New investor: invest in local properties or remote ones

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New investor: invest in local properties or remote ones

Benjamin Ertl
Kenosha, WI · Member since 2015 · 2 posts · 2 votes

Hi BP community,

Over the last two weeks I've really taken an interest in real estate investing having listened to over 20 of the podcasts and reading my fair share of articles (a.k.a I'm a newbie).  I'm currently undergoing the process of pre-qualifying for a loan for about $100,000 just so I can start seriously shopping.

I currently live in the Kenosha, WI area where there are relatively affordable home due to being sandwiched between Chicago and Milwaukee.

Despite this, I've spoken with a couple real estate agents in the area that say multi-family homes are rarely in my price range and foreclosures get swept up quickly before investors can participate.  Single family homes usually go for my price range but not multi-family.

There's a city southwest of me (Rockford) which seems to have decent amounts of inexpensive multi-families within the inner-city.  The 2 hour drive though wouldn't be worth it to me.  

So my question is ... does this 2 hour distance make it significantly harder to check out, buy, manage, etc properties as a 1st time buyer?  Or is it really all about the expