@Aaron Mazzrillo It would be great if you could describe how he finds deals others can't. That information would be worth its weight in gold :-)
@Dawn Anastasi I have the same investment strategy as you! People always look at me with amazement when I tell them 30k houses exist, and are profitable!
@Oscar Campos back to your orginal question, here are some tips ive learned about investing out of state. I hope any of this will help you:
I invest outside of where i live, and I suggest it for everyone with a few caveats
1) Go out and visit the area. It doesnt have to be across the country, you can go into Reno, NV or Carson City and find affordable housing. Is that within driving distance of 1-1.5 hr of you? With the state capital there, and a university, and lower taxes, you can't ask for much more in a low cost rental property. Mitigate the amount of visits this by coming up with a solid list of candidates to look at when you come. If you only have a Saturday and Sunday, you should look at at least 14+ homes. If you need to get a few realtors and section them in blocks of 4 hours to not wear them out.
2) Since you're open to travel, check out state and local politics. The gist is that if you have a choice of municipality, take into account Red State/Blue State politics. The bluer the state, the more risks you have on your real estate because the number of fines/payments to be made, and entities to be paid under threat of lein action escalates by the state. A city that doesn't know how to contain spending, and ONLY knows how to tax the populace, are always aiming to to hit property owners with fees to be paid to code enforcement, environment registration, lead registrations, and property taxes.
3) Thirdly, the US has so many different city states and different microcosms, that its easy to use the internet to flesh out a great list of potential, affordable real estate investments that give high rents. I have all of these sites up when searching for 1-Local Realty MLS (local vs national also has cheaper deals) 2-Crime Reports (at my price point, i want ot make sure you're only choosing "safe" neighborhoods and most municipalities have some sort of online presence with 30-60 days of crime reports) 3-Rentometer (this is a pretty accurate rent aggregator to tell you the low/medium/high rents for that address 4- Craigslist to see what type of rental activity is listed there.
4) While you're there, meet up with some turnkey managers and property managers. If you like their selection and feel that they are honest with you, they are a great lead for investors like me who decide to sell their properties for whatever reason, and can hand them over tenant in all. My current property managers all send me listings that current landlords are selling.
5) When looking for maintaining the property, only look at highly rated/accredited GCs or Property Managers.I have found that the GC or PMs that come with higher ratings, come with a higher price tag, but you get the quality you want. From there, you can structure a solid contract that takes care of your needs in case things do not go according to the statement of work.
When I go to a new city, i usually only visit the area about 2-3 times before I bid/win a property, and then 1 a week to check up on contractors. If you get a quality GM who sends pictures every week of work completed, with a good contract, you can break that down to visiting 1 a month. The expenses are deductible, and I usually use the time to explore the city and check out new restaurants...i love my job :-)
All in all, don't be hesitant to look at homes within an hour's drive that offer low cost housing and high rents. I live in DC, and I have properties within 1-1.5hr from me that I purchased for under 30k and rent for $900+
Hey Oscar Campos welcome to BiggerPockets! I was just down there in the Bay Area and yeah - prices are crazy!
There are lots of turn key providers here on BiggerPockets, everyone with their own idea of what's best. Then there are others who suggest just going out to do it yourself, like the last segment of Podcast 25 with Mehran Kamari .
Whatever you choose - just be sure to do your research. Find a great area, find a great neighborhood, ask for reviews, and make a plan.
Glad to have you here! Don't forget to add a photo! :)
Brandon Turner would you be up for a little wager? We both go to the Bay Area to see who can find a cash flowing deal. Naturally, Joshua Dorkin will pay for our trips :) What do you think?
Fortunately you live in a beautiful area. Unfortunately you live in an area where buy-and-hold real estate investing doesn't make sense.
I too live in sunny California where the prices and taxes are sky high, but it has forced me and thousands of other investors to look elsewhere. Having been an out-of-state investor since January 2004 I can tell you that you'd be far ahead of the game in other markets where the economy is strong and the numbers pencil out.
