Casa Grande, AZ · Member since 2020 · 17 posts · 34 votes
I’m 20 years old and live in Arizona but I was looking at a cheaper markets to invest in like Memphis Tennessee. I’m seeking advice on should I try to get a primary residence here in Az or a rental property in a cheaper market? I have about 15k to invest
Rental Property Investor · Phoenix, AZ · Member since 2020 · 7 posts · 14 votes
5y
Hey Jovann,
Its funny, because I live in Phoenix as well and found myself asking the same question about a week ago.
Things I would consider:
The market is getting a little pricey in the valley however I don't think it is going to slow down soon. So appreciation would still be a benefit of getting a property in Phoenix.
Another factor that you may want to consider is the return that you are looking for? Cash flow vs buy and hold.
Alone, 15k will probably get you a property that could benefit from renovations, something you could live in and fix up.
Also consider when looking in another market that you will need a team/network to help.
I was recommended to read David Greenes book on Long Distance Investing.
Feel free to message me if you have any other questions or would like to chat. Hope this was helpful!
Rental Property Investor · Mount Juliet, TN · Member since 2017 · 20 posts · 1 vote
5y
@Jovann Thompson Hey Jovann how’s it going. My wife are only 5 months into investing and we bought out of state. We’re in Ca and our two homes are in Oklahoma. We got our 1st one with just over $15,000. We ended up with a great team. Very fortunate that things have lined up well for us. We interviewed over 5 realtors and PM companies. We did it as if we’re getting 4 to 5 bids in a job, and just went with what felt right, and it’s worked. Message me if you’d like to know more.
Rental Property Investor · Florida & Shanghai · Member since 2017 · 192 posts · 68 votes
5y
Remote investing in RE has it's challenges no doubt, but I have doing it for nearly 3 years now from outside of the USA and about to close on my 14th unit this month.
Like any challenge, you have to size it down into a scale you can understand, isolate and develop a solution for. Whether it's time, people or material resources, it eventually becomes a line item in your proforma. These can differ greatly between localized and remote investing models.
It goes without saying that communication skills are a underlying necessity in all forms of RE investing.
Honey brook, PA · Member since 2017 · 17 posts · 11 votes
5y
@Jovann Thompson
@David A
I’ll give my few cents here. 5 yrs ago I bought my first property in Memphis TN. Within a 1 1/2 yrs I had 3. 2 of them did pretty well meaning 8-15% Return on investment. The 3rd I still have not made a dime. I sold one last yr since it had appreciated some and I am investing locally.
I didn’t buy for appreciation but surprisingly they did appreciate. I’m actually going to sell the one that never cash flowed since that particular neighborhood appreciated about 35%.
With that said it was a great place to get started on my real estate journey. I never regretted it. I am investing primarily locally now so am no longer buying in Memphis. Make sure you have a great team when doing out if state.
Liz over at Mid South Home buyers helped me out wonderfully and they do a really good job.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
5y
Out of state investing can be done, but it takes a strong team. That sounds easy, but can be very difficult. Sometimes the people/companies work out really well, but other times you may go through many, just to find a good match. In Cincinnati, we purchased out of state apartment buildings and had to fire our property management company, not just once, but 4 times. Currently our 5th property management company is doing a good job, so fingers crossed. In other states we have found the property manager and contractors on the first pitch, but that seems to be the exception, not the rule.
Now, as far as investing in small properties and chasing markets because they are cheaper - well, I think that is a bad idea. Phoenix is a great growth market, with many excellent fundamentals showing that it is poised for an excellent trajectory or continued positive growth. Why leave a market like that, in your own back yard, for a cheap market? Also, small properties, don't give you scale and ease of management, something that I feel is valuable with out of state investing.
If you decide to go out of state, I have 2 articles that may help in your journey.
Investor · Phoenix, AZ · Member since 2016 · 13 posts · 3 votes
5y
@Jovann Thompson.
