Is it possible to invest out of state? I need some advice.

24 Replies

Hello All,

First of all, thank you for such wealth of information in this place. I wanted to know if any of you have invested in properties outside of your state? I am from NY and investing in properties here is very expensive. I currently have 1 single family house rented, but my ROI is low for such property ($250K House - $250/cash after paying P&I/taxes) so I am looking for your advice. I currently have 100K in the bank doing absolutely nothing and I want to get the best bang for my buck in terms of properties/investment.

I figured that if I am able to invest 100K outside my state, I would be able to buy several properties and put them to work for me compared to just buying one here in NY.  I am still new to this and learning as I go, but I have decided that this is what I want to do and would like to dedicate myself to this to be able to provide a better future for my family.

Thank you and looking forward to your answers!

Gabriel

@Gabriel Rodriguez before looking out of state there may be some markets in NY that are affordable to buy multiple houses or multi-family that are inexpensive. I’ve heard Rochester and Buffalo are ideal areas to buy houses that cash flow well. I’ve always went with the notion to look in your back yard before looking too far away, there’s always deals if you look hard enough.

Thank you @Ken Nyczaj I can definitely look at those areas. My question was based on the fact that certain places are starting to warm up such as the Midwest as well reading about some people in those areas being very successful. One thing I don't like about doing this in NY is that most NY laws are more tenant-friendly than landlord-friendly and that is a concern for me since I personally saw my grandmother trying to evict someone from her apartment and that process taking well over 2 years and thousands of dollars in legal expenses.

@Gabriel Rodriguez I think a lot of northeast states are said to be more tenant friendly. I’m in Maryland and it’s the same way, but with the proper lease and screening of tenants you are being proactive. In Maryland it varies by county, after doing some research and talking to landlords, in some counties the eviction process is much simpler and they take the landlords side especially if you have a clear lease and can explain your position to the court. It might vary by jurisdiction in New York as well, and come down to the the history of that specific court house and the judges point of view.

Hi @Gabriel Rodriguez you could also consider investing with a multifamily real estate syndicator, have no extra work or worries, and make something like 9% CoC and 15% IRR as an example.

$50k - $100k can get you started with most. Some only accept accredited investors some also accept non-accredited but sophisticated investors for their deals.

I think I can provide some good perspective on this.  I live in D/FW, where a lot of out-of-state investors purchase.  Also, I am a mortgage loan originator that does a fairly significant amount of volume.  Add to that, I am a real estate investor with 36 doors.  Finally, I spent two years almost exclusively working with investors, providing nearly every type of financing.

My guess would be this: there is a very definable trade-off between local knowledge and access to properties that "check all of the boxes".  I frequently see people from out-of-state (we'll call them "Californians" lol) purchasing properties that meet their criteria but that are properties I wouldn't invest in, personally.  The properties are "better" by various metrics relative to properties in California, but they are in completely random, less than ideal areas, which highlights the lack of insight the investor has in the area.

The most successful investors I work with have partnered with true, local expert Realtor partners that have a very high awareness of the local market but that also understand investing.  They also take time to learn the area in more than just a superficial manner.

No doubt that there are "better" opportunities in areas where the numbers make more sense, but a weekend Wells Fargo "Investor Seminar" held in the Bay Area doesn't give you all the tools you need to successfully operate in a place with which you are totally unfamiliar (personal anecdote).

@Gabriel Rodriguez I second what @Sam Elder stated in his post. If you want to invest out of state, "boots on the ground" are essential for your business success.  This can be a partner or a reliable property manager (it's a challenge to find one but they do exist!). 

In terms of what @Ken Breeze mentioned, I'd advise you to determine for yourself, how active do you want to be in this investment?! How much time and effort do you want to put in?! Answering these questions will help you make a decision as to whether look at active or passive opportunities. 

Happy to chat further offline if you have any additional questions.

Best!

@Gabriel Rodriguez I'm fairly new as well and had the same thoughts as you whether to invest out of state since NY is too pricey. I'm using Roofstock to make my first investment purchase and am currently under contract. With this being my first one, I was more comfortable taking the plunge with a little "hand holding" through Roofstock. They're in several Midwest markets that will cash flow well, but of course do your due diligence. I also came across this link on landlord/renter friendly states that was helpful in narrowing down where I would like to invest in addition to other metrics https://shar.es/an736g

Originally posted by @Gabriel Rodriguez :

Hello All,

First of all, thank you for such wealth of information in this place. I wanted to know if any of you have invested in properties outside of your state? I am from NY and investing in properties here is very expensive. I currently have 1 single family house rented, but my ROI is low for such property ($250K House - $250/cash after paying P&I/taxes) so I am looking for your advice. I currently have 100K in the bank doing absolutely nothing and I want to get the best bang for my buck in terms of properties/investment.

I figured that if I am able to invest 100K outside my state, I would be able to buy several properties and put them to work for me compared to just buying one here in NY.  I am still new to this and learning as I go, but I have decided that this is what I want to do and would like to dedicate myself to this to be able to provide a better future for my family.

Thank you and looking forward to your answers!

Gabriel

Yes, investing OOS is very doable. What are you looking to do? Buy and hold? Flip? Trying to flip OOS can be difficult as contractors may not be reliable, and if you cannot be there to coordinate it, things may fall apart. If you are looking to buy and hold, you can find an okay property on the MLS or maybe go with a Turnkey Provider where everything is done and ready to go for you.

Good luck to you!

@Gabriel Rodriguez

As a fellow New Yorker, I can attest to your logic.  I have been investing out of state for 11 years now and my money definitely went a lot further in terms of asset purchasing and building passive income.  With the funds you are talking about, I highly recommend linking up with someone who has successfully invested out of state and get some insight from them before proceeding to use your cash.  Best of luck and keep in touch!

@Gabriel Rodriguez Don't know what markets you have in mind but 100K doesn't buy several properties although most states are better value than NY. 

I would second @Ken Nyczaj comment and look to markets in your own state. Out-of-state could mean an hour or 5 hour drive depending on where you live.

@Sam Elder has made good points. As a Canadian, I can tell you that US real estate is dirt-cheap and better value (on average). But you need local knowledge. Otherwise you can end up overpaying. 

I wouldn't recommend the syndication route just yet (FYI: I am a syndicator). Would urge you to develop your knowledge and firm up your investment criteria before deciding what route to pursue.

@Gabriel Rodriguez yes you can invest out of state you just need a good team. After that’s all set up it’s arguably easier than buying locally as your team doesn’t most of the ground work for you.

The downside to this is you’ll be paying slightly more than if you lived in the market. But when the trade off is buying a 200-300k starter rental (like in my market) it’s worth it, at least to me.

I can get a brand new, fully rehabbed house for 75k in a B area (for that city). I can get an updated (a few years ago) property for less than 60, also in a B area.

Just gives you an idea

Hi @Gabriel Rodriguez , welcome to BP.

Out of state is definitely possible but I believe you should be able to good returns in NY. Not sure what part of NY you are in but I have purchased properties in the Buffalo area for low prices it’s been some years but the area in general is still pretty low priced .
Buffalo seems to come up on those lists of “where millennials are moving “ these days .
Rochester might be another one to look into .

I’d be looking for areas that are gentrifying or have a good potential . High property taxes are one thing I remember about the area but you have that in Midwest cities as well .
Need to run the numbers .

Some interesting articles .

It’s funny years ago I never imagined they’d be talking about gentrification in Buffalo . The same thing in parts of L.A too that used to be “gang areas “ but now hipsters are getting into bidding wars over properties .

https://www.nbcnewyork.com/news/local/Realtor-Hot-Spot-NYC-Realtor-Yelp-NYC-Rochester-Buffalo-450315393.html

https://www.newyorkstatedestinations.com/explore-niagara/elmwood-village-hipster-hotspot/

http://www.wivb.com/news/local-news/group-speaks-out-against-gentrification-in-the-queen-city/1083119084.

@Gabriel Rodriguez I think it’s a fine plan to get started with a few rentals at 25k down payments each.

This investing thing especially as a passive investor is not a get rich thing but relatively low risk.

