Long distance investing

Multi-Family and Apartment Investing
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Long distance investing

Arun Dharan
Investor · NC · Member since 2020 · 30 posts · 30 votes

I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing?

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Satyam Mistry
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y

@Arun Dharan Educate yourself as much as you can on long distance real estate investing through books, podcasts, BP, Youtube, blogs, etc. There is so much information out there to learn what to do and not to do. Start looking into an area that you have some ties to and would not mind checking in on as this is your first venture into real estate investing it is beneficial to meet with some contacts such as agents, inspectors, property managers, etc. 

One of the most important aspects of long distance investing is having systems in place and having people to manage those systems. It takes time to build this. If you know someone that is in a more affordable market that has experience and may be interested in partnering with you that could be an option as well. Remember the importance of having reserves in place when investing in real estate and including 10-20% monthly expense for maintenance/CAPEX.

Firstly identify what strategy, returns, and type of investment you are looking for. 

Jumping into a long distance multi family investment as your first real estate investment is not something that I would strongly suggest, but that being said it can be done. Start targeting a few areas that you may be interested in and start calling agents and explain to them what you are looking for and see what is out there. Think about who is going to manage the property and ask questions of property management companies such as what their processes are, fees, general vacancy rates, other properties they manage so you can get references, etc. Also start talking to lenders in the area so you know what you are approved for in terms of financing before potentially finding a deal. Best wishes!

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  • Erik Hatch
    Rental Property Investor · USA · Member since 2018 · 325 posts · 222 votes
    6y

    I bought a book on amazon named just that. Long Distance Investing. It certainly can be done. 

    0Reply
  • Satyam Mistry
    Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
    6y

    @Arun Dharan Educate yourself as much as you can on long distance real estate investing through books, podcasts, BP, Youtube, blogs, etc. There is so much information out there to learn what to do and not to do. Start looking into an area that you have some ties to and would not mind checking in on as this is your first venture into real estate investing it is beneficial to meet with some contacts such as agents, inspectors, property managers, etc. 

    One of the most important aspects of long distance investing is having systems in place and having people to manage those systems. It takes time to build this. If you know someone that is in a more affordable market that has experience and may be interested in partnering with you that could be an option as well. Remember the importance of having reserves in place when investing in real estate and including 10-20% monthly expense for maintenance/CAPEX.

    Firstly identify what strategy, returns, and type of investment you are looking for. 

    Jumping into a long distance multi family investment as your first real estate investment is not something that I would strongly suggest, but that being said it can be done. Start targeting a few areas that you may be interested in and start calling agents and explain to them what you are looking for and see what is out there. Think about who is going to manage the property and ask questions of property management companies such as what their processes are, fees, general vacancy rates, other properties they manage so you can get references, etc. Also start talking to lenders in the area so you know what you are approved for in terms of financing before potentially finding a deal. Best wishes!

    5Reply
  • Arun Dharan
    OP
    Investor · NC · Member since 2020 · 30 posts · 30 votes
    6y

    @Satyam Mistry thank you so much for the knowledge. I will definitely look more into this

    1Reply
  • Arun Dharan
    OP
    Investor · NC · Member since 2020 · 30 posts · 30 votes
    6y

    @Erik Hatch thank you Erik will look into that and order me a copy

    1Reply
  • Filipe Pereira
    Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Arun Dharan:

    I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing?

    Hi Arun,
    Here are some starter tips. This information is based on my experience as a property manager in Connecticut with a heavy percentage of my clients being out of state investors:

    Rely heavily on referrals, whenever you can. I personally advise against buying a property sight unseen and recommend that clients come out to see the property once it is under contract, and scheduled for an inspection. Don't buy something based just off of photos. Ask your agent to do a video walk through.

    To me, the most critical part of your OOS strategy will be a great PM. A great PM will make or break your investment in my opinion. Choose wisely.

