Looking to Invest Out Of State

56 Replies

@Dannielle O'Buckley . I’m currently stationed in Jacksonville, NC and have a solid team (Realtor/Property Manager/ Contractor) all under the same roof here in Onslow County, North Carolina.

Very easy to find “1%” properties from the 70k to 120k price point.

Most of the renters are military and some are capable of 1 year or more leases.

Would be happy to put you in touch with my team.

Are people choosing a market, or property and that dictates the market? I’m looking for multifamily homes, and that’s kind of making me have to look everywhere!

Feel like I’m at a chicken before the egg thing, but do I find realtors/property managers first, or after I find a property that looks favorable?

Kinda late to the thread, but happy to help anytime if I can! I live in LA and have mostly invested out-of-state. This article isn't about finding a location, but it's a starting point of things to think about-

https://www.biggerpockets.com/...

Locations depend on what you're trying to do, budget, etc.

Reach out anytime if you have any questions!

@Dannielle O'Buckley

New York, San Francisco, Hawaii, Los Angeles, Seattle, Boston are examples of primary markets which are NOT ideal for cashflow investing.

It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work).

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%.

@Dannielle O'Buckley I am local to you and came to the same realization about a year ago. I wound up getting comfortable with Little Rock after I did a small tour of the south/south east. I spent some time out there meeting with people and building a team.

I closed on two properties and so far, so good 🤞🏻.

One thing I will say, fly or drive out to your market. Interview the people, look them in the eye, ask them lots of questions and write down their answers. Some will say that this is not worth the cost, but I would never have taken the step without seeing the neighborhoods and meeting the people myself. I got lucky and was hooked up with a fantastic realtor by a recommendation here. I interviewed a few property managers as well and I must have connected with over a half dozen lenders. My one weak area is a contractor. I haven’t found one yet. All the ones I have spoken with charge NY prices +50%, they definitely know when you are an out of state investor.

I am not too far ahead of where you are at, so feel free to reach out to me if you have questions.

I’m not an out of state investor myself, but I am a native of Memphis so I’m part of the “team on the ground” so to speak for a few investors abroad. 

I have to second the notion that it is well worth flying into your targeted market to get a good feel for the area as well as shake hands with your prospective “team”.

While selecting markets, most of the top Midwest cities have been mentioned here so from there it is a matter of looking into job growth, development, vacancy rates and weather patterns. Oddly enough, cities with high crime rates tend to be at the top of the list for best cash flow markets like St. Louis and Memphis. You can’t expect much appreciation in these areas, though. 

Once you’ve selected a market, next up is selecting a property. If you don’t feel comfortable forming your own team (someone to finds deals, PM, contractor, inspector, lender), then you may want to consider going the turnkey route for your first few ventures. You can do most of your due diligence from afar looking at Trulia’s crime map, compare asking rent rates on Zillow nearby (and how long they’ve been listed) and looking at the street view to make the block. 

Best of luck on your ventures!

Originally posted by @Eric Ippolito :

Are people choosing a market, or property and that dictates the market? I’m looking for multifamily homes, and that’s kind of making me have to look everywhere!

Feel like I’m at a chicken before the egg thing, but do I find realtors/property managers first, or after I find a property that looks favorable?

I recommend finding a few target markets. There are several here in the midwest as well as various other markets. They do not have to be the "best" deals, but a market that has deals. At that point, start engaging professionals and providers in that market as well as networking with other OOS investors who are in your target market. BiggerPockets is a great place to find other OOS investors. In my opinion, having a great team in a decent market is better than having a poor team in a great market. The team really is that important. I've talked to many investors whose biggest frustration was purchasing what appeared to be a great deal but having limited professionals to manage and maintenance the property. You find yourself somewhat stuck and unable to tweak your team by replacing some members. Usually this happens in smaller markets where opportunities present themselves.

To me... the most important parts of your team will be your realtor, property manager, banker, and insurance agent. They should likely be able to recommend title companies/attorney's, contractors, home inspectors, etc. It can be difficult to find the right realtor as their financial incentive isn't necessarily aligned with your long term financial goals and investors can be very time consuming for a realtor to work with. Realtor commissions are very deal driven. Property managers are more performance drive. Bankers, and insurance companies have a much greater exposure to the liabilities that may come with holding investment properties long-term, so there tends to be a greater financial alignment there as well. Your insurance company can let you know if you have to carry flood insurance or if an area has a variety of risk factors that need to be considered. Bankers want to make sure that a home will perform well enough to cover the overhead and not default.

