Out of state investors - how did you get started?
Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes
Out of state investors - how did you get started?
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Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
12y@Ali Boone really your first purchase was out of the country? yikes. How did that go for you?
As to investing out of state it comes down to a person thing. For me I only invested where I have people I trust fully and completely both with Real Estate and in other aspects of life.
As to making the decision for out of state investing, I get why people in expensive markets like LA or most of California feel the need to get out of state. for me, it had to be a huge investment with a killer return, as where I am at, there are plenty of options within a quick drive.
So, I guess I ask people what they are after? A ROI? Turnkey? Handsoff? DO they want to buy property and hope to build equity over a long haul? Are they more up for being a private lender and just earning a steady return?
23 Replies
- 12yShawn McenteerBusiness MemberRealtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
Interview and do your due diligent on PM, brokers etc first. Good broker should be able to guide you in correct direction prior to you putting any offers in. PM will be an asset throughout and should be able to provide you with good knowledge as to where and where not to invest. If done properly you could use both a form of check & balances. Once you find an area you want to invest in a good suggestion would be to bring it to the forum for references i.e. PM, broker, inspector, handyman etc.
House Hacking New Jersey563 Reviews - Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes12y
@Shawn Mcenteer Thanks, I'm in the process of trying to figure out what other areas of the US we should consider investing in, so once we've figured out if there are any areas we want to consider buying in, I'll probably start contacting local PMs, brokers, etc. Excellent point about talking to both as a form of checks and balances! Regarding references in these forums, do people just post a new thread asking for recommendations on PMs, brokers, etc. in an area? Or is there a specific area on this site where people give recommendations? I'm still trying to learn all the different features and aspects of this site.
- 12yShawn McenteerBusiness MemberRealtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
@Kimberly T. My take is it varies to the individual. As long as you are not soliciting/ promoting a company as an employee or you have some association where you benefit there is no worries with making it a public conversation. Some people will say PM (private message) with details of XYZ. I typically like to make it as public as possible this way it leaves a topic up for debate also if people feel it is best to PM with recommendations and contact info they will.
"Reviews and Feed back" tab is where I will post recommendations.
Keep us in the loop with what you decide on :)
House Hacking New Jersey563 Reviews - Residential Real Estate Agent · Phoenix, AZ · Member since 2012 · 19 posts · 6 votes12y
Hi Kimberly,
Congrats on the multi unit buildings! I've always wanted to get a triplex or fourplex. Hopefully in the future. As for my wife and I, we have 3 rentals in Phx and the prices rose so much that we decided to invest elsewhere. We chose Memphis b/c the prices were pretty low with high cash flows and I felt we could trust the turnkey company we went with.
I know it's not very scientific and we probably should've done more research and due diligence but I heard the heads of this company on two of my fav REI podcasts and decided to go with them. I definitely have not regretted my decision so far. I'm not sure what the rules are so I won't put them on this post but if you're curious I can message them to you. Also, they seem to do solely SFR's so if you're looking for multi units they might not be for you. Good luck Kim!
- Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes12y
Picking a market is step one. The Bigger pockets news letter just had a great article by Ali Boone (an out of state investor who lives in CA) on just this topic.
http://www.biggerpockets.com/renewsblog/2014/02/22/which-market-should-you-buy-in/?utm_source=BiggerPockets+Newsletter&utm_campaign=4cb39babde-February_23_2014_Newsletter&utm_medium=email&utm_term=0_97489b8401-4cb39babde-71098349
Some people go with a turnkey provider others do not. In my opinion it depends just how dedicated you plan to be to your chosen market. If you want to pick up a property, maybe another if things go well, then turnkey is the way to go. If you plan to build a serious portfolio in a market then you need to commit to networking and building a team there. You want to spend the time up front learning about the market. If you find the right contact that person can open up a market for you. For instance, a good investor oriented realtor will turn you on to the cash flow properties in good rental areas, may know which PM's have a good reputation and may know a lender who works with out of state investors.
