Investing out of state

10 Replies

Is there anything I should consider about investing out of state?

I purchased my first triplex in the same city as where I live. Now, as I'm looking to invest in another property, the numbers don't work well in my city (Portland, OR). It's going to be difficult to get anything to cashflow here.

I'm seeing some properties in other states that seem to work better, but I'm concerned that I don't know the area and I don't have relationships there.

Does anyone have experience and guidance? I'm not opposed to investing in another state. I just want to go in with my eyes open.

@JR Hinds  

  JR  being here in PDX market as well I have been investing out of state since 2000  and have owned 350 mid west rentals at one time ( lots of work)... having owned that many homes on and off for the last 15 years I have gotten one heck of an education.

The industry has gotten much better over the years and the good companies by and large have risen up and the bad actors while still out there are being weeded out.

The main thing someone from our area needs to understand is the supply demand issue. And the liquidity of out of state properties.. Its not like it is here in our market were when you want to sell something you simply list it on MLS it will be sold in less than 90 days for 98% of ask for cash either cash buyer or finance buyer..

So when you go out of state you need to dig into these things a little more than having a west coast mentality to how real estate is bought and sold.

If you think about market dynamics 90% of rental properties in our market are bought by locals... Were in the Cash flow markets that changes drastically..

One thing you may want to consider is buying in a market were you may one day want to use the property for vacation or retirement  Like Vegas Phx Florida type properties. Or even Central Oregon or Central WA over to Idaho panhandle.

However one thing that most in the business will recommend as an out of state investor you want to buy on the upper end of the market in a given city as opposed to the very bottom end... The bottom end of many of the cash flow markets are very very tough to deal with and out of state investors mortality rate for getting completely wiped out is quite high... If you think of our market here in PDX you cannot drive down a street and see 5 board ups per block.. you might see a ugly house and maybe a board up 1 every 20 blocks.. but in the Mid west in some of the towns there is just a big oversupply of homes. 

So choose wisely there are 20 to 30 markets to choose from and well over 100 TK companies

Thanks for the great advice, @Jay Hinrichs ! I'm still new and didn't know what you meant by TK company though. And do you know of any good resources for identifying good markets across the U.S.? I've found a few cities from reading BP blog posts, but I always like to have as much data as possible.

Originally posted by @JR Hinds :

Is there anything I should consider about investing out of state?

I purchased my first triplex in the same city as where I live. Now, as I'm looking to invest in another property, the numbers don't work well in my city (Portland, OR). It's going to be difficult to get anything to cashflow here.

I'm seeing some properties in other states that seem to work better, but I'm concerned that I don't know the area and I don't have relationships there.

Does anyone have experience and guidance? I'm not opposed to investing in another state. I just want to go in with my eyes open.

 Hi JR,

Just though I would post links to a few blog I wrote for Bigger Pockets a while back about out of state investing. See below and I hope you find them useful.

http://www.biggerpockets.com/renewsblog/2014/12/20/first-investment-property-important-things-consider/

http://www.biggerpockets.com/renewsblog/2014/07/26/sight-mind-real-estate-investing-afar/

Thanks and have a great day.

Thanks @Engelo Rumora ! I read the posts and got some good information out of them.

@JR Hinds

TK company: A company that sells Houses, that are ready to rent and/or occupy.

Supposedly without any additional work needed.

Raymond

@JR Hinds  

  most markets have their plus's and minus's once you get east of the rockies this is a general statement  " properties will be far less expensive than west coast so they will quote un quote cash flow better"  appreciation will be very slow to nill in the price points most folks buy TK... PM  ( property management) will be the sole driver to your long term success.. WEll and pick a good company that does a good job up front as well. But if you going to own long term you want good strong house and GREAT PM...

@JR Hinds  

@Jay Hinrichs  

The midwest has a lot of boarded up properties, but there are parts of the midwest that are also experiencing great growth right now.  There are a couple key areas that have huge potential:)

We are buy and hold investors. My husband is active duty so "local" is just relative. We buy both local, local turned out of state, and pure rentals out of state There are LOTs of thing you should think of about buying out of state.

*Taxes/Fee

*Costs of operating out of state- travel costs etc

*management fees

*Type of tenants - We buy in a higher class so we can self manage from atari.

*misc higher costs- we have had the $200 an hour handy man because something needed to be done and we couldn't find someone else. We have also the friend who helped with move out and did a much worst job on "inspection" costing us money because we couldn't go after their security deposit. I have heard the same thing about property managers. 

What every you do, there will be down falls. If we were not transient, I would TOTALLY buy all local even at a higher cost. Local as defined as less than a 4 hours car ride. That being said, if there is a will, there is a way!

Wow! More great advice. My challenge is that it's a very strong sellers market in Portland, OR. I appreciate the thoughts and it sounds like finding a good PM in the areas I'm looking is paramount. Any suggestions on how to find a good PM? I can go to the local PM association website, but that just shows me who's paying their association dues. And Yelp shows me who the tenants like.

@JR Hinds  

  If you go the TK route they will have it in house or set up for you.

ONe thing Brie and I are working on for phase two of our new website is to have PM's in the given markets on our site with reviews of them as well as there is just as much request for this as were to buy houses etc.

@Brie Schmidt  

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