What do you do when you feel your home market is to expensive?

23 Replies

Looking to expand outside of my home market. Still a relatively new real estate inventor. I purchased 2 properties last year but its to expensive in my home market and want to look somewhere with better cash flow.  What cities are worth looking at?  I am new to BiggerPockets.   Thanks!

Tyler.

I invest only out of state and can help you out.

I invest in Memphis, St. L, Cleveland, Akron, BHAM.

They're all great cash flowing markets. 

@Tyler Wittwer You buy toilet properties that look great on paper but for some reason can't be sold to local investors.

I kid.

But seriously, be careful out there.

Start looking outside your home town, places you have reliable contacts in first.

Maybe your folks live somewhere cheaper and they could help you? There's a business relationship in the making.

Originally posted by @Tyler Wittwer :

Looking to expand outside of my home market. Still a relatively new real estate inventor. I purchased 2 properties last year but its to expensive in my home market and want to look somewhere with better cash flow.  What cities are worth looking at?  I am new to BiggerPockets.   Thanks!

 Welcome to the site Tyler. If you are looking for info on out of state investing you have come to the right place. I recommend setting up a keyword alert for "turnkey". It's one of the most widely discussed topics here in the forums. Very quickly the major markets & players in those markets will become clear to you as we frequent these pages often.

As for the concept of buying out of state remember that It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

@Terry Lao   well on your list of top 10 where this OP lives is number 7 so why go anywhere right ?   this is a common theme of course on BP its pretty much every day.

and you pretty much have all those that live in a market target a market .

I like @James Wise cut and paste responses he does .. he nails it well and its worth cut and pasting every time someone ask the same question that has been asked 1000 times.

I like to Add James that when going out of market.. also if you simply buy at the median price points of any given MSA your buying in an area were you have a lot of homeowners buying generally... so you get a mix of cash flow and appreciation and or more important you have a defined exit IE you can sell to a homeowner as opposed to buy at the bottom of the price point and the only out is to an investor..

And Frankly your company is kind of a unicorn in the US.. there are not many companies like yours that specialize in reselling these assets for individual owner/investors. 

PS i just learned how to cut and paste when my grand daughter showed me how too that's why I always wondered why some folks post the same thing all the time.. thinking they just typed in the exact same message time and again.. . Very time efficient and like i said your message is dead on .. so keep that cut and paste going. !!

@Tyler Wittwer ,

Well, remember that the asking price is what they are asking, not what the property is worth. Many listed properties have an asking price not supported by the property's condition.

To make your determination, you need to do a full analysis to see if it matches your criteria, including your expected ROI and cash flow potential as well as the comparable recent sales.

We targeted the largest growth markets within easy driving distance, and then researched and visited each area until we decided on one, and invest there.  We've had a property manager there, still self-manage the one we still have locally, but will eventually manage all ourselves once we have more free time.   We've owned property too far from where we could drive but have found it too difficult when issues arise, as even with decent  property management, problems arise where you need to be there, so we sold those off.  

@Jay Hinrichs

Always feel honored when mentioned by name from you. I'm really into the numbers and Realtor.com list is a good beginning for novice. The list is a forecast. When the actual numbers come out each month, it is Seattle #1, Las Vegas #2, San Jose/SF #3, DFW#4, and could flip flop some months. 

I saw your other postings about Las Vegas, and you look at the home foreclosures as a indicator of things to come. What other indicators do you look for? The LV median high is $341k in Jul'08, and as of Feb'18 it was $275k for SFR. Do you think it will pass $341k? Do you have a estimated date of downturn?

My exit strategy is $300k, or when the Raiders finish their stadium in 2020. However, if it hits this minimum target, I will look at overall condition of RE market.

I believe you bought condo in Las Vegas, did you upgrade to SFR in Summerlin?

