Out of state investments

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Out of state investments

Gabriel Almendariz
La Puente, CA · Member since 2016 · 15 posts · 15 votes

Hello, 

I'm a brand new investor in CA.  I've realized i do not have the working capital to currently invest in CA, since all the hard money lenders I've talked with require 20-35% down with a new investor like myself.  That being said how do out of state investors go about choosing a market?  I've been looking into Dallas, Texas and Cleveland, Ohio.  I'd also like to know if out of state investors try to locate a property manager before acquiring deals or is that something you figure out as you go? Any insight you have will be helpful.

Thank you for your time,

Gabriel 

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Jeffrey Allen
Rental Property Investor · Cambridge, MA · Member since 2020 · 32 posts · 45 votes
5y

@Gabriel Almendariz

I invest in Ohio, primarily Columbus.  If I read your thread right, 15K isn't going to get you much if anything multifamily in Columbus either.  You might get into the Linden or Hiltop area, but you will need to make sure you have the right property manager that can support that type of tenant base.  I know of one if you're curious.

With that money, I'd look into Dayton/Toledo.  They aren't big cities and the population is declining but rental market is fairly solid.  You can get into an "ok" property with good cashflow that could set you up.  

Alternatively, you can partner with people dealing out of state that is in on the right deal.  It could enable you to leverage and build more equity faster with better appreciation while also delivering a solid cashflow.

Finally, I would recommend you see TONS of houses locally.  Know what to look for an be sure to ask your agent to take pictures and videos of the things you want to see.  If they miss something send them back.  Familiarize your self with the tenant laws in the state and some of the building code.

Happy hunting

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  • Gabriel Almendariz
    OP
    La Puente, CA · Member since 2016 · 15 posts · 15 votes
    5y

    @Andrew Rosenberg thank you for your response.  I'm optimistic i can find a great PM and establish a great relationship.  Thank you.

    0Reply
  • Gabriel Almendariz
    OP
    La Puente, CA · Member since 2016 · 15 posts · 15 votes
    5y

    @Jared Lomker It would be great to connect with you. 

    0Reply
  • Gabriel Almendariz
    OP
    La Puente, CA · Member since 2016 · 15 posts · 15 votes
    5y

    @David Nutakor I see your located in Palmdale, CA.  Do you invest in out of state deals? I'm actively looking in Dayton, OH. I'm optimistic I can make a deal work. 

    1Reply
  • Gabriel Almendariz
    OP
    La Puente, CA · Member since 2016 · 15 posts · 15 votes
    5y

    @Shawn Bhatti I'm in a situation were I bought my family home in order to help out my family. There is not enough equity in this home to do a HELOC. Unfortunately this has seriously complicated the idea of doing house hacking.

    0Reply
  • Jeffrey Allen
    Rental Property Investor · Cambridge, MA · Member since 2020 · 32 posts · 45 votes
    5y

    @Remington Lyman

    I work with Zeke.  Old Town North, South Orchard, Olde Town east.  Columbus is hot, trying to get the deal that hits the numbers I need is tough.

    2Reply
  • Jeffrey Allen
    Rental Property Investor · Cambridge, MA · Member since 2020 · 32 posts · 45 votes
    5y

    @Gabriel Almendariz

    I know Dayton well enough.  I used to live north of Dayton so has some familiarity.  I do not invest in that area right now.  Mostly because I trying to leverage some scale with my PM's and don't want to spread out too much too soon.

    Bigger pockets is a place.  Join facebook groups in Dayton.  I have found those to be solid places to find realtors and PMs.  You'll want to do some serious digging on what you're looking for in a PM.  Happy to share thoughts on that.

    2Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Jeffrey Allen:

    @Remington Lyman

    I work with Zeke.  Old Town North, South Orchard, Olde Town east.  Columbus is hot, trying to get the deal that hits the numbers I need is tough.

    Nice! Those are all great areas. Solid Realtor too! 

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  • Arn CenedellaPro Member
    Rental Property Investor · Greenville, SC · Member since 2008 · 786 posts · 1k+ votes
    5y

    @Gabriel Almendariz

    I’m a life long Silicon Valley resident who has been investing in real estate for over 40 years.

    Laura and I moved to Greenville SC and love it.

    Investing outside CA make sense.

    Lots of good markets in Southwest, Mountain West, and Southeast.

    Job 1 is to find a few markets you like - easy to do online research - and then find someone you trust in those markets and get started.

    [email protected]650-575-6114
    1Reply
  • Stephen E.
    Rental Property Investor · Member since 2020 · 172 posts · 110 votes
    5y

    Hi Gabriel, good question.

