I live in Portland OR and since the market has always been hot here, I decided to invest out of state.

I started investing in RE in 2013 and when the market was down I bought 2 SF in Peoria AZ and they are being managed by an amazing PM.  I've have 0 vacancies, no major repairs and they cash flow OK.  I don't remember the last time I talked to the PM. On 5th of each month I receive my direct deposit and the statements are loaded to the owner portal!  So totally hands off. 

Then in 2015 I bought SF home in Milwaukee WI, flipped it (long distance, never met with any contractors) and made $50K.  

Then I purchased 10 rental units in the inner city Milwaukee WI (5 duplexes) which were a huge mistake.  They quickly became money pits, high vacancy rate, lots of evictions, tenants trashed the units each time, dishonest PM's one after another, so the units never cash flowed and I tried for 3 years to unload them, but I was getting offers from local investors for less than what I paid for, not including all the repairs and upgrades.  I was on the phone constantly with PM's, city inspectors, tenants calling me directly, .... just a huge headache.  

Having to deal with these units, I decided to put a break on purchasing more since I felt like a total failure for a while. 

This summer, after working with an agent for 2+ years, I finally sold the Milwaukee units. I took a loss, but also learned invaluable lessons in RE investment. 

I've parked the $$ in a CD and have taken a break.  I own a non-RE business full time, have a young kid and a busy family life, so my next investment needs to be a no headache investment (buy and hold).  I'm self-employed, so my goal is to purchase enough rentals over time to have a nice retirement income. My goal is $150K in cash flow in order to retire. 

I'm back on the Bigger Pockets to start my research into the next chapter in RE investment. I'm interested in learning about possibly purchasing a vacation rental that we'll use ourselves and Airbnb it other times. or maybe couple of SF in AZ to have the same PM manage and be hands off.  

I consider myself a newbie and here to learn from the pros. 

@Azita Shahgaldi

Here’s a thought from another newbie, have you considered combining the ideas of a vacation rental and the AZ pm? I mean buy a property in AZ that you would like to vacation at (it seems folks from the NW like to vacay down there in the winter months) and see if the PM in AZ is willing to manage that one as well?

Or another thought is that if you vacation in AZ you can check up on the investments there from time to time.

In any case I wouldn’t be in too big of a hurry unless you need to 1031 the cash.

@Azita Shahgaldi don’t hesitate to reach out!

I have found that finding a good deal is only a quarter of the battle. Having the right partners/contractors is even more important. People over deals. A bad deal can be salvaged by good people, and bad people can wreck a good deal. So if you found someone in AZ that works for you and does an awesome job, keep going back to that PM! Share the name too!

I'm happy to answer any questions about the Phoenix market. I also have names for PM, handymen, inspectors ... anything you need. Getting a trusted team in place will help you feel confident jumping back into REI!

Originally posted by @Azita Shahgaldi :

They quickly became money pits, high vacancy rate, lots of evictions, tenants trashed the units each time, dishonest PM's one after another, so the units never cash flowed and I tried for 3 years to unload them, but I was getting offers from local investors for less than what I paid for, not including all the repairs and upgrades.  I was on the phone constantly with PM's, city inspectors, tenants calling me directly, .... just a huge headache.  

What is your plan to not make the same mistakes? Your saying that you don't like the constant phone calls, tenants trashing the place, and calling your directly but you want to move into a vacation rental? I would assume you'll need an even more hands on approach with that model. You will have more frequent turns and potentially more damage as guests will be in and out more frequently. Since you'll still be off site will you use a PM or are you going to self manage? Who's going to do the daily cleanings and the maintance? How will you ensure they were done to your standards or the standards of your guests? To me i'd suggest investing in a REIT or something like Crowd Street or one of those platforms.

@Rion Redinger

Older folks from PNW like living in AZ in the winters.  My family in general likes to vacation in Mexico and the Caribbeans.  We also like going up to the mountains in OR for winter vacation.  

So vacation home in AZ at this point in life does not interest me, but maybe once I'm a snow bird, I'll live there in the winter. 

@J Tessier

This exact reason is why my $$ is in a CD and not invested yet. If I end up buying a vacation rental, it will be managed by a PM and not myself. The ROI must be good enough to be offset guest damage.

@Courtney Richards

If you live in CA and investing in Milwaukee, I have list of people to avoid and list of a few trustworthy people I worked with.  Please feel free to PM me. 

I would say it depends on how much you have to invest and when you want to retire. If you're hoping to get to $150K in annual cashflow, then you may need to do more flips in order to raise money before you retire. 

The problem with duplexes and smaller rentals is that they are VERY susceptible to lost cashflow because of vacancies and turnover. If one person moves out, there goes half your cashflow for the month. Plus, after turning over the unit, marketing for a new tenant and paying the leasing broker, you may be out another 2-3 months of cashflow.

It may be better to build up your cash with flips and then buy a multi-unit that's much larger. The more units you have under one roof, the more your cashflow is protected.

First of all, it is good to hear that it seems like you are ready to jump back in. Many times, jobs like that make it very difficult to recover and want to try again. I work to the west of Milwaukee in Rock County, WI. I feel that we have very similar ideas about how to invest out of state and I would love to talk more about your investments and your investment goals. If you have any interest in the area, or any questions, please feel free to let me know. 

Consider syndication.   They are 100% passive.    The downside is that you don't have the control.   Check our CrowdStreet or RealCrowd to see what they look like and what they offer.   

