Your thoughts about MF investing out of state

[Diem Tran]

I'm working up the nerve to invest in a 60+ MF in Arizona. CAP is about 9% ( with property management) which sounds pretty good compared to 6% in Miami, where I live. I have next to zero experience in MF properties and will definitely have property management do everything. I really like to hear your thoughts on this, especially if you invested out of state and had PM on board.

I thought about investing in smaller properties or even something closer to home but again I don't have any experience and would need a PM anyways so wouldn't economies of scale work out better on a larger property with a higher CAP rate especially if I have the capital for it? I've always thought it might be wiser to buy a property that I could readily get to . But then I ask myself, why is that important if I don't manage it myself anyways?

Please help.

Confused and Not even a rookie yet 

[Louis Rodriguez]

My advice, if starting out, would be to consider investing close to your home and to maybe start out at a level that you feel comfortable with. There are major advantages to a larger concentration of units (more units per building) but the mistakes are a lot more costly as are the general operating expenses should something not work out just right. Investing out of state: my current rule is that I have to be able to get to the property (by car) within a 2 hour drive. Having a building out of state is not easy and the PM will be a critical part of your success. In fact, your success will almost entirely lie in the hands of your manager if you have no one else that you trust living close to the building. I have an apartment building approximately 2 hours drive from my home and I can honestly say that in the beginning I was there all the time as I worked to reposition the property. It wasn't easy. I also had a very difficult time finding the right manager due the size of the building (37 units). Many great property management groups do not like buildings that small (whereas a 60 unit may or may not fit into their "sweet spot.") If you are selecting a professional property management company, with a good reputation, you will likely have better luck than I did in the beginning. I had to interview and hire individual managers that would live on site and manage the building by day. A big part of the out of state question, in my opinion, also relates to the current status of the building. If it's a turn-key, Core or Core-plus property (not needing a major overhaul), it will likely be much easier than a Value-Add property to manage right out the gate. A good manager could jump right in and send you monthly reports and you could make adjustments from your home state. In my humble experience, there is simply no better substitute than starting out small, getting your hands dirty, and learning the business step by step. You can gain priceless knowledge that will serve you well if you decide to continue investing. Just a few thoughts from my personal experience...