Purchasing Out of State

32 Replies

Hello BiggerPockets! I’m new here, and to Real Estate Investing! I’ve spent the last year (roughly) learning from reading BP forums, and from relationships I’ve made with local REIs. I have a question for the whole forum: Would you purchase property out of state? I am very fortunate to live where I live. The downside, extremely high property values (many overvalued), and drastically high taxes. I have considered purchasing property in other states, including North Carolina, South Carolina, Florida, Connecticut , etc. I have reached out to several management companies who deal in some (or all) of those states. I don’t think there is necessarily a right or wrong answer to this question, just a personal preference. What do you all think?

I have some experience with out of state investors. I worked mainly as the "boots-on-the-ground" for a variety of them during my time in Cleveland. From my point of view it can be very rewarding and lucrative as long as you have the systems to back it up. Overall, investing out of state needs a lot more up front planning and networking than investing in your own community. You need to know rehab teams, brokers, other investors, PM, etc. I suggest finding a young, hungry agent like myself in your desired location! PM me if you want to talk more about this! Best of luck,

I invest out of state in South Carolina and love it. It's a lot of time on the phone, rewarding and helpful with diversifying across geography. I have great relationships down there.

That being said, I'm glad I waited until I had some local experience before jumping in long-distance. Happy to chat if you'd like. 

@Alexander Coventry

Live where you want invest where the numbers made sense. I invested in Indianapolis Birmingham and Atlanta when I lived in seattle.

Primary markets just has too much unsophisticated money chasing local deals.

I've been investing out of state for over 10 years. My main tips are - make sure you find a great property manager, because it's all about management. And also start building relationships with local investors. 

Let me know if I can be of any help. 

@Alexander Coventry , @Jason Carter is right on the money -  the people you work with are going to make or break your investment, even if you choose the perfect market. Of course, the numbers need to line up, but that being said: People first, market second. 

There are tons of people here on BP in the exact situation you're in - pricey home markets force you to go out of state to make the most of your capital. The best advice I can give is to focus on the people - and that goes for the turnkey route as well as the more DIY strategies like BRRRR. Ask questions and expect solid answers based on hard data (ie if you ask what a turnkey provider's occupancy rate is, you shouldn't get an answer like "oh it's great, like 100%"). Ask for references - any provider, agent, contractor, or PM should be willing and able to put you in touch with people who will talk to you about their experiences. Use BP to check out review threads, ask people here via PM what their experiences have been. Do your homework and vet the people you're considering partnering with like your life depends on it - because your investment definitely does.

When you've narrowed down your top one or two markets/teams/providers, bite the bullet and fly out to meet the people, tour the operation, and see their work first-hand. It's a small expense in the scheme of things and it will pay you back ten-fold in peace of mind.

Best of luck!

Clayton

Originally posted by @Alexander Coventry :
Hello BiggerPockets! I’m new here, and to Real Estate Investing! I’ve spent the last year (roughly) learning from reading BP forums, and from relationships I’ve made with local REIs.

I have a question for the whole forum: Would you purchase property out of state? I am very fortunate to live where I live. The downside, extremely high property values (many overvalued), and drastically high taxes.

I have considered purchasing property in other states, including North Carolina, South Carolina, Florida, Connecticut , etc.

I have reached out to several management companies who deal in some (or all) of those states.

I don’t think there is necessarily a right or wrong answer to this question, just a personal preference. What do you all think?

 Many investors try going out of state, and it can be a great idea if it is done right! For investors who live in expensive markets, or work full time, going OOS with a provider who has it all done for you can be a great idea. The first step is to lock down a market you like first and then look for either a Turnkey Provider in that area or some other kind of team that can assist.

Good luck! 

I'm likely to move to Washington state in 1-2 years, and will buy a house there (hopefully a duplex/triplex I can house hack). From there I plan to invest in more affordable markets like Birmingham/Huntsville, Pittsburgh, Manchester, etc.

In case no one's mentioned it yet, pick up David Greene's book on long-distance real estate investing (it's over in the BP store). I'm reading through it now; there's some good material on building up a local team from anywhere. Best of luck!

@Alexander Coventry Use the power of BP. Search for investors in that area and then send them a DM asking whatever you want to know. Something like, "Hi Joe , saw you invest in XXXX. I'm researching that market myself and was curious what you thought of the Pinecrest Hills neighborhood as a potential area for SFH rentals?" Or ask if they can recommend a reliable property manager. Or an agent.