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
I accidentally stumbled on it really. I live in LA too and had shopped through foreclosures in the OC and couldn't for the life of me figure out where there were profits to be had. Then I met some random people who specialized in out-of-state buying and it was a match made in heaven from there. My first buy was actually out of the country, not even just out of state. But then I got going in other states.
- Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes12y
@Ali Boone really your first purchase was out of the country? yikes. How did that go for you?
As to investing out of state it comes down to a person thing. For me I only invested where I have people I trust fully and completely both with Real Estate and in other aspects of life.
As to making the decision for out of state investing, I get why people in expensive markets like LA or most of California feel the need to get out of state. for me, it had to be a huge investment with a killer return, as where I am at, there are plenty of options within a quick drive.
So, I guess I ask people what they are after? A ROI? Turnkey? Handsoff? DO they want to buy property and hope to build equity over a long haul? Are they more up for being a private lender and just earning a steady return?
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
It went horrible @Account Closed. Lol. Well, I shouldn't say that. The investment itself tanked but all the doors it opened up for me have literally changed my life for the better and I wouldn't take it back for a second. Worth every penny of the investment! There are still lawsuits in the work (it was a pre-construction development that the developer bounced on) so who knows, maybe I'll recoup some of it eventually but if not, still worth it.
I have always been known to do everything backwards....start with harder things and then go more for normal stuff.
I have always bought turnkeys personally because I want to be as hands-off as possible. I don't want to touch an investment property, I just want the passive income. I know a lot of people prefer to work on their own stuff though.
- Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes12y
I am glad you look at it in that way @Ali Boone must would just run for the hills and never invest again.
I dont' do my own work. I buy, fix and rent primarily. I do flips on occasion. I have done lending and tax liens as well. But I like the renting. But I prefer to buy and force appreciation through rehab, plus if I run the rehab process I know the property has been completed to my maintenance standards.
- Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes12y
@John Ivicevic , we're pretty much looking for multifamily properties (2-4 units as well as 5+ units); we like the idea of not having 100% vacancy when a tenant moves out. The US is such a big place, there are so many possible markets to invest in, it's hard to know where to start looking!
That's a great article from @Ali Boone ! Thanks for posting that, @Brant Richardson . I had not heard of turnkey providers before joining BP, but then, most everything I know about buying and managing rentals I learned from my parents, and they were self-taught landlords (who have done very well for themselves, I might add). This site is a vast wealth of information, so perhaps turnkey is something I will investigate. But before we get to that point, we have to figure out how to narrow down what market(s) we're interested in (as per Ali's article) - we want a decent ROI in an area where we can get decent renters (min 600 credit score, no evictions, min income of 3x rent, etc.), in an area that isn't going to have prolonged industry/economic issues (like Detroit).
@Account Closed , that's part of my problem - we've lived our whole lives in SoCal, so we don't know anyone in any other markets for us to be able to reach out to people we trust regarding the local market conditions. Looks like we should be able to start that networking process here on BP, though, so once we figure out how to narrow down our possible markets, I'll probably post in the networking forum to start connecting with possible PMs, brokers, etc.
Thanks everyone, love to hear the stories from others!
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes12y
Hi @Kimberly T.,
Welcome to BiggerPockets! Nice to see another 'OC' neighbor. :)
When I first started investing out-of-state, I had to do everything from the beginning. I didn't have referrals to work with and I had to learn about the markets through trial and error. By being aggressive, asking lots of questions, and of course making some costly mistakes, I learned all the ins-and-outs of how to successfully invest anywhere outside of my backyard. It became a methodical system that I eventually turned into a niche business back in 2003/2004 (what some people call "turnkey" investing today).
It's a "team sport" as Robert Kiyosaki likes to say. And that is very true because you cannot do everything by yourself, but with the right talent working with you and for you, you chance of success is almost assured.
It's a great time to be building your real estate portfolio. Most of the California markets don't make sense today from an investment perspective. If you're a buy-and-hold investor looking to create wealth the tried and true way, then you little choice but to look into better markets where the numbers, the economics, and the fundamentals make sense. I've been doing this for over 10 years now and I have always found better and more profitable markets as the cycles change.
