Do you have a system for investing out of state?

34 Replies

I'm looking to purchase rental property to buy & hold for positive cash flow.

Unfortunately I'm located in New York City, where anything remotely close here is far out of my budget, and regardless, this is not a landlord friendly location.

Specifically, I'm looking for MFHs (mostly duplexes) for around $40-$55k, which need minor, mostly cosmetic work, and can be rented for around $500-$700 per side.  The closest that I can find properties like this seems to be the Wilkes-Barre/Scranton area of Pennsylvania, which is about a 2 to 2.5 hour drive, which isn't terrible, but certainly not a commute I'd be making a regular basis.  I haven't ruled out other areas of the country as well (namely the south or midwest), but that would likely mean a plane ticket and hotel instead of a day car trip.

For those of you that invest even further away, what's your process like?  How many times do you physically view the home prior to purchase, if at all?  I've read about a few people that arrange for Skype walk-throughs of the properties and never even visit them in person.

How do you get a feel for the neighborhood?  I'd also be open to the greater Philadelphia area, and a quick search on realtor.com shows plenty of properties in this price range, but for all I know they're in places that the police are afraid to visit.

I'm guessing at least two in person visits would be necessary, one to view the property in person to make sure the photos are an accurate representation of the place, and then another for the closing process.  Although with things like conference calls and Skype sessions, perhaps that can be cut down to one visit, or even none at all.

Of course a thorough home inspection would be very important in a deal like this.

I'll be using a PM company once the home is purchased, so hopefully I'll be as hands off as possible. 

genereally speaking those type of assets are pretty tough to manage as your dealing with the HIgh touch renter base.. IN some cities its akin to financial suicide...

Be careful... I was just in the Penn area you described and rather liked it... would defiantly look at that compared to Urban core  in the other cash flow cities.

I work with out of state investors all the time since most markets that I would consider to be out of state (not in my state), can't cash flow well or not at all.  I'm lucky.  Michigan, SE Michigan to be precise, is a cash cow.  Not expensive at all to get in and high immediate (as in not having to wait for your cash flow) returns in cash flow...not just equity.

Now before someone starts talking about low cost properties being a problem, and talking about Detroit in a bad way, let me stop you right there with two statements:

1 - The same house you buy in California, or N.Y., or many other markets that costs $400-450k, I can get for $40-45k.  Yes, the exact same house...maybe minus the proximity to an ocean...the Great Lakes are nice...and it's not salt water.  Same quality of life, same A or B rating, same rating on the school system, same condition of the house, same....

2 - Michigan, is NOT in Detroit.

Originally posted by @Tyler Brown :

I'm looking to purchase rental property to buy & hold for positive cash flow.

Unfortunately I'm located in New York City, where anything remotely close here is far out of my budget, and regardless, this is not a landlord friendly location.

Specifically, I'm looking for MFHs (mostly duplexes) for around $40-$55k, which need minor, mostly cosmetic work, and can be rented for around $500-$700 per side.  The closest that I can find properties like this seems to be the Wilkes-Barre/Scranton area of Pennsylvania, which is about a 2 to 2.5 hour drive, which isn't terrible, but certainly not a commute I'd be making a regular basis.  I haven't ruled out other areas of the country as well (namely the south or midwest), but that would likely mean a plane ticket and hotel instead of a day car trip.

For those of you that invest even further away, what's your process like?  How many times do you physically view the home prior to purchase, if at all?  I've read about a few people that arrange for Skype walk-throughs of the properties and never even visit them in person.

How do you get a feel for the neighborhood?  I'd also be open to the greater Philadelphia area, and a quick search on realtor.com shows plenty of properties in this price range, but for all I know they're in places that the police are afraid to visit.

I'm guessing at least two in person visits would be necessary, one to view the property in person to make sure the photos are an accurate representation of the place, and then another for the closing process.  Although with things like conference calls and Skype sessions, perhaps that can be cut down to one visit, or even none at all.