Originally posted by @Gabriel Rodriguez :

Hello All,

First of all, thank you for such wealth of information in this place. I wanted to know if any of you have invested in properties outside of your state? I am from NY and investing in properties here is very expensive. I currently have 1 single family house rented, but my ROI is low for such property ($250K House - $250/cash after paying P&I/taxes) so I am looking for your advice. I currently have 100K in the bank doing absolutely nothing and I want to get the best bang for my buck in terms of properties/investment.

I figured that if I am able to invest 100K outside my state, I would be able to buy several properties and put them to work for me compared to just buying one here in NY.  I am still new to this and learning as I go, but I have decided that this is what I want to do and would like to dedicate myself to this to be able to provide a better future for my family.

Thank you and looking forward to your answers!

Gabriel

 I invest out of state. I live in Texas, where lots of people invest from out of state and do not own any investment real estate here. 

My perspective is a little different. I don't target AREAS, I target DEALS. I qualify that by stating I only invest in areas that are growing demographically.  Both of my multifamily deals have been from old rich guys that didn't want to manage anything or run a business anymore. 

I would love to have something here in Texas. We are booming and riding the wave.  That is common knowledge and the sentiment of sellers reflects it. There are deals to be had in Texas but I haven't found one yet. Still going to keep looking though. 

Lastly, I don't invest in SFH anymore. With 100k I wouldn't suggest that you do either, especially out of state. Everyone has their niche. I like MFH.

It's definitely possible...it's most of what I've done from LA. There's two ways you can do out-of-state-

https://www.biggerpockets.com/renewsblog/2012/12/2...

Old article, but same ideas still apply. I've only done turnkeys for myself. With those, $100k could get you 3-4 good turnkeys out-of-state, or you could use it to do a BRRRR+turnkey (the good ones I know of are in Philly and Baltimore, which is close to you) and once you cash-out refi, you could snowball it into more properties. Rinse, and repeat.

It's definitely doable!

@Gabriel Rodriguez   I have been investing in the Buffalo NY market since 2011.  All of our properties are cash flow positive and all of them have appreciated.  A few in particular have almost doubled in value.  

I would hate to see possible investment dollars leave the state, and Buffalo in particular :).  Take a good look at Buffalo, it has been very good to me over the past 7 years.  Happy to share more info if need be.

If you want to invest in out of state, then you need to invest in time to find local people who would run the business for you.

Finding house is easy part, but finding good and honest people is the harder in my opinion.

@Gabriel Rodriguez I would suggest you to buy some properties in Midwest where the prices are still reasonable and they will cashflow from day one and with $100K you can still buy 15-20 SFRs in our area that will definitely give you a decent cash flow.
I know you might be surprised but you still can still buy a decent house for 35-40k in Fort Wayne area and I have done this.

@Gabriel Rodriguez I invest out-of-state and it’s pretty much like being an absentee owner, just with...more risk :) You don’t intuitively know the right vs. wrong side of the tracks, you can drive by a property on the weekend, you’ll be taking a property managers work (even with documentation) that expenses are necessary, and you’ll pay for a couple of flights a year just to see the places you own. It’s all manageable but those areas all represent risk and (at the very least) am investment of time. The biggest area for you to consider is the different in absolute dollars investing in a 60 mile radius vs. out-of-state. More risk/hassle for another $20K per year is different “math” that having it for another $2K per year. You can change the actual dollar figures but larger theme still applies.

Originally posted by @Gabriel Rodriguez :

Hello All,

First of all, thank you for such wealth of information in this place. I wanted to know if any of you have invested in properties outside of your state? I am from NY and investing in properties here is very expensive. I currently have 1 single family house rented, but my ROI is low for such property ($250K House - $250/cash after paying P&I/taxes) so I am looking for your advice. I currently have 100K in the bank doing absolutely nothing and I want to get the best bang for my buck in terms of properties/investment.

I figured that if I am able to invest 100K outside my state, I would be able to buy several properties and put them to work for me compared to just buying one here in NY.  I am still new to this and learning as I go, but I have decided that this is what I want to do and would like to dedicate myself to this to be able to provide a better future for my family.

Thank you and looking forward to your answers!

Gabriel

Tons of folks on bigger pockets invest out of state. Setup a keyword alert for "turnkey" It's probably one of the most widely discussed topics here on bigger pockets. Ya see, 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.