As Brandon Turner has mentioned, there are some turnkey providers here on BiggerPockets. Each of them focused on different market(s), varying neighborhood demographics, and with slightly different investment philosophies.
Without getting into a lengthy step-by-step explanation, my suggestion to help point you in the right direction is to focus on markets with a stable housing market, and a growing (or stable) local economy.
Once you've identified the best market for you and your investment goals, then select neighborhood and property combinations that make the most sense. Analyze the numbers and condition of the properties. Consider the schools, amenities and crime statistics. Talk to local property managers and narrow it down to the best deal. (I could go on, but you get the general idea.)
Since you're new to BP, check out the Ultimate Beginner's Guide. You may also want to download my '2013 Housing Market Forecast' to help you jump start your market selection.
Feel free to post any questions you have. There is lot of talent in the forums, and we're happy to help out.
Oscar Campos, I live in Santa Clara, but have been doing a lot of investing in Pittsburgh, PA. It seems to be working out well, but I'm not rich yet :-)
I love you Ben, but I have to challenge your wager with Brandon Turner and Joshua Dorkin. I think you'd be in for a steep uphill climb.
I took a quick look, and the cheapest property for sale right now is $210,000. That property rents for $2,364 with a Section 8 tenant (probably lower with a regular tenant), and has a HOA of $324 per month. At best this property would break-even.
San Fransisco has an (overall) average rent-to-value ratio of about 0.4% -- far below what an investor can get in other markets with stronger economics and lower purchase prices.
I think eventually you'd find a piece of property with a positive cash-flow, but the length of time you'd have to spend to sift through enough properties to find that "diamond in the rough" would make the effort questionable.
Additionally, the very high land cost under those properties carries a high level of exposure and risk for any investor since the first thing to drop when the housing market turns and cycles down are land values.
I live here in Los Angeles and I definitely do all my investing out of state right now for the same reasons. That's not to say that there isn't money to be made in my area, you've got to be real creative!
If you have any questions after listening to the podcast, I'll be glad to help.
I'm in Atlanta and the numbers work pretty well here. So much so we've got hedge funds in town buying everything in site and making it hard to find rehabs...I dont hold rentals anymore, but am doing stuff in Florida and St. Louis on flips just to get away from the hedge funds. There are still some opportunities here, but its way tighter than it was even 6 months ago...
Plenty of turnkey rental stuff with decent ROI around, though, that seems to be the game everyone is playing right now.
Cash low is nothing more than a terms equation. I have a very good friend who operates out of the Bay Area and buys cash flowing properties every year. Stop thinking 20-30% down and conventional financing.
Now there's someone with common sense - thank you Aaron Mazzrillo. Guys - purchase price is only one of many, many, many negotiable terms that tee-up CF (and I am not talking about putting more money down to lower the debt service payment).
What Brandon Turner and I know, and what I want Mehran Kamari to think about (only cause I think you got talent and you are in my article for next week :) is the following:
STOP LOOKING FOR PROPERTY, AND START LOOKING FOR TERMS!
Ben Leybovich Thanks for seeing potential in me :) It's reassuring because I consider you a real sharp, resolute guy. Looking forward to reading next weeks article! Aaron Mazzrillo actually shared with me one of his recent deals in my area and it really opened my eyes. The more I learn about different ways to structure deals, the more I'm realizing the limitless possibilities there are to be creative.
Bought an investment property with seller financing. Terms were ZERO Down, and a graduating interest rate rising 1% per year for 5 years then leveling off for the next 25 years. (Chapter 19)
Another investment property was being sold by a real estate broker, who was the owner of the property. I've speculated that he needed cash to operate the business. He offered to finance the property for 3 years, at 12% interest fixed, and $10,000 down. I countered at no balloon 15 years self amortizing, 9% interest fixed, and $10,000 down. He accepted. I borrowed the $10,000 on a signature loan from a credit union. (Chapter 6)
Two recent deal we did were zero interest, seller financing, and another investor I know bought his personal residence with seller financing at ZERO INTEREST.