Of course a thorough home inspection would be very important in a deal like this.

I'll be using a PM company once the home is purchased, so hopefully I'll be as hands off as possible. 

Go all in....  I moved my family specifically to SE michigan with the goal in mind  to build "my team"  so that I can be an out of state investor for the long term. 

 You being out of state investor, your always second to the local investor for the pickings, paying a premium for turnkey, or your giving up a significant amount to a partner of your investment, that you will rely on to make the decisions for you. 

So ask yourself how serious do you really want to be in real estate investing, and what are you willing to do to to get it. Depending on that answer rather passive or aggressive, will provide with a goal on what you need to do.

@Tyler Brown Plenty of NYC investors make a killing in Philly. My advice would be come down for a day and set up meetings with about 5-10 RE agents that seem credible after some online digging and BP mingling. Have them take you thru areas that they would recommend and places they'd suggest you invest in. Keep your budget in a range that wont absolutely kill you if it all goes south, read philly real estate blogs and then buy some property and find out for yourself. Anything in NYC is about 10x's a comparable property in philly so your playing a relatively small game when you come down to philly, take some risks and make a bunch of $$$.

I do a lot of research online regarding housing prices, crime statistics, employment rates, cash flow rates, for certain areas.  I make sure to base decisions mostly on cash flow, not appreciation, so I was able to go thru the downturn in the economy unscathed. 

After Everything looks good for a certain area, I do go out and visit, speak with several agents, property managers, see homes and discuss that area in detail.

I opted against one area, which had looked great, because the property manager states that they needed to remove the entire AC unit from each home when vacant or they would be stolen. (Cages around them didn't suffice)  I've invested in a lot of areas, but this was a bit much, the crime rate there deterred me.

I have invested in Utah, Las vegas, Houston and currently Kokomo, Indiana. (strong employment, inexpensive homes, strong rental market)  I've been the happiest with the $60-$120K price range)

After all the research is done, I may not actually see the house prior to purchase, but I have found the agent or property manager to do a thorough walk through. I also do get an inspection, no matter how small the home. 

I hope this helps.

What about Jersey?? Plenty of deals right across the water in JC, union city, north Bergen etc?? Mightn't be quite 50k but worth a look as its so accessible to the the city..

@Christine Kankowski , thanks, that helps outline the process a bit.

@Brian Whelan , I just did a quick search on realtor.com, and even with a cap of $80k, there isn't a single MFH anywhere in Bergen County.  Hudson County has 3, and they appear borded up and in need of serious work.

Essex County, especially Newark and the surrounding towns have plenty for sale for under $60k, but man, talk about a war zone.  I'm sure there are decent patches here and there, but I don't know where they are.  The only good part of Newark that I know is the Ironbound, and there's nothing for sale there in my price range.  

I just saw one that has blatant gang graffiti all over the exterior of the house, and that must be the best image of the place because that's the one the realtor chose to use for the ad!

Originally posted by @Mike Zipf :

@Tyler BrownWhy 40-55k? That is the real question, maybe you need to pick up a copy or "Investing with low and no money down". MFR for 55k would mean 27.5k per door, even in Wilkes-Barre isn't that easy.

 Why's that?  I've been searching properties and speaking to a realtor in the area.  There are quite a few properties to be had in that price range that need minimal cosmetic work, some with long term tenants in place.

Most low/no money down methods require owner occupancy, which I won't be doing.  And still, 20% down plus closing costs is only around $15k, which is no big deal.

If you're looking for a fixer upper and you're a handyman (which I'm not), there are a good number even under $30k.

@Tyler Brown I have been looking into Wilkes-Barre as well because I have family there, my uncle is actually a painter in town. The problem is with the sub 55k multi-families in the area is the old housing stock and all the problems that come with them, as well as restrictive rental laws. Be careful about the allure of cheap real estate and have a good home inspector. My uncle told me that almost every pre war building he has painted in the area had asbestos wrapped pipes and decades old boilers just as one example of a large capital expenditure. I'm not saying don't do it, just that what your realtor is saying is turn key may not be, and may even be illegal to rent in its current state.