    Lastly, work with someone who has the heart of a teacher, not that of a salesman. It's important that you learn through the process and develop skills that will make you a better investor, as opposed to just going through the steps but not learning anything!

    Talk soon,

    Filipe

    3Reply
  • Mohammad Dawood Wajid
    Rental Property Investor · Member since 2020 · 17 posts · 4 votes
    6y

    @Filipe Pereira

    Very good advice and great tip I must say.

    0Reply
  • Evan Polaski
    Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
    6y

    @Arun Dharan, to second what @Filipe Pereira mentioned, a good PM will be the make or break of a deal.  I know many OOS that "self manage".  They hire a realtor to do leasing as needed, but all rents are mailed directly to investor, and they have a group of good contractors they can call when something comes up.

    Definitely visit the property.  This is still a real estate investment, and investing directly should never totally be hands off.  Plan a couple trips a year to check in on property, meet face to face with team, etc. 

    As for areas, it seems to be easiest in areas that you already have a connection to.  Somewhere you travel for your day job, have family, etc.  Makes it easier to get out and see your assets regularly. 

    But it definitely can be done.  I talk with many people that are very happy with OOS investing.  

    0Reply
  • Bonnie Jean Tijerina
    Member since 2019 · 1 post · 0 votes
    6y

    Hello! San Antonio is a great place to find investment real estate for under 100k!

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    6y

    @Arun Dharan    There are countless threads here on BP that talk about investing out of state. Like you, I'm also here in the Bay Area............I happened to choose Cleveland for a myriad of reasons....all of whom are on countless threads here on BP....Half my tenants there are Section 8 and all my tenants here in the Bay Area are Section 8.....there are a myriad of threads here on BP that talk about the advantages of Section 8 tenants as well.  

    1Reply
  • Stone Saathoff
    Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
    6y

    @Arun Dharan

    Investing out of state is a great option for rental properties. Have you considered the San Antonio area in Texas?

    Plenty of multi family opportunities, but unless you're ok with overpaying I would suggest a value-add property where you can do some renovations. That's how most out of state investors I work with operate. 

    So the first steps would be investigate areas where you'd like to invest, get in contact with someone who can show you properties there, get in touch with some contractors and see who you'd like to use, and also get in touch with a local property manager, they can also give some insight. 

    Hope this helps point you in the right direction.

    0Reply
  • Kyle Flores
    Vallejo, CA · Member since 2019 · 3 posts · 5 votes
    6y

    @Arun Dharan

    I just started reading Long-Distance Real Estate Investing by David Greene. He too is from California. Recommend reading.

    1Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    6y

    @Arun Dharan

    Coastal residents like us should definitely take the out-of-state route. I have invested in Tennessee, Kentucky, North Carolina, and Virginia. 

    If I was farther west, I'd likely take interest in some of the better income markets out there. Phoenix, Reno, Boise (although not for long) come to mind.

    Get your strategy together in order to find good partners. As a long distance investor, you primarily provide one thing: money. Good brokers, managers, and service providers see this an opportunity for growth. Bad ones see this as an opportunity to con someone outside the locality.

    Feel free to reach out with questions. Thanks!

    0Reply
  • Abe McLaurin
    Realtor · Columbus & Cleveland, OH · Member since 2019 · 44 posts · 60 votes
    6y

    @Arun Dharan Hi Arun, have you looked into Columbus Ohio? Cost of living in Ohio, in general, is far less than San Fransisco and the state is seeing a lot of attention from out of sate investors. Columbus specfically is growing in population and the economy is following along with it. Might be worth your time to look into! Best of luck.  

    2Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    6y

    I second @Abe McLaurin, Columbus, OH would be a good place to consider! 

