California investors are regularly having issues with out of state investments. Vacancy is just one of many problems. There is weekly discussion threads about these problems.
In these markets, local investors do better than out of state investors for several reasons:
1. They know the good neighborhoods. Even one block can make all the difference.
2. They are their own "feet on the ground". That means local investors can be at the property to get it shown quickly, keep an eye on it or keep an eye on the property manager. Phone calls, texts and e-mails only get you so far.
3. If you are local and self manage, you can be more flexible. Most the property managers I know refuse to show a vacant property at night or on the weekend. I have rented properties to people on a Saturday, who were only in town for the weekend house shopping. They tell me other companies didn't even return their calls on the weekend or wouldn't show until Monday. I also show my properties before they are vacant, so I often have no vacancy. Many property managers only show vacant properties (for good reason).
4. I see property managers over charge rent. They either push large rent increases forcing vacancy or market too high. I drop price quickly if it is not renting. This fall, I had a property that came on the market one month after a similar house that was a half block away. I priced it at the same rent but had low interest. I dropped rent after a week and had it rented by week two. The other property sat for four months vacant. They finally dropped the price to what I had rented my property at.
5. Out of state investors can get gouged for repairs. The reality is "California Investor" (to some people) is a license to overcharge or do unnecessary repairs. Without the ability to go physically look at the problem, you are at the mercy of others. Unfortunately there is a perception that in California the streets are paved with gold, so people justify their own bad behavior. It is not right, but it is a real risk.
Some of these things can be avoided by picking the right local team, so I am not saying you should not invest out of state. I am just saying be careful.
The reality is we are later in the recovery cycle. There were plenty of out of state investors who purchased in 2010-2016 and are doing great. The problem is now with prices inflated, there is less room to make mistakes. Also many of the cheap properties are still cheap for a good reason. They are run down and in a bad neighborhood.
Indiana is not California. Stop thinking about "deals" meaning low cost. Stop thinking about return as only being gross cash flow. Expenses, vacancy and appreciation are all factors beyond gross cash flow. One good property is better than three crap properties.
I am not saying you cannot be successful. I am just saying many (maybe even the majority) have had problems. Some of these markets are only seeing appreciation because of out of state investors. I see it in my state. Out of state money is pushing prices up to levels that the rents do not support. Forced appreciation only works if there is a tenant pool to support it. Lower salaries and abundance of build-able land are factors that California investors do not consider.
