something like that), where he talks about home equity (which plays into your 15 vs 30 question).  Check it out.  Let me know what you think.  I’m also a high W-2 earner investing passively.  If you ever want to chat, feel free to send me a message. 

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    6y

    Yea books tell you one thing but from experience you are always getting screwed as an out of state investor. There are hundred of OOS people born every day. Why would a PM put up with an annoying client who is micromanaging them. Why would you not overcharge a investor living 1000 miles away that has never seen the property let alone the repair for XYZ.

    0Reply
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