Originally posted by @Richard Dunlop :
Originally posted by @Joe Villeneuve:

2 - Michigan, is NOT in Detroit.

They moved it???

Detroit is in Michigan, not the other way around. I think what Joe was getting at was that Detroit is only a small subset of all of the real estate in Michigan. You don't have to avoid the entire state just because Detroit went under.

Originally posted by @Steven Kleppin :
Originally posted by @Richard Dunlop:
Originally posted by @Joe Villeneuve :

2 - Michigan, is NOT in Detroit.

They moved it???

Detroit is in Michigan, not the other way around. I think what Joe was getting at was that Detroit is only a small subset of all of the real estate in Michigan. You don't have to avoid the entire state just because Detroit went under.

Here is a screen shot from the post above!

Please note where I live and invest.  It amuses both @Joe Villeneuve and me that people confuse Detroit and Michigan and that people think we live in a 3rd world country.

Metro Detroit has problems? Yes but it also has single family homes that would sell for $10,000,000.00 in today's down market.

Detroit itself is experiencing appreciation faster than any other market AND has better Cash flow than most anywhere. I could not have accomplished half of what I have in any other market.

Here is my answers to question asked about Detroit and or Michigan

@Tyler Brown , you will be hard pressed to find a duplex in Philadelphia at your price point of 40k-55k that only needs cosmetic repairs and will rent for $500-$700k per unit.

While you may find a number of duplexes online at your price point they are neighborhoods well outside of the Center City District.  Homes in this price range tend to be lower income neighborhoods and the rent you can expect would probably be more of $450-$500 per unit.  And yes, expect to do a little more than a cosmetic fix up in most cases.  However, if you aren't opposed to renting Section 8 you can get a bit more in rents. 

Figure out where you want to invest, what type of tenants you want to attract, and do your research from there.  Philadelphia is a hot area right now for investors, but not all that glitters is gold.

I like Detroit. All my houses there are rented and kicking out nice cash flow. I will keep buying more. I live in San Diego. Don't care for Detroit's weather but like their prices compared to what renters are paying. You just have to find a good property manager. Mine keeps me updated and keeps the places rented. With out a good property manager I would be screwed. So to answer the question above, find the property manager then the property for them to manage in the areas which have the prices you are looking for. 

As an out of state investor who invest in PA, I find it heart warming that @Jay Hinrichs says that he rather like (some part) of PA :)

@Tyler Brown  I would advise you not too buy too cheap, and be seduced by high cash flow on paper. So many thing can go wrong, and it could take you quite a bit of money to stabilize them. The end return could be abysmal, many people actually loose money on these low end properties.

I rather like Wilkes Bare/Scranton area too, reasonable demographic with lots of working class renters, and really not too far from where you are.

Are you thinking of managing it yourself, or do you want to hire a PM. If the later, you should find that first before spending too much time looking at the property. The PM can then point out the better areas to hunt properties in.

@Luke Smith & @Ezra Nugroho , yes I'd be using  PM, and your method is probably better.  I've been approaching it somewhat backwards, looking for a property first, then researching and reaching out to a PM.  Going to the PM first and having them suggest some more specific locations is a good idea.


1 - The same house you buy in California, or N.Y., or many other markets that costs $400-450k, I can get for $40-45k.  Yes, the exact same house...maybe minus the proximity to an ocean...the Great Lakes are nice...and it's not salt water.  Same quality of life, same A or B rating, same rating on the school system, same condition of the house, same....

Tell you what @Joe V, why dont you come visit my house in the Bay Area in January and tell me that the same house in SE Michigan (see I didnt say Detroit) offers the same quality of life...lol. 

