First time Rental Property Investor Out Of State

[Matt Hrachovy]

Hi All!

I'm potentially looking to invest in a home to rent out. I live in California though, and it can be pretty expensive unfortunately. So i'm potentially looking into finding something out-of-state to purchase. Is purchasing out of state as my first investment risky? I'd love to hear feedback or any tips. Thank you for your time! 

[Cassi Justiz]

Hi @Matt Hrachovy, 

I don't think buying an out of state property has to risky, but it can be. I think it's extremely risky to go into an area without visiting or doing any research and buy the first cheap house with "great cashflow" that comes through your email. But if you do your research and set up a great team and have criteria in mind before you start buying, you can have investments that are no more risky than buying the house next door. And once you get away from the coasts, there are a lot of great areas in the middle of the country that make a lot more sense for investment properties. 

The process that I feel is the least risky for new and out of state investors is to buy slightly nicer, turn-key style properties in good areas and then hand them over to an experienced property manager. You don't get the same "equity" that you would with a BRRR strategy or major rehab, but it's a much easier path for a first investment if you have cash available for a down payment. If you buy nicer properties (B+) in desirable areas at reasonable prices, you always have an exit strategy of selling to owner occupants. (Exit strategies are one way to help make the investment less risky).

If you buy run down D- properties in a war zone, you probably won't be able to sell to anyone other than another investor. 

I'm happy to answer any questions you have about setting up criteria, building your team, etc. I work with a lot of out of state investors and have a pretty smooth process at this point.