How do you go about investing out of state?

53 Replies

Hello! I'm a Engineer working full time in New York and I'm interested of how people go about investing out of state in a state that has very low or no cash flow. (I have 40k in downpayment prepared for my first investment) How do I find a hot market? I have my sights set in Florida and Ohio now. I have family in Florida that's in the flipping buisness but we aren't to close to them and people seem to be raving over Ohio as of late. Should I be going for 200k multi family properties or try and shoot for a 50k property? I'm more so interested in buying and holding right now in multifamily housing. I want to get my feet wet and make a deal already but I'm not sure if im rushing into it. I have started off reading Rich Dad Poor Dad and it was a fantastic read and now I'm going to buy Davird Greenes book of out of state investing.

Updated over 2 years ago

Hello everyone! I've had many amazing people message me over the course of my first post in the forums. I am excited to ask many more questions and network to many more people. Hope to see myself join the same train to success with you all!

@Michael Stanley Nino

Do yourself a favor and invest passively alongside an experienced investor who can put you in a much larger investment (100+ units). @Omar Khan is a reputable sponsor and active investor on BP. Consider contacting him to see what he is up to.

Bigger properties lead to:

1) Less tenant risk

2) Better economies of scale (less cost/unit compared to single family or small multifamily)

3) Better returns (see 1 and 2)

@Michael Stanley Nino

Exactly. Ultimately all real estate investors are looking for one thing ... good returns. I'd rather invest passively in a deal with greater income potential than as the quarterback of a deal that won't produce as strong returns. 

@Michael Stanley Nino

I absolutely hear you. We'd all love to own our own deals. As you get started in the business, you'll become an infinitely better investor by learning from the experience of an experienced operator. Once you get a couple deals under your belt with professional investors, you'll be able to better assess deals for yourself.

I don't personally know @Michael Blank , but I know lots of folks respect his operation as well.

Best of luck to you!

@Michael Stanley Nino you can do passive investing like @Tyler Kastelberg suggested or learn how to do it yourself. 

Its really a matter of choice and if you have the time to do it or not....

David Green have a great book about long distance investing. 

https://www.biggerpockets.com/store/long-distance-...

Its double, Im investing in the US from New Zealand!!

@Hadar Orkibi I think investing from a distance is much easier than people think. It also opens up a ton of options. Biggest challenge with distance investing is building a team you can trust!

An engineer's mind may need higher control over investment :)))

let's check on the scenario of independent investing: with 40K down and conventional mortgage you could get a decent quality old duplex in the good location of Midwest.  Let's say in Blue Springs, Lees Summit, Belton, Grandview, MO you could buy a duplex for 150K,  monthly cash flow 1,400.  Minus mortgage (30 years fix around 5%), taxes, insurance, property management company, maintenance, and repairs, you will end up with a few hundred dollars positive cash flow while building an equity.  Let's be optimistic and say you will end up with 4K positive cash flow for a year, which is 10% cash on cash return.  Any major problem (roof, basement, conditioner, driveway, tenant turnover, etc) may cost 5K.  So potentially you may be spending more money on deferral maintenance before you will see positive cash flow.  After you will be done with deferral maintenance in a few years you may be able to increase the rent and see a better cash flow.  After you spent more money on repairs and improvements your cash on cash return may still be below 10%.

Now compare this number with the opportunity of passive investing with a pool of other investors into the apartment building or commercial real estate.  

One more opportunity is to keep the cash and wait for the market downturn, which may be due in a few years.

@Jane A. Ran into this thread and I like what u said! Don't like to be debbie downer but i think the market will end up being a "buyers market" I don't like to say there's isn't any deals out there but for me as a newbie to investing I don't want to own something just to say I own and lease a property with less than 6% ROI I want to be in the 10% at least. And feeling confident for future investments.

@Tyler Kastelberg

Hi Tyler, what is the typical cash on cash return in passive RE investment instruments like apartment buildings, commercial RE, RE Mutual Funds, REIT?

Thank you for sharing your expertise!

Originally posted by @Hadar Orkibi :

@Michael Stanley Nino you can do passive investing like @Tyler Kastelberg suggested or learn how to do it yourself. 

Its really a matter of choice and if you have the time to do it or not....

David Green have a great book about long distance investing. 

https://www.biggerpockets.com/store/long-distance-...

Its double, Im investing in the US from New Zealand!!

 Haha yeah I actually already have the  book on the way! I hope to read it as soon as it comes i'm very excited about it.

@Michael Stanley Nino Having 40k for a downpayment is a great start but remember for a conventional loan banks will look at Credit Score , reserves as well.. If you have a HELOC or 401K it will help.. I like the Florida market and explored some cities in FL when deciding to invest out of state, Florida you need to pay close attention to Insurance prices depending where in FL you invest can be a major expense.. I love the coast and beaches but I wouldn’t invest next to the coast especially being Out of State. I’m in the Carolinas and although the last storm did a lot of damage my properties were fine because they are all inland no where close to any rivers or coast..

@Michael Stanley Nino   Investing from a distance is not terribly complicated, however it does require some travel and some hands-on activity.  

It's completely feasible to achieve enormous levels of success investing out of state - but keep in mind that when you get involved in a deal that is not local you're losing some control, and your visibility & oversight of the deal is dramatically diminished.

Unless you're buying a turn key or getting into a PPM or some other commercial investment vehicle with a group that is managed and regulated, you may want to consider keeping it local until you've gained the experience and knowledge, and developed the out of state relationships necessary to be successful from a distance. 

Originally posted by @Raul R. :
@Michael Stanley Nino Having 40k for a downpayment is a great start but remember for a conventional loan banks will look at Credit Score , reserves as well.. If you have a HELOC or 401K it will help.. I like the Florida market and explored some cities in FL when deciding to invest out of state, Florida you need to pay close attention to Insurance prices depending where in FL you invest can be a major expense.. I love the coast and beaches but I wouldn’t invest next to the coast especially being Out of State. I’m in the Carolinas and although the last storm did a lot of damage my properties were fine because they are all inland no where close to any rivers or coast..

 Well I have a pension does that count? Im in a union with a retirement fund. I will keep that in mind when investing near a body of water, I'm sure there is some kind of insurance to cover hurricane damage?

Originally posted by @Blair Poelman :

@Michael Stanley Nino  Investing from a distance is not terribly complicated, however it does require some travel and some hands-on activity.  

It's completely feasible to achieve enormous levels of success investing out of state - but keep in mind that when you get involved in a deal that is not local you're losing some control, and your visibility & oversight of the deal is dramatically diminished.

Unless you're buying a turn key or getting into a PPM or some other commercial investment vehicle with a group that is managed and regulated, you may want to consider keeping it local until you've gained the experience and knowledge, and developed the out of state relationships necessary to be successful from a distance. 

 As good as investing locally sounds, 40k won't do anything in New York. The best I could do here is get a duplex and have my tenant help paying mortgage but at the end of the day Ill be paying quite a bit for property. I could start there but maybe saving up for a higher downpayment out of state is a better investment. I dont know to much about out of state investing but I will try and learn a bit from researching and hopefully networking out to people who starting out investing out of state and has done very well.

Hi Michael,

Passively investing in an apartment syndication is a good place to start. You won't have control of the deal, but going through the process of reviewing the deal and receiving ongoing updates as the syndicator implements the business plan will be a great learning experience. Then, you can use that knowledge to eventually syndicate your own deal, or at least take a step in the right direction.

Hi Michael, and if you are looking for something like 8% or even 10%, does not stock market look better than RE at this point?