    3Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    6y

    Cleveland, Indianapolis, and Kansas City are the tops ones. Let me know if you have questions about KC

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    6y

    @Arun Dharan the first thing is to narrow it down to local markets, not states. That would be like asking what is a good stateto live in. Every state has good cities and bad cities. Start by identifying your investment goal. If it's cash flow,  the Midwest  is a good choice. There's a lot of cash flow markets in the Midwest, however some of them are better than others. Look for markets that have growing populations, growing jobs, modern, diverse economies etc. Personally, I thin that Indianapolis and Kansas City offers the best combination of all of these.

    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y
    Originally posted by @Arun Dharan:

    I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing?

     You need to develop a solid team of 4 rock stars in each market you are buying in. This comprises a Realtor, Property Manager, Lender, and Contractor. It is very easy to get lemons, so make sure you ask multiple people for multiple referrals.

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    0Reply
  • Michael Ohara
    Investor · HI · Member since 2017 · 328 posts · 124 votes
    6y

    I live in Hawaii and invest in Cleveland.  The key is having a solid team on the ground, especially management. All the best.

    0Reply
  • Nick GiulioniPro Member
    Rental Property Investor · Carmel, IN · Member since 2016 · 1k+ posts · 615 votes
    6y
    Originally posted by @Arun Dharan:

    I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing?

     Lots of good markets. We've been in Indy.

    0Reply
  • Bob Prisco
    Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes
    6y

    @Arun Dharan  Cleveland, ( we used to invest elsewhere )  , there is a reason dozens of clients from Silicon Valley, and surrounding,invest there .10- 14% net caps are to be had, Its all about your team, 

    ALL THE BEST 

    0Reply
  • Kaitlyn Nesbitt
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 15 posts · 15 votes
    6y

    Hi Arun! I live in Los Angeles and am looking to invest out of state as well. I just finished reading David Greene's book "Long-Distance Real Estate Investing." Very eye opening to the processes we need to have in place. Some of the criteria I'm looking at are population numbers, crime rates, unemployment rates (though with the current situation they are constantly changing), job diversity, and average price to rent ratios.

    1Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    6y

    I've written several blogs on out of state investing. The first here is on how to find the best market

    https://www.biggerpockets.com/member-blogs/10145/83188-finding-emerging-markets

    This one is a list of the best markets (written a few years ago)

    https://www.biggerpockets.com/member-blogs/10145/68178-top-real-estate-markets-to-invest-in-through-2020

    This is a few keys to investing out of state successfully

    https://www.biggerpockets.com/member-blogs/10145/74387-keys-to-out-of-state-investing-oos

    1Reply
  • Arun Dharan
    OP
    Investor · NC · Member since 2020 · 30 posts · 30 votes
    6y

    @Todd Dexheimer this is very helpful! Thank you

    0Reply
  • Ben Halabi
    Property Manager · Cleveland, OH · Member since 2019 · 123 posts · 65 votes
    6y
    Originally posted by @Arun Dharan:

    I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing? 


    Hello Arun, Cleveland is one of the best rental markets and the most popular for investors because of high rental demand and low cost of entry, property prices are pretty inexpensive here. I also recommend taking a look at Cleveland Price & Neighborhood Map which will help you have a better understanding of the neighborhoods and general market in Cleveland. Good luck!

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Arun Dharan:

    I live in San Francisco and wanting to invest in a multi family home in another state since everything in California is too expensive. What are some good states to look into? Also what is the best tips for someone starting in real estate investing?

    Many markets available for guys like you Arun. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

    In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

    • Cincinnati, Ohio
    • Dayton, Ohio
    • Toledo, Ohio
    • Youngstown, Ohio
    • Cincinnati, Ohio
    • Memphis, Tennessee
    • Saint Louis, Missouri
    • Indianapolis, Indiana
    • Detroit, Michigan
    • Erie, Pennsylvania
    • Louisville, Kentucky
    • Milwaukee, Wisconsin
    • Jackson, Mississippi

    Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

    One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

    • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
    • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
    • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
    • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
    • Make sure your property manager is a licensed real estate brokerage.
    • Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
    • Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
    1Reply
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