My Out of State Investing Mistakes

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My Out of State Investing Mistakes

Matthew Masoud
Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes

So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

I thought I was purchasing a cash-flowing machine. 

Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

That knowledge took me from 3 units to 51 in less than 2 years.

We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.

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Carlos Hudgins
Member since 2021 · 3 posts · 2 votes
3y

@Mathew Masoud,

What part of Cleveland Ohio was your D property in was it in any zip codes of 44127 or 44105 ? Was it with section 8 tenants or self paying tenants?

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  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


     Impossible to succeed without failing, however you did not fail, 

    0Reply
  • Jared Threat
    Member since 2020 · 36 posts · 13 votes
    3y
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


     Thanks for sharing. Motived me to take the next step! 

    0Reply
  • Michael BlankPro Member
    Rental Property Investor · Atlanta GA · Member since 2013 · 85 posts · 82 votes
    3y

    Good for you for taking action into your own hands and making a positive outcome.

    My first property was also in an area I wasn't familiar with and was D Class. Man oh man was that a brutal experience! 

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    0Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    3y
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


     I love this honestly and humility. We all learn very painful and expensive lessons as we get started. 

    I get torn apart on these forums all of the time for saying it, but these "cash flowing machine" deals are usually incredible losers in reality for the reasons you've listed above. It's counter intuitive, but you'll make MORE money more passively by spending more. 

    Good on your for sharing and pushing through to the next phase, congrats!

    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    So many of us have made the same mistake of not understanding what comes with the Class of property we buy.

    Or worse, we misunderstood the property Class.

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    0Reply
  • Matthew Masoud
    OP
    Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes
    3y
    Quote from @Corby Goade:
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


     I love this honestly and humility. We all learn very painful and expensive lessons as we get started. 

    I get torn apart on these forums all of the time for saying it, but these "cash flowing machine" deals are usually incredible losers in reality for the reasons you've listed above. It's counter intuitive, but you'll make MORE money more passively by spending more. 

    Good on your for sharing and pushing through to the next phase, congrats!


     I think most investors learn the hard way in that there really isn't more cash flow in C/D-class properties. The reality is expenses sky rocket as well.

    1Reply
  • Carlos Hudgins
    Member since 2021 · 3 posts · 2 votes
    3y

    @Mathew Masoud,

    What part of Cleveland Ohio was your D property in was it in any zip codes of 44127 or 44105 ? Was it with section 8 tenants or self paying tenants?

    2Reply
  • Michelle Cohen
    Member since 2022 · 24 posts · 15 votes
    3y
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


    I'm glad I read this today! We are dealing with what are most likely just rookie mistakes. We are getting frustrated and tempted to throw in the towel, but I think if we're making mistakes now, they're basically training for how do NOT do things, which will lead to us learning firsthand how to do things correctly. 

    Were you in Cleveland? We have a property in the Clark-Fulton area right near the hospital. My realtor says it's a C-class area. We were there in person, but we aren't super familiar with the neighborhoods in the sense of living there or spending more than a long weekend.

    0Reply
  • Nathan Harden
    Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes
    3y

    Win or Learn. Love to hear the perseverance! 

    0Reply
  • Matthew Masoud
    OP
    Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes
    3y
    Quote from @Michelle Cohen:
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


    I'm glad I read this today! We are dealing with what are most likely just rookie mistakes. We are getting frustrated and tempted to throw in the towel, but I think if we're making mistakes now, they're basically training for how do NOT do things, which will lead to us learning firsthand how to do things correctly. 

    Were you in Cleveland? We have a property in the Clark-Fulton area right near the hospital. My realtor says it's a C-class area. We were there in person, but we aren't super familiar with the neighborhoods in the sense of living there or spending more than a long weekend.


    I always make a joke that take whatever the realtor says and subtract a letter grade. 

    Definitely spend some time in the area. You can make a lot of money in C class but it's quite a bit of work.

    0Reply
  • Michelle Cohen
    Member since 2022 · 24 posts · 15 votes
    3y
    Quote from @Matthew Masoud:
    Quote from @Michelle Cohen:
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


    I'm glad I read this today! We are dealing with what are most likely just rookie mistakes. We are getting frustrated and tempted to throw in the towel, but I think if we're making mistakes now, they're basically training for how do NOT do things, which will lead to us learning firsthand how to do things correctly. 

    Were you in Cleveland? We have a property in the Clark-Fulton area right near the hospital. My realtor says it's a C-class area. We were there in person, but we aren't super familiar with the neighborhoods in the sense of living there or spending more than a long weekend.


    I always make a joke that take whatever the realtor says and subtract a letter grade. 

    Definitely spend some time in the area. You can make a lot of money in C class but it's quite a bit of work.


    Yeah, maybe! It's Clark-Fulton, close to the new hospital. When we were there, we saw several new houses being built in between the old ones, so there is some movement in the area. We haven't dealt with any crime/nonpayment/etc, mostly just a bad PM company and for some reason they/we can't get the third unit rented. It's nicely updated and priced competitively so IDK. Maybe it's the street.

    0Reply
  • Matthew Masoud
    OP
    Investor · Orange County, CA · Member since 2014 · 363 posts · 408 votes
    3y
    Quote from @Michelle Cohen:
    Quote from @Matthew Masoud:
    Quote from @Michelle Cohen:
    Quote from @Matthew Masoud:

    So back in 2018, I decided to purchase property out of state since I couldn't afford the property in SoCal. I chose Ohio as a market and started looking for property.

    The first deal I found was a 3-unit for $100k. Market Rents were $600-$800/month/unit. Monthly expenses were around $1,000 with everything.

    I thought I was purchasing a cash-flowing machine. 

    Turns out, the property was in a D-class area. Break-ins, loitering drug addicts, and inherited awful tenants were my everyday headache.

    Before I knew it, I had to fire my property manager and move from Los Angeles to Ohio to figure out what to do with this property. I started doing repairs myself to save costs and slowly over 6 months got all the bad tenants out and got 3 solid tenants in all at $800/month.

    In exactly 12 months I sold the property for $190k. Even though I lost my hairline, I gained so much knowledge. 

    That knowledge took me from 3 units to 51 in less than 2 years.

    We are all so worried about making mistakes but the mistakes I made with that 3-unit is what got me to where I am now. A lack of action is WAY worse for your success than mistakes.


    I'm glad I read this today! We are dealing with what are most likely just rookie mistakes. We are getting frustrated and tempted to throw in the towel, but I think if we're making mistakes now, they're basically training for how do NOT do things, which will lead to us learning firsthand how to do things correctly. 

    Were you in Cleveland? We have a property in the Clark-Fulton area right near the hospital. My realtor says it's a C-class area. We were there in person, but we aren't super familiar with the neighborhoods in the sense of living there or spending more than a long weekend.


    I always make a joke that take whatever the realtor says and subtract a letter grade. 

    Definitely spend some time in the area. You can make a lot of money in C class but it's quite a bit of work.


    Yeah, maybe! It's Clark-Fulton, close to the new hospital. When we were there, we saw several new houses being built in between the old ones, so there is some movement in the area. We haven't dealt with any crime/nonpayment/etc, mostly just a bad PM company and for some reason they/we can't get the third unit rented. It's nicely updated and priced competitively so IDK. Maybe it's the street.


     New development is a big green flag. Home builders spend a lot of time, energy, and money looking at statistics before building.

    As far as renting that 3rd unit consider incentives that your competition is not offering like first month free or half off, whatever. 

    Goodluck! 

    1Reply
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