Hi Jovann. I had $25k to invest in 2013. Bought a duplex and lived in one unit while I rented the other. The rent income covered my expenses, I saved and bought two additional rentals a couple years later.
5 years later I tried an out of state flip (in same area my rental properties are- I had moved away).
I went through 4 project managers, one who stole supplies and equipment from me, one whose work I had to completely redo and one who pocketed my money (he was a “friend”) and ghosted me.
I flew back 5-6 times to ensure it was done correctly and made $100k more on the Sale than I had bought it for. I think I actually netted $5000 on the whole deal when you take out my travel and losses.
Don’t do the out of state until you really know what you’re doing and you have a great deal of savings and a great team in place, including backups.
Hi Jovann. I had $25k to invest in 2013. Bought a duplex and lived in one unit while I rented the other. The rent income covered my expenses, I saved and bought two additional rentals a couple years later.
5 years later I tried an out of state flip (in same area my rental properties are- I had moved away).
I went through 4 project managers, one who stole supplies and equipment from me, one whose work I had to completely redo and one who pocketed my money (he was a “friend”) and ghosted me.
I flew back 5-6 times to ensure it was done correctly and made $100k more on the Sale than I had bought it for. I think I actually netted $5000 on the whole deal when you take out my travel and losses.
Don’t do the out of state until you really know what you’re doing and you have a great deal of savings and a great team in place, including backups.
Start and grow with a house hack here in phoenix.
What do you mean great deal of saving and backup? You need to put aside 20% aside for problems and you should prepare few exit strategy indeed. This is the tuition fees
Investor · Phoenix, AZ · Member since 2016 · 13 posts · 3 votes
5y
@Ari Hadar
He needs savings to survive a longer Repair process than he expects and any problems with his contractors. He needs a great list of key contractors to work with and a couple to fall back on if those are busy or don’t want the job.
He needs savings to survive a longer Repair process than he expects and any problems with his contractors. He needs a great list of key contractors to work with and a couple to fall back on if those are busy or don’t want the job.
Money reserves and backup trades people including backup realtors, pm, lenders as well.
Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
5y
Long distance investing is much easier than local investing (in my opinion.)
Yes, they both come with their challenges but here is my take from someone who has done a decent amount locally and afar.
Drawback of long distance RE vs Local
- Traveling
- Finding the right team/Networking is EVEN MORE crucial when your boots aren't on the ground
- Less familiar with areas so you do need to conduct additional local diligence
Benefits of Long distance RE
- More time saved from not wasting time and energy driving to the site, picking up materials and getting caught up on the small stuff. This is the most important one to me. A General in the military doesn't get there because they spend their energy micro managing each rifleman. They get there because of their leadership and ability to prioritize objectives.
- Most (not all) people can find superior cap rates in out of state. You get to choose your market, not have your market choose you. Find the best market that gives you the cash flow, appreciation, or stability that YOU desire.
Rental Property Investor · New York City, NY · Member since 2017 · 493 posts · 386 votes
5y
@Jovann Thompson
It’s not easy but it’s manageable, it gets easier over time once you have your team members and processes in place..
Don’t expect it to be 100% passive expect to travel back end forth at first as you’re learning your new market. Im glad I started 4-5 years ago and not now during Covid. Everything is relative you might find your market expensive but I or your Cali neighbors will not..
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
5y
@Jovann Thompson yes it’s very difficult and honestly there are a lot of better investments then buying rentals long distance. You will likely lose money long term with this strategy.
@Jovann Thompson knowing the market you are investing in is the best way. Who are the major employers? Are companies relocating to your state? If the area has steady employment, better chance you’ll have tenants that pay. Talk to property management companies to get advice. Also contractors. Start asking around on Nextdoor for local advice.