    I have both in state and out of state. I got involved in out of state after I got connected to a property manager I really liked. That gave me the confidence to invest in inexpensive cash flowing properties in Mississippi. But I don't think it's a requirement. A bad property manager is a true nightmare, something I saw happen to a neighbor of mine.

    Dallas seems like it might be kind of expensive, but it depends on your capital. You can get a single family home in many areas for $40,000 that's in good shape and rents for $800 a month. You'll have to buy it outright, banks won't loan on property that costs less than $60,000 (ymmv) but if you get a couple of them you can go back to the bank and refinance them as a portfolio loan and get a lot of your money out.

    So depending on your capital that could be a good way to get started in out of state. Those would be C class properties generally at that price point but as long as you have a good property manager it won't be a headache.

    Another consideration is that cheap property often cashflows well but doesn't appreciate, so it's a very conservative investment. Hard to lose money but also hard to hit it out of the park.

    Good luck!

    0Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    5y

    Out of state investing adds an element of risk that local investing does not.  If something goes wrong, your physical proximity can matter a lot.

    0Reply
  • Cole Eicholtz
    MD · Member since 2020 · 9 posts · 6 votes
    5y

    @Gabriel Almendariz

    Congrats on getting into out-of state investments! Myself and my partner are new to this too and getting started. I recently made a connection with @Zach Lemaster and hope to work with him soon on out-of-state investments! He has helped so many people on BP and has a ton of expertise in this field. I sent you a connection invite, feel free to shoot me a message and we can follow each other’s journey!

    Cheers!

    -Cole and Fred

    3Reply
  • Margie Richardson
    Contractor · Cincinnati, OH · Member since 2017 · 6 posts · 0 votes
    5y

    @Gabriel Almendariz hi Gabriel we work with a lot of out of investors in CA. 8% management fee monthly, no hidden fees, in house maintenance in Dayton and Toledo, Ohio.

    0Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Gabriel Almendariz:

    Hello, 

    I'm a brand new investor in CA.  I've realized i do not have the working capital to currently invest in CA, since all the hard money lenders I've talked with require 20-35% down with a new investor like myself.  That being said how do out of state investors go about choosing a market?  I've been looking into Dallas, Texas and Cleveland, Ohio.  I'd also like to know if out of state investors try to locate a property manager before acquiring deals or is that something you figure out as you go? Any insight you have will be helpful.

    Thank you for your time,

    Gabriel 

    Hi Gabriel, that's great. I invest here in Columbus, OH.  

    1Reply
  • James G.
    Investor · St Louis, MO · Member since 2017 · 250 posts · 181 votes
    5y

    Go to city-data.com look for markets that have rising population, growing employment, and low crime. Start marketing with the big players in the market (brokers, property managers, agents, lenders) and get a feel for the market. Once you pass all of this criteria, travel to the market, and personally drive the sub market that you are interested in investing in. It seems like a lot of work, but it will pay dividends down the road if you do this correctly!

    5Reply
  • Bryant Naylor
    Realtor · Falls Church, VA · Member since 2019 · 23 posts · 16 votes
    5y

    @Gabriel Almendariz read the books on long distance real estate investing and your core four. That will get you started on the right track. Good luck!

    0Reply
  • Account Closed
    Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes
    5y

    I feel like the vegan who walks up on the fisherman and starts throwing rocks in the water...

    The flow of stupid from California when it comes to investing out of state appears endless. Investing out of state as a beginner is about the worst idea there is in the entire industry. Investing is not easy as a beginner when you do it in your own back yard and do it all yourself. When you invest out of state, not only do you need to learn all there is about real estate, you have to go out and find other people, strangers, to do all the work for you because, you know, it's sort of tough to do from 1000 miles away.

    BP is full of property management companies ready and willing to take your money though. Some are legit. Some are not. All charge fees for their services and make additional money when things go wrong for you at your property.

    The truth is people like you attract sharks. People like you might even cause an otherwise honest person to become a slime ball. Why? Because tomorrow there will be another one of you asking the same stupid question and at a certain point a person might just ask themselves, why not? Why not just take these people's money. Think I'm wrong? Go back in time on this forum and you will find a brand new person everyday for years asking the same question - "I'm a newbie from CA and want to invest out of state. Where should I invest?"

    If you understood how to invest in real estate, you would understand how there is rarely any money left over after paying other people to manage the investment for you. This is because real estate markets include owner occupant buyers who compete with investors for the same properties, and can afford to pay more for less (puts pressure on the margins). What usually happens to out of state investors is they use the money that ought to be set aside for long-term repairs to pay for management, then when the big repair comes along they lose their fanny. Run the math and tell me I'm wrong. 