Perhaps it is a step too far, you seem to want to stay with direct ownership, but I thought you might want to consider it.  

@Michael Skoczylas I believe finding the deal is the hardest problem. Past 3 months, I’ve spoken to 10 re agents telling them to find me a deal. Not 1 called me back knowing I can close.

@Steve Orluski

You’re right, finding the deal is the hardest part.

I get calls and emails from investors all the time asking for the impossible deal. They get on BP and think they can get rich over night. They reach out to us Realtors asking us to find these impossible deals. They lay out their impossible criteria and expect us to spend days scouring the market for them.

I’m not saying this is you but you may be being perceived as such if you’re contacting Realtors with a shotgun approach. There are good deals to be had but my best investor friendly deals will always be presented to those investors that I’ve established a relationship with first.

My guidance is to chose an area, pick an investor friendly Realtor and build a relationship. Be realistic and discuss options. Value their expertise, then follow up, stay in touch and build a valuable relationship. Treat your Realtor as a partner not a telemarketer. A good investor/Realtor relationship can be very lucrative for both parties.

@Azita Shahgaldi - thank you for sharing your story! I am tempted to give you a call for a video interview - you have lived through what I am trying to tell people on BP on an almost daily basis to out of state investors. 

The numbers in the INNER CITY of Milwaukee look very, very good (actually increadibly good) - and as the old saying goes: if it looks to good to be true.... It is hard to describe what you have experienced in a few short sentences. People just look at the numbers and say "I'll just hire a PM" - problem is that any PM worth their money (knowing what they are doing) will not service these properties. 

I have been an investor in Milwaukee much longer than I have been an agent. We have started buying properties about ten years ago and I have "retired" in 2016. Our portfolio is still growing on a scheduled rate and there is a reason I am paying a multiple for properties which do not "cash flow" on a spectacular rate. I know better.

The reason I capitalized INNER CITY is because Milwaukee as a metro area is doing very well, in fact the city is reinventing itself. We see a huge amount of new construction, commercial and residential, a ton of MF development and Milwaukee has become kind of hip (according to clients of mine who moved here). The city is growing a sky line on the lakefront and is developing a start up culture.

If you follow my posts you know that I believe in a possible scenario where real estate in Milwaukee is going to be valued signfificantly higher than it is today. The reason is simple: supply and demand. We have now room for further growth, the city is fully built out. And single family new construction in the suburbs is 500k to 750k on large lots. We are limited to existing inventory, except highrise condos, there will not be any new supply.

Originally posted by @Steve Orluski :

@Michael Skoczylas I believe finding the deal is the hardest problem. Past 3 months, I’ve spoken to 10 re agents telling them to find me a deal. Not 1 called me back knowing I can close.

Are you suprised? 

My best deals go to my best clients - because I know they will understand the deal. I have learned that lesson early: most new investors lack the context and experience. They will look at an exceptional deal and ask me if I have something better. Or they can't make up their mind. I invest a lot of time and energy into my investor clients - the goal is to educate them, so they know as much as possible of what I know. 

I am a full time agent, we manage our portfolio in house (with an assistant) and I typically have 1 or 2 construction projects going on at any point of time. Time is my most limited ressource, so I am very careful, who I invest it in. Certainly not in someone who calls ten agents.

The other thing you need to understand is that agents generally don't know the first thing about investing. I mentor young agents and they all want to work with investors, because they don't understand what that means. This industry has a drop out rate of almost 90% in the first year; if an agent has been in the business for more than 3 years he/she is a seasoned veteran. The national average is 7 deals per year. Finding a good agent is not easy, finding one who also happens to understand investing is even harder. I know, because I have worked with probably 20 different agents trying to find someone who knew more than I did. I finally got licensed myself.

Finding a great agent is your #1 mission. And once you have found a good fit, you have to invest time and energy to build a relationship and mutual trust. If you can't trust your agent and your agent does not trust you, you are not going anywhere. 

Hope this makes sense and helps you going forward!

@Marcus Auerbach

So true!!! mot reputable PM's won't manage inner city properties.  One told me that their guys would be scared to even drive through these neighborhoods!!

I myself visited the properties once when I suspected they were being miss-managed and wouldn't feel safe going there by myself.  The inner city Milwaukee takes a special kind of investor!

@Azita Shahgaldi Marcus hit the nail on the head. 

I moved to the Milwaukee area in 2017 and started investing in real estate. My first deal was in the Sherman Park area. I was drawn to the numbers of the deal, but I didn't realize how much work it would be to manage. I am thankful to say it wasn't as bad of an experience like what you had. I went on to buy a second duplex about 10 blocks west. It is crazy how different a few blocks can make for both property values, quality of tenants, rents, etc. 

I now have narrowed my criteria to areas where the cash flow will be slightly less; however, the management headaches (vacancies, midnight calls, property damage, etc) will also be less. I too like @Marcus Auerbach decided to get my license because most agents don't understand investing. 

I think you made a good choice to set the cash aside, take a breather, and regroup! A lot of 2019 for me was building systems and organizing so I can have future growth with less headaches. 

Happy Holidays! 

@Azita Shahgaldi I have coached some investors in getting some cash flowing properties in Arizona. They are getting harder to find but they are still out there. We follow a lease option model and it tends to minimize property management while it maximizes returns.