The south and midwest are the best as far as cash flow go. But be very careful buying out-of-state. If you want to, I would recommend reading this article I wrote that has some more tips on it: https://www.biggerpockets.com/blog/2014-12-23-investing-out-of-state-essential-items-to-vet

@Dannielle O'Buckley hi Dannielle! I just closed on my first deal and it was half way across the country!! I am from NJ and found real estate in St Paul MN to be very lucrative. I recommend reading David Greene’s book on long distance real estate investing. That helped a ton.

Best of luck!

@Dannielle O'Buckley you could check out the REI meetups in your area and attend one. Chances are that if your backyard doesn't work, you will meet other investors that are investing out of state. That's a great place to start. Ask them why they are investing in the markets they are in, then do your own research. The internet is a great way to verify what information you get. Good luck!

@Bobby Esposito I also had a ton of fun building my team out there. I was able to get a lawyer, realtor, property manager, and contractors all on the same team and all from New Jersey. They are wonderful people and I trust them entirely. Heck I even purchased the house without seeing it!

Technology is a wonderful thing. When you leave to leverage that you will excel.

Hi, I help out of state investor with their purchase in Atlanta and surrounding areas.  I'd love to help you if you are open to know more about Atlanta market. 

@Dannielle O'Buckley

Good evening Dannielle how are you ?

I’m in Michigan houses here are good in some areas I have several rentals in different locations

But the advantage that I have I’m a license builder and carpenter by trade so I can do the work and get the house done with not a lot of over head if you are interested in investing In Michigan let me know I can help

Thanks

@Dannielle O'Buckley I think it is wise to be really careful investing OOS, as previous posters have already mentioned. BUT, I still think there are good deals here in Grand Rapids, MI for investors. Reach out to me if interested in exploring that. I'm a Realtor, and a real estate investor with some rentals here. I can help with contractors to repair my clients' properties, too.

@Dannielle O'Buckley

New York, NJ, all of NE, San Francisco, Hawaii, Los Angeles, Seattle, Boston are examples of primary markets which are NOT ideal for cashflow investing.

It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work).

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%. 

@Dannielle O'Buckley

You need to determine ‘where’ you’re going to invest. If cash flow is your goal and I assume it is, then the Midwest and southeast are your best bet. You basically have 2 options: 1. Build your boots on the ground team or 2. Turnkey. Either way can work, but you need to buy a plane ticket/hotel/rental car and go meet the people. I’m amazed at how many people will drop $25k-$40k in down payment/closing without spending the $800-$1,000 for basic due diligence!

Originally posted by @Dannielle O'Buckley :

After running a lot of numbers, I realized it’s not feasible to invest in my backyard. I’m looking to invest out of state now, but I have no clue where to start looking for a location. How is everyone who is investing out of state doing their due diligence?

 Good news is that you are not alone. Many investors are in the same position as you. Typically they look to the turnkey markets. Tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cleveland, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Birmingham, Alabama
  • Kansas City, Missouri
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. 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.

@Dannielle O'Buckley Congrats on taking action to create a better life. I am originally from NYC and now live just over the border from NY in Milford, PA, just under Port Jervis, so not that far from you. 

I invest in South Carolina. Both Charleston and Greenville. 

1. Do you have any ties to any markets. Did you go to school in a different market then you live? Do you have family or friends in other parts of the country. Are there places that either you visit on a regular basis or would like to visit? 

If the answer is no to the above then start like this

1. Which part of the country resonates with me most?  Northeast, Northwest, Southeast, Southwest, Midwest

2. Within that section what are the bigger MSA's? So for instance the southeast has Charlotte, Atlanta, Charleston, Greenville, Jacksonville, Orlando, Knoxville, Nashville, Little Rock, Birmingham, etc.

Another way to get market leads is to type top 10 retirement city's or top ten city's for population growth, or job growth, top 10 best place to live, work, vacation, go to college, etc. let your mind run wild.

3. Pick the ones you like best and run the numbers.

      Visit Bestplaces.net and city-data.com

Collect population, population growth over the last 5 years, job growth over the last 5 years, who the major employers are and how much of the job market they employ. Unemployment numbers, percent of population between 20 and 34 and then 55+ Vacancy rates, median household income, per capita income, median home price, to name a few.

4. after you lay out the numbers for each market you can then get a clearer picture of which market will best suit your needs.

Use resources like Viewpoint 2019, Berkadia 2019 national apartment forecast, 2019 Multifamily investment forecast to help aid you.

An article I wrote on this exact topic can be found here  https://pikecountyreia.org/picking-a-real-estate-market/ 

Please feel free to reach out to me if I can add value to you in any way.  I am always willing to pay it forward.