Multi-units might be a good place for you to expand into. Just make sure they align with your investment goals, and be aware of the pros and cons related to them.
Be sure to check out the Ultimate Beginners Guide as well as my 10 Rules of Successful Real Estate Investing. Don't worry about the volume of information, just learn what you can, and what you need, related to your investment strategy. Your team and/or turnkey provider will help you with the rest and fill in any gaps.
Continues success!
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes12y
Originally posted by @Ryan Steele:
"So, I guess I ask people what they are after? A ROI? Turnkey? Handsoff? DO they want to buy property and hope to build equity over a long haul? Are they more up for being a private lender and just earning a steady return?"These are good questions, and they come back to what that investor's goals are within real estate. There are "101 ways" to make money with this asset class, and you need to be clear from the beginning in:
- what you want,
- how you're going to achieve it,
- then know what it looks like when you see it.
I have this conversation every day with clients!
- Real Estate Investor · Durham, NC · Member since 2014 · 89 posts · 32 votes12y
I have yet to invest in real estate myself, but am honing in on a property. Regardless, I will definitely:
- Choose a market through the advice of networking contacts I have made (and analysis on BiggerPocket's like that post above that @Ali Boone wrote).
- Go with Turnkey. I am looking for positive cash flow without having to quit my job (or my personal life) here in NYC. I also don't need home runs. I have a stable job and I am just trying to hustle to add incremental income, so turnkey fits me perfectly.
- Choose partner turnkey companies based on referrals.
- Start with SFHs. I may look at duplexes, trips, and quads further down the road, but for now, I want to be conservative and be in SFH neighborhoods (start small).
I completely agree with you, though @Kimberly T. - BiggerPockets has been an amazing resource so far. If you haven't listened to the podcast yet, I recommend that as well (although, I am kind of a podcast nut in general).
- Real Estate Investor · Durham, NC · Member since 2014 · 89 posts · 32 votes12y
Also - just to be specific, the markets I am looking at are:
- Indianapolis
- Houston
- Dallas/Ft. Worth
- Chicago
And in that order as well. I would like to be diversified in my geography, so the plan is, after a few years to have properties in each of those markets (although, as the landscape changes, I may need to adjust). Again, you can see the diversification you can achieve through Ali's post, linked above.
Sorry - I realized my last post lacked specifics and I thought this might be more helpful.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes12y
@Dave Olverson: Welcome to BiggerPockets!
Be sure to jump in and ask questions. It's a fast way to learn and get on track. Also posting new topics here will help generate quick replies to your questions and ideas.
- Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes12y
Originally posted by @Dave Olverson:
Also - just to be specific, the markets I am looking at are:
- Indianapolis
- Houston
- Dallas/Ft. Worth
- Chicago
Good market choices - but what is your investment criteria? Those are good choices for different reasons, but like being a "kid in a candy store", where do you start? Align this with what you want to acheive with your investing.
I like Dallas for it's rapid growth and future growth potential (among many other demographic and economic factors). I also like Indianapolis for it's lower price points, higher cap rates, and growth potential (among other factors). Our clients weigh these options when choosing between these and our other markets when trying to narrow down their primary market.
Houston has a great major employer setting up on the north side with Exxon new world headquarters that plans to employ 10,000 people. We've seen a lot of activity around this region, including new construction, because of this large employer.
- Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes12y
As an out of country investor my criteria for picking a market were:
1. Population. City must have stable and preferably growing population
2. Employment. City must have diverse employment not reliant on one single industry and with a wide range of Pink, white and blue collar jobs
3. Weather. Anywhere that gets lots of snow and or hurricanes tornadoes was excluded as this raises maintenance and insurance costs.