Terry

@Terry Lao   yes condo was too small for us we ended up in Summerlin

Originally posted by @Tyler Wittwer :

Looking to expand outside of my home market. Still a relatively new real estate inventor. I purchased 2 properties last year but its to expensive in my home market and want to look somewhere with better cash flow.  What cities are worth looking at?  I am new to BiggerPockets.   Thanks!

Investing outside of your home market can be a great idea when your market is too expensive!  What other markets have you been looking into?  Have you considered looking at markets in the Midwest?  I know Cleveland has some amazing ROIs right now.  

What kind of investments are you looking for?  Turnkey or Buy and Hold?

@Tyler Wittwer I think many/most of us feel your pain. In this sellers market prices are going through the 1% formula all the time! Don't compromise your goals or criteria look harder instead. Maybe look at other areas within your market. I only want investments that are no more than an hour away-that works for me. So when I started running into what you are running into I started looking at other neighborhoods within my area. Others will go out of state etc. syndications, notes, loans etc. No end to the variety. Pick what you feel comfortable with and does not introduce undue risk.

@Tyler Wittwer You can still look outside of where you live relatively closer. Have you tried a 2 hour radius? 

If I lived in an area hostile to landlords or a place with a voracious appetite for tax dollars I'd certainly consider investing outside my home area (actually I'd probably consider moving), but I think it would be hard owning property that I can't work on, see, or visually inspect easily.  You'd have to trust other people way too much for my comfort level.

For example, last September I was disconnected from the world when Hurricane Irma hit. The morning after my first goal was to visually inspect my house and then them my next goal was to visit my rentals. If I was where I used to live, 1000 miles away, I'd been climbing the walls waiting for information. I also wouldn't have been able to do anything to prepare those houses for a beating.

... but on the flip side if some of my rentals were a few states away then I wouldn't risk a single natural disaster taking all of them out at once.

@Tyler Wittwer Also, there is a really great book  about out-of-state investing by David Green. 

Hope this helps. Goodluck. Thanks! - Ola 

@Tyler Wittwer

I second the motion as to what others say about investing in Cleveland. You may not get as much, or even any appreciation as some of the other more sexy markets, but you can and should get NICE cash flow.

Originally posted by @Brian Garlington :

@Tyler Wittwer

I second the motion as to what others say about investing in Cleveland. You may not get as much, or even any appreciation as some of the other more sexy markets, but you can and should get NICE cash flow.

 #theland isn't sexy? 🙊💔

@Tyler Wittwer As the Real Estate Guys say " Invest when the numbers make sense".

I been investing out of area and out of country for over a decade now. 

If you focus and systematize the process it is not as hard and scary as it first sounds.

its all about getting to know the market and building a team.

Your easy alternative is Turn Key, but the downfall is that you pay full retail for the property. 

@David Greene has good book about it. you can buy it here on BP.

Its called Long-Distance Real Estate Investing

@James Wise

TheLand is not "sexy"....but that's not a negative.....give me "average looking that put's more money in my pocket and is highly unlikely to have someone else try to pick it up" over "sexy that wants to take money out of my pocket and is also more likely to be susceptible to being picked up by somebody else" any day of the week and twice on Sundays.  

Thanks for all the great advise and input from everyone. Another question I have is if I were to invest outside of my home state what are the tax ramifications? Obviously I would have to file a tax return with that state. Is this a difficult process? (I am sure every state is a little different)

My home area is also too expensive . So I look harder . My last 3 deals were word of mouth .  I know the areas I want to buy in , the research is already done .  When I go to look I bring a contract with me ready to put in the price .  I got great prices on all 3 . All were " as is "  cash .  Average time looking at the property , 30 minutes . 

The deals are there , you just have to be the first one there 

@Tyler Wittwer

You are required to file a resident return in the state that you live in. You will report worldwide income on your resident tax return.

You will also be required to file a non-resident tax return in the state that you have rental properties in.
If you pay any tax in the non-resident state - you will receive a credit for taxes paid to other states on your resident tax return.

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