Originally posted by @Anish Tolia :

1 - The same house you buy in California, or N.Y., or many other markets that costs $400-450k, I can get for $40-45k.  Yes, the exact same house...maybe minus the proximity to an ocean...the Great Lakes are nice...and it's not salt water.  Same quality of life, same A or B rating, same rating on the school system, same condition of the house, same....

Tell you what @Joe V, why dont you come visit my house in the Bay Area in January and tell me that the same house in SE Michigan (see I didnt say Detroit) offers the same quality of life...lol. 

So are you suggesting that one of @Joe Villeneuve 's neighbors living in a comfortable house with a value of $40,000 should sell and take their $40,000 and move to SF for the quality of life.

Ok do they spend their $40,000 on rent for 8 months or do they try to borrow(gift) $350,000 more from their rich relatives as down payment so their mortgage on the $400,000 additional still financed does not exceed their annual income.

My quality of life is 10 x what I ever would have been able to establish anywhere in California. I lived and worked in all three major markets of California, San Diego, OC Tustin, Bay area Santa Clara had I not left California I would still be looking at REI from the outside.

Yes, I am suggesting that one of your neighbors that owes a mortgage payment of $3000 even though they have $350,000 equity should take the equity, leave the rat race, and buy enough properties in SE Michigan"(see I didnt say Detroit)" to retire with an annual  income exceeding the best 5 years they've ever done all put together.

And since they are now retired they could come back and visit you for all of January.

Come to think of it they could spend January anywhere in the world that they want to.

Originally posted by @Anish Tolia :

1 - The same house you buy in California, or N.Y., or many other markets that costs $400-450k, I can get for $40-45k.  Yes, the exact same house...maybe minus the proximity to an ocean...the Great Lakes are nice...and it's not salt water.  Same quality of life, same A or B rating, same rating on the school system, same condition of the house, same....

Tell you what @Joe V, why dont you come visit my house in the Bay Area in January and tell me that the same house in SE Michigan (see I didnt say Detroit) offers the same quality of life...lol. 

 ....uh, see what @Richard Dunlop just wrote.  Let me add I didn't say ALL 450's in CA were = to ALL $40's in MI.  I said what you can buy in CA for $450 you can get in MI for $40k and they would be the same...just different Zips.  There are many different Markets in CA where $450k buys you different things, just like in MI.

Originally posted by @Joe Villeneuve :
Originally posted by @Anish Tolia:

1 - The same house you buy in California, or N.Y., or many other markets that costs $400-450k, I can get for $40-45k.  Yes, the exact same house...maybe minus the proximity to an ocean...the Great Lakes are nice...and it's not salt water.  Same quality of life, same A or B rating, same rating on the school system, same condition of the house, same....

Tell you what @Joe V, why dont you come visit my house in the Bay Area in January and tell me that the same house in SE Michigan (see I didnt say Detroit) offers the same quality of life...lol. 

 ....uh, see what @Richard Dunlopjust wrote.  Let me add I didn't say ALL 450's in CA were = to ALL $40's in MI.  I said what you can buy in CA for $450 you can get in MI for $40k and they would be the same...just different Zips.  There are many different Markets in CA where $450k buys you different things, just like in MI.

And the $400k in the high desert of San Bern/Riverside does not get you much quality of life. Haven't seen the gang areas of Oakland recently but I'm guessing the same $400k leaves you wishing life had more quality to it.

I loved San Diego and now I could afford to live there if I choose. California has some great areas but unless you've owned a house or houses for 20-30 years the average person cannot accomplish much quality of life. 

Originally posted by @Luke Smith :

I like Detroit. All my houses there are rented and kicking out nice cash flow. I will keep buying more.

Are you originally from Detroit or have some connection there?  How do you know what neighborhoods are safe to invest in?  Detroit seems like a great place to get very low priced housing stock, but how do you know you're not purchasing something in the middle of a war zone?