4. Most obvious but least important of the 4, decent yields to make the long term nature of the investment worth while.
- Real Estate Investor · Durham, NC · Member since 2014 · 89 posts · 32 votes12y
Originally posted by @Marco Santarelli
Thanks. I literally plan to go in that order and completely agree with your analysis. Indianapolis is a good place for me to start because of its lower costs. After my property there has had time to get up and running, I will start looking at Texas - as you said, I think this will be a good addition for potential growth reasons. And finally, Chicago, which as I see as a bit riskier, with tenant situations that might not be as stable, but once I have those other, more stable properties, moving on to Chicago and the good cash flow there will be prudent given my diversification.
- 12yMike D'ArrigoPro MemberTurn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
@Kimberly T. a lot of out of state investors live in high cost markets like we do here in CA where you can't get anything to cash flow. You're forced to look out of state which I don't think is such a bad thing. There are a lot of great out of state markets with strong cash flow and ROI and markets change all the time. 3 years ago everyone was buying in Phoenix but as prices have been driven up, they've been forced to look towards other markets. I wrote a report on how to invest out of state that I'll be happy to send you if you want. You might also want to listen to this podcast from a real estate investment radio show that I host in the Bay Area. My guest is from CA and he talks about how he got started investing in Indianapolis and the challenges he faced. You might find it helpful.
http://www.spreaker.com/user/6739607/pinnacle-perspective-01-11-14
Hope this helps.
Mike
- Residential Landlord · San Mateo, CA · Member since 2013 · 49 posts · 12 votes12y
@Kimberly T. : As I think some on BP know, I actually got started "by accident". We live in the SF Bay area and have family in Portland, Or. We were talking with my in-laws (Brother and Sister) who live there about purchasing a duplex to live in at retirement to allow us to take equity from our primary homes to help fund retirement and travel like crazy. After two years of not finding anything we could afford I started looking at SFR's and found one! So we bought it on our own with the hope of being able to make it pay for itself by renting it out as a vacation rental when we were not using it.
Within two months of making the house available, it was booked for 14 months in advance, and is seems to stay booked out about 10 months, so we never get to stay there! Since I just wanted to break even, I underpriced the home for the first 18 months of the rental, and actually lost money on a cash flow basis, but I have up about 120% net in two years based monster appreciation in Portland, and that was just dumb luck. Now that the house is cashing flowing well, I am hooked and just heard the sellers accepted my offer on a Loft Condo in the Pearl District in Portland, for another vacation rental, so I am on property 2!
Anyway to get to your questions:
1) Got started with the vacation homes, love this niche and will stay here.
2) Bought in the area because of family who are a second line of defense to my contractors.
3) Yep, we knew Portland pretty well, but only the highlights, there are still a number of emerging neighborhoods and markets here.
4) Learning about the area - I forced myself to do a Blog on my web site for the vacation rental which helped me learn more, I also subscribes to the local magazines and small community newspapers, they give me a wierd look when I tell them my adress, but hey, it is a GREAT source of info.
5) Relied on family who knew the area and my RE broker, he is fantastic.
6) The lessons learned - know ALL the expenses up front, that 10% for maintenance you do not think you need to budget, you do, I know. Probably not as important for non-vacation rental investors, but for me, it is all about zoning and knowing the HOA's. I looked at 30 condo's before I found two that are commercial zoning (city of Portland) AND allow rents of less than 30 days (HOA).
7) As mentioned, I have an HOA and a Condo/Loft.
Best of luck!
- Investor · Colorado Springs CO · Member since 2014 · 535 posts · 253 votes12y
@Mike D'Arrigo That would be great if you could send that to me, thanks! I'll listen to that podcast too.
@Account Closed Thanks! Vacation rentals, not something I had considered. And yes, I will definitely want to pick the brain of some local realtors regarding areas/neighborhoods before buying, always a great source to confirm what some of the locals say about areas on sites like City Data.
- Investor · Cincinnati, OH · Member since 2013 · 2k+ posts · 1k+ votes12y
@Kimberly T. - the first step is picking a market that makes sense based on your biz goals. When looking at markets the #1 thing is jobs. You'll want to analyze unemployment trends, the industries in that market and how diverse the job pool is.
After that, then take a look at cost of living, supply/demand, landlord friendly or not, and ability to get good team members.
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