I'd keep it to one question at first and then build from there. Some people will not respond but don't take it personally. And some may have short responses. But it's like anything, you work it a little bit and you may hit it off with some. It''s always good to have local knowledge and you never know, they could wind up  partnering on a deal in the future. Or sending you a deal. They can also be good resources for vetting contractors and such. And try to add value for them too, whenever you use their recommendation make sure to give them credit. Or if you see people on BP who need help in their area, recommend your new connection.

Always be networking. It can open a lot of doors. 

Originally posted by @Alexander Coventry :

@Tom Ott When you say provider do you mean a property management company?

 A Turnkey Provider. One who owns the property, renovates it, and then manages it after you purchase it. 

I'm also an out of state investor. I agree with what most people already said. The one person that really makes or brakes your business is your property manager. Once you have found a good manager, treat him well and don't pretend that you are a big shot. Too many people that only have one rental property act like they are the most important account that the pm manages. 

The property manager does A LOT of work for the 7%-10% that you pay him. When I started out I told my property manager that I would buy a lot more houses in the area for him to manage and I performed on my word. Every once in a while a send him a gift card because I appreciate what he does for me and my family. Your PM will also have an "in" with local contractors and he can make sure that you are not screwed over.

@Alexander Coventry

As someone who lives in LI, I can attest to what your talking about.  Investing out of state can be lucrative BUT there are various components you must factor if you are to choose this type of investing.  I have been doing it for 11 years now and still learn something new everyday.  I would talk to successful out of state investors and discuss your specific situation so you can build a solid road map.  If you need any help feel free to reach out.

@Alexander Coventry I have been doing nothing but investing out of state since 2012, so I guess that makes it clear what I prefer.  There are additional challenges and risks, but they can be mitigated by building or choosing the right teams to work with.  

@Alexander Coventry I'm going to echo what @Jason Carter and others have said -  BP is going to be your best tool here. Think about markets you're interested in and set up increasingly more specific keyword alerts. So for example, I'm in Birmingham and I sell turnkey, so I like to know when people are talking about my market and my niche, so I have 'Birmingham AL' 'Birmingham turnkey' 'Birmingham turnkey reviews' 'Spartan Invest' etc. This helps me know when people are talking about something that relates to me generally or specifically. When you see someone doing the type of investment you're interested in and succeeding in the market you like, reach out to them and ask about their experiences, ask people for references for providers, agents, contractors. The worst they can do is say no, and you'll find most people on BP are more than willing to help out new investors. 

If there's an REI meetup in your area, go to it, shake some hands, make some connections and learn from people that are further along than you. BP is one big social club where we all have one obsessive interest, so make the rounds, send some PMs and start building a network. You'll be surprised how many useful bits of advice, solid leads, and valuable referrals can come from BP relationships.

Good luck!

@Alexander Coventry or anyone else thinking about investing out of state: I would start by listening to this podcast:

https://www.biggerpockets.com/renewsblog/biggerpockets-podcast-257-how-to-become-long-distance-real-estate-investor-david-greene/

If it sparks your interest, I would definitely recommend buying @David Greene 's book, Long Distance Real Estate Investing (maybe not the most creative title but it is GOLD!). I've read over 35 RE books and this is BY FAR the best one. Quick summary: it's 2018, with all this technology, investing OOS is as easy as investing in your backyard. He also gives you systems that are easy to implement.

I'd be happy to answer any questions!

Alfredo

@Alfredo Elias I bought my first rental out of state, sight unseen (sort of) at 22. So yeah I think it’s rewarding and possible. If you live where a basic rental is going to cost you 250k I look elsewhere. My rentals are usually 3 br 1-2 bath and 1000-1200 square feet. Simple, gets the job done. Solid middle level rent that lots of people can afford.

@Caleb Heimsoth  Exactly, that's awesome! Good to hear success stories about oos!

I live in CO Springs. You can't even get properties in D neighborhoods that meet the 1% rule... it's crazy! Properties last 1-3 days on the market and people are over-paying hoping for appreciation... seems like 2007 behavior. For me an others in markets like this with 2018 technology, investing oos is a no-brainer.

"He who doesn't learn from history is doomed to repeat it"