    The only real play for people like you is to hopefully break even on a monthly/yearly basis, consider yourself lucky it doesn't cost you out of pocket big along the way, and after 10, 15, 20 or 30 years, depending on your length of mortgage, will own a piece of real estate free and clear from the burden of the mortgage, but not free and clear from the burden of physical  depreciation, management expenses, insurance and property tax. If you have cash and have a partner you could trust, maybe an out of state investment could work. You don't have cash, you have a down payment, and it doesn't look like you have a partner either, and instead flaunt yourself on an online forum. Be mad at me if you wish. I'm still going to say you're welcome.

    I haven't posted in almost a year and sure enough, the flow keeps a flowin'

    Sorry fisherman. Storm screwed up your catch today. No worry, tomorrow is but a day away and this post will be drowned in the sea of posts in no time.

    2Reply
  • Pride Davis
    Rental Property Investor · Norfolk, Va. · Member since 2018 · 72 posts · 56 votes
    5y

    Unfortunately, I have to give my vote to @Account Closed at least partially. I am currently doing my first out of state investment and to say mistakes have been made is an understatement. Before you dive in deep like I did, I would recommend some sort of internship or joint venture with an experienced investor in you local area to develop your systems and team management skills. This way you have some practical knowledge of how it all works and as a bonus you will have an experienced partner who might be willing to take on some of the risk with you when you decide to make the leap out of state. 

    0Reply
  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
    5y

    Hey Gabriel, 

    I would narrow down to 2 or 3 markets and then start building your team from there, including the property manager. If you are a serious investor, then realtors/wholesalers/managers/etc will be willing to connect with you even if you haven't decided on their market yet. 

    I think at that point, as you're building a team, you'll slowly realize which market is best for you. Or it may come down to which deals you end up closing. 

    I made a video that explains our process when we started, if you want to check it out: How To Choose A Long Distance Market

    0Reply
  • Daniel Pierson
    Investor · San Francisco, CA · Member since 2015 · 75 posts · 25 votes
    5y

    Hey @Gabriel Almendariz I'm in CA and invested OOS for my first property. There's certainly risk when choosing this route, but it can be managed by working with the right people and buying in the correct area. as an OOS investor, I'd shy away from areas where the population is declining. Not to say there isn't money to be made in certain scenarios. Feel free to PM me if you'd like to chat more.

    0Reply
  • Winston Varghese
    Rental Property Investor · New York, NY · Member since 2018 · 8 posts · 4 votes
    5y

    Hey Gabriel, out of state investing is definitely awesome but also more risk then getting a property locally. Like others have said, make sure you get a good property manager/company to take care of your property. I would look at their website, and google reviews etc. to make sure they’re reliable. I’m currently investing out of state and i’m going to have a family member manage it for me, lucky me. Definitely focus on one market, or your favorites and make some comparisons (cash flow vs appreciation, type of neighborhood, population income, etc) You should be writing down everything and compare!

    0Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    5y

    @Cole Eicholtz

    Thank you very much for the mention!  We look forward to working with you in the very near future!  As you know we focus on markets that maximize cash flow, appreciation & equity, but also consider other criteria like low taxes, landlord friendly taxes, population & economic growth, etc.  This is how we've successfully built our portfolio for many years!

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

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  • Oliver Betuel
    Member since 2020 · 8 posts · 2 votes
    5y

    @Matt Santillanes - fancy seeing you here, bro! Let's connect when you're free. 

    0Reply
  • Matt Santillanes
    Newport Beach, CA · Member since 2018 · 13 posts · 6 votes
    5y
    Originally posted by @Oliver Betuel:

    @Matt Santillanes - fancy seeing you here, bro! Let's connect when you're free. 

    Dude!

    Let's definitely connect ASAP!

    0Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    5y

    @Gabriel Almendariz There are lots of things to look for in a PM.  You can find some good boiler plate questions to ask through a quick Google search.  One thing that gets over looked though is making sure the PM uses a good management software and allows you to access the data whenever you like.

    0Reply
  • Angel G.Pro Member
    Moderator
    Rental Property Investor · Colorado Springs, CO · Member since 2016 · 61 posts · 37 votes
    5y

    Hi @Gabriel Almendariz - I asked the very same question you did almost a year or so ago before taking the leap into my first true out of state investment. Although I'm sure this has already been mentioned, I would focus on getting my "team" ready to go to make the process just that much smoother for you. The following was the order of effort that I took to line this team up:

    1. Lender - I wanted to make sure I had the money lined up and ready to go to start making offers. 
    2. Property Manager - (disregard if self managing)
    3. Realtor - let's start making some offers!
    4. Contractor - I had plenty of time to vet while making offers on properties.

    Best of luck!  

    2Reply
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