Investor · Nashville, TN · Member since 2019 · 92 posts · 96 votes
5y
Of the many people that have given their advice, for someone that is 20 years old with 15k, my advice would be to house hack. If you are able to get into a home with little to no money down thats great. Its a place to start. Though, I would consider the costs of PMI. The longer you have PMI the more money you are throwing down the drain. If you are able to get into a 3 bedroom and rent out the other two rooms to cover your mortgage and possibly cash flow a few hundred bucks, thats a great place to start. You are able to maintain and manage the property yourself, your renters are paying down your mortgage and building your equity. Meanwhile, you are living rent free and saving whatever income you have along with the growing appreciation in your house. After two years, you'll be able to avoid capital gains tax and with the combination of a cash out refi plus what you've saved...you'll have A LOT more money to invest. Also, you'd only be 22 years old with a rental property ready to buy the next one/two/three. Love the hustle man!
I’m 20 years old and live in Arizona but I was looking at a cheaper markets to invest in like Memphis Tennessee. I’m seeking advice on should I try to get a primary residence here in Az or a rental property in a cheaper market? I have about 15k to invest
Have you considered house-hacking? If you buy an investment property you will have to put anywhere from 15-25% down. If you live in the property, you will only be required to put 3.5-5% down.
Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
5y
@Jovann Thompson Hi Jovann! I have not read through the thread, so please forgive me if I'm reiterating what someone has already posted. If you are investing out of state the only thing that really matters is finding a terrific, honest, property management company :)
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
5y
@Jovann Thompson it doesn't have to be hard if you understand what to look for. The reality is that most of the mistakes you might make or the things that could go wrong can happen whether you're investing in your local market or out of state. The main challenge for out of state investors is knowing the neighborhood. The biggest mistake new out of state investors make is buying in bad neighborhoods. Any other mistake or problem can be fixed but you can't move a house.
Rental Property Investor · Santa Barbara, CA · Member since 2018 · 9 posts · 5 votes
5y
Definitely go with the house hacking advice, all the benefits, don't need big down payments you stay local and in control, safer bet to start and jump on the ladder to get investements under your belt. The biggest pay off of all is the education. I look back now and wish that was the avenue I took I just didn't even knew it existed. You'll know so much more in a year or two this way, and make far better decisions for OOS and your future investments. Free university
Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
5y
@Jovann Thompson
I would classify myself as the master of long distance investing since 2009. I’ve been buying, selling and renovating property remotely for the past 11 years. Most of that time I was on the other side of the world, not simply in a different state.
I also started a property services company which I run remotely. This company does repairs, maintenance, remodelling, leasing, architectural plans and other services for investors in Miami and Daytona Beach.
I’ve developed various systems, procedures and policies to mitigate problems. It’s so well developed that I’m thinking about franchising the business in the coming years.
Your success is based on several factors.
Firstly, you have to know real estate through and through. This isn’t a newbies area to venture into. Secondly, your success largely depends on the team that you recruit and how well you manage them.
I have a very thorough recruitment process which includes a video interview, running a paid background check on the individual, having them do a drug test before they’re hired and having them complete a DISC assessment.
The employment contracts they sign are extremely thorough and address every possible problem which may arise. The employees need to believe in the vision and fight for your cause. People don’t simply want to go to work every day for $25 an hour. They need to be motivated by a cause which they feel in their heart. Praise and positive encouragement works wonders. Criticism should be given in a very constructive and polite manner.
Remote management is very intensive, especially when done from a different timezone. I have designed and implemented numerous systems to make sure things run as smoothly as possible. The number one need for such a system is to make sure the workers are held accountable. It is too long for me to divulge and elaborate on here.
Now to answer your original question “Is it difficult?” Yes, it is but anything in life that is worthwhile requires some form of arduous exercise.
I definitely do prefer to purchase and remodel properties in person but that’s not always been possible for me for certain reasons. I wasn’t prepared to let these barriers stop me from doing what I loved, so I simply found ways to embrace it.
Casa Grande, AZ · Member since 2020 · 17 posts · 34 votes
5y
@Nat C. Thank you for that advice. I’ll definitely put all of it into consideration. I would love to here about your journey in real estate. If you don’t mind you can always dm me because I’m curious!