Thanks guys for taking time to respond I just got my book today how I turned thousands into millions. I have not chosen a city yet going to take my time to be more informed first thanks guys
With the exception of one home in Atlanta I have purchased all my rentals in South Carolina. I closed on my 5th rental last week and made an offer on the 6th.
I couldn't have done it without the BP resources:)
It always amazes me how expensive a rental can be in California. 2200 a month sec 8 on 210K? No wonder California is going bankrupt. I have no problem finding 20-30K properties that rent for 550-700 per month, here in Kansas City. Taxes average to 900-1100 a year. For 220K I could get a near move in ready 6plex that would rent for 650-725 per month.
I have no problem finding 20-30K properties that rent for 550-700 per month, here in Kansas City. Taxes average to 900-1100 a year.
Likewise I have no problem finding $20K - $30K properties; the difference is that these rent for $700-900 but the taxes are higher; more like $1500-$2500 per year.
Yep, Louisville KY - Buying a house for $27 from HUD, needs $3 to make repairs and convert to a 4/1. My manager is working on a lease for for $825. Taxes in my county are ~1% of the FMV for the year.
@Aaron Mazzrillo It would be great if you could describe how he finds deals others can't. That information would be worth its weight in gold :-)
@Dawn Anastasi I have the same investment strategy as you! People always look at me with amazement when I tell them 30k houses exist, and are profitable!
@Oscar Campos back to your orginal question, here are some tips ive learned about investing out of state. I hope any of this will help you:
I invest outside of where i live, and I suggest it for everyone with a few caveats
1) Go out and visit the area. It doesnt have to be across the country, you can go into Reno, NV or Carson City and find affordable housing. Is that within driving distance of 1-1.5 hr of you? With the state capital there, and a university, and lower taxes, you can't ask for much more in a low cost rental property. Mitigate the amount of visits this by coming up with a solid list of candidates to look at when you come. If you only have a Saturday and Sunday, you should look at at least 14+ homes. If you need to get a few realtors and section them in blocks of 4 hours to not wear them out.
2) Since you're open to travel, check out state and local politics. The gist is that if you have a choice of municipality, take into account Red State/Blue State politics. The bluer the state, the more risks you have on your real estate because the number of fines/payments to be made, and entities to be paid under threat of lein action escalates by the state. A city that doesn't know how to contain spending, and ONLY knows how to tax the populace, are always aiming to to hit property owners with fees to be paid to code enforcement, environment registration, lead registrations, and property taxes.
3) Thirdly, the US has so many different city states and different microcosms, that its easy to use the internet to flesh out a great list of potential, affordable real estate investments that give high rents. I have all of these sites up when searching for 1-Local Realty MLS (local vs national also has cheaper deals) 2-Crime Reports (at my price point, i want ot make sure you're only choosing "safe" neighborhoods and most municipalities have some sort of online presence with 30-60 days of crime reports) 3-Rentometer (this is a pretty accurate rent aggregator to tell you the low/medium/high rents for that address 4- Craigslist to see what type of rental activity is listed there.
4) While you're there, meet up with some turnkey managers and property managers. If you like their selection and feel that they are honest with you, they are a great lead for investors like me who decide to sell their properties for whatever reason, and can hand them over tenant in all. My current property managers all send me listings that current landlords are selling.
5) When looking for maintaining the property, only look at highly rated/accredited GCs or Property Managers.I have found that the GC or PMs that come with higher ratings, come with a higher price tag, but you get the quality you want. From there, you can structure a solid contract that takes care of your needs in case things do not go according to the statement of work.
When I go to a new city, i usually only visit the area about 2-3 times before I bid/win a property, and then 1 a week to check up on contractors. If you get a quality GM who sends pictures every week of work completed, with a good contract, you can break that down to visiting 1 a month. The expenses are deductible, and I usually use the time to explore the city and check out new restaurants...i love my job :-)
All in all, don't be hesitant to look at homes within an hour's drive that offer low cost housing and high rents. I live in DC, and I have properties within 1-1.5hr from me that I purchased for under 30k and rent for $900+