Out of State Investments
The thought of investing in an out of state property can be frightening. There are so many pros and cons to this scenario. Working in real estate for over 8 years, I have pretty much seen it all! The risk associated with “winning" or "loosing" on a deal may be concerning. Not only do you need the right agent with hands on experience with investors, but finding the right location and right property to fit your investment goals is key.
For those of you who have considered, but not moved forward with an out of state investment:
What is holding you back?
What would it take for you to feel comfortable and say yes to such an investment?
#2 Wholesaling Contributor
- Wholesaler
- Tampa, FL
Many investors hesitate to invest in out-of-state properties due to the fear of being unable to handle unfortunate events that may arise. While I understand this concern, I believe it's important to consider the potential benefits of investing outside of your local market, such as increased diversification and access to higher-performing properties. Personally, I'm not currently investing out of state as I don't feel the need to do so at this time, but I remain open to the possibility of expanding my investment portfolio in the future to include out-of-state properties.
@David Ramirez i believe you are correct. The hesitation is giving up what you think is control when unfortunate events happen. Truth is, when unfortunate events happen, in most cases it wouldn't matter if you were standing right there. 9 times out of ten , you will have to call someone, plumber roofer, pest control, and such. So you finally tell yourself you can do that from anywhere and so can your property management team if you have one. Pull the trigger and start your journey. Keep in mind that in most cases you can find the boots on the ground team you need.
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
It is not as easy as you are making it seem. You need a solid team, everyone has to play their role and rapport has to be built prior to hiring anyone for out of state projects.
@Eliott Elias, no, it is not easy, just as you said. The question was, what holds people back?. With time to do the homework, secure your funding , and build your team,what else could be holding them back? Having been in those shoes, for me , the answer to her questions was giving up some control.
#2 Managing Your Property Contributor
- Property Manager
- Royal Oak, MI
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#2 Managing Your Property Contributor
- Property Manager
- Royal Oak, MI
We think the Midwest is a GREAT place for OOS investors to consider!
YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods:
https://www.biggerpockets.com/...
(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)
Your biggest question shouldn't be WHERE to invest, but HOW you will invest!
Many OOS investors set themselves up for failure because they don't truly take the time to understand:
1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.
2) The Class of the PROPERTY they are buying - which is relative to the overall area.
3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.
4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.
5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.
6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.
7) That OOS property Class rankings are often different than the Class ranking of the local market they live.
8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.
9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.
10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.
11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.
Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?
Good luck with whatever you decide😊
Please send us any feedback via email, as we do not use the DM feature here.
Quote from @Mackaylee Beach:
The thought of investing in an out of state property can be frightening. There are so many pros and cons to this scenario. Working in real estate for over 8 years, I have pretty much seen it all! The risk associated with “winning" or "loosing" on a deal may be concerning. Not only do you need the right agent with hands on experience with investors, but finding the right location and right property to fit your investment goals is key.
For those of you who have considered, but not moved forward with an out of state investment:
What is holding you back?
What would it take for you to feel comfortable and say yes to such an investment?
Well, first time OOS investor here to answer your question as I literally walk through this new process at this exact moment :)
Btw, I'm looking for a investor agent right now (insert winky eye). What I am needing to move forward:
1. A agent who is willing with walking through different investment strategies in the Kansas City are with a newbie and all the annoying questions that will likely come with that. Are you willing to look at and or help write up a analysis of said properties to rule them in or out?
2. Someone familiar with the Kansas City area, has 1st or 2nd hand experience with references like cleaners, handy men, utility bill estimates ect.
3. We hope to do maximize our investment property and do a STR/MTR, so experience with these are a plus +
I'm ready to move forward now, just starting to reach out to people who might want to be on our team. I can not speak for others as to what holds them back, but its usually in my opinion the insecurity of making the first step of saying, I don't know what I don't know but I'm damn ready to learn. This, is a statement that I'm really good at saying lol. We are ready, prequalified and actively searching Zillow and realtor daily, so anyone reading this who has what I need, please reach out!
April
Quote from @April Thrasher:
Quote from @Mackaylee Beach:
The thought of investing in an out of state property can be frightening. There are so many pros and cons to this scenario. Working in real estate for over 8 years, I have pretty much seen it all! The risk associated with “winning" or "loosing" on a deal may be concerning. Not only do you need the right agent with hands on experience with investors, but finding the right location and right property to fit your investment goals is key.
For those of you who have considered, but not moved forward with an out of state investment:
What is holding you back?
What would it take for you to feel comfortable and say yes to such an investment?
Well, first time OOS investor here to answer your question as I literally walk through this new process at this exact moment :)
Btw, I'm looking for a investor agent right now (insert winky eye). What I am needing to move forward:
1. A agent who is willing with walking through different investment strategies in the Kansas City are with a newbie and all the annoying questions that will likely come with that. Are you willing to look at and or help write up a analysis of said properties to rule them in or out?
2. Someone familiar with the Kansas City area, has 1st or 2nd hand experience with references like cleaners, handy men, utility bill estimates ect.
3. We hope to do maximize our investment property and do a STR/MTR, so experience with these are a plus +I'm ready to move forward now, just starting to reach out to people who might want to be on our team. I can not speak for others as to what holds them back, but its usually in my opinion the insecurity of making the first step of saying, I don't know what I don't know but I'm damn ready to learn. This, is a statement that I'm really good at saying lol. We are ready, prequalified and actively searching Zillow and realtor daily, so anyone reading this who has what I need, please reach out!
April
@April Thrasher as a fellow investor with a great understanding of the Kansas City market, as well as a background in analytics, I think I’d be able to help provide the assistance you are looking for. Would love to chat and see how I can help.
@April Thrasher Getting started is a big obstacle to overcome! Finding a team is key. My team specializes in providing a turnkey product so you don't have to micro manage a team. Sure you may lose on a little equity - but it's usually worth it. All that goes into buying, rehabbing, designing a home is time consuming. However, if you decide against the turnkey route, I can recommend a dozen or more agents in the area willing to provide services. Either way, we should keep in touch. I have been an agent almost 8 years and know the market very well.
@April Thrasher Agent in KC here, specializing in investment properties. To answer your questions
1. I have worked with several new investors, and have no issue discussing strategies, and finding out which deals and strategies work for you.
2. I network CONSTANTLY and have an entire list of people to help you start to finish.
3. I have an investor who does a few MTRs and I have a customer and a coworker that do STRs. So I am pretty familiar with those!
Hope this helps
The problems that I have had with out of state investments is that when things go wrong and you don't have a management company to help. I owned a property in Panama City Florida while I lived in Hawaii and the septic tank had to be pumped but the company that I used had to have someone there and they only took cash. So I had to really work magic in order to get the septic tank fixed. I think if there was a way to fix that problem with out having to give your property to a management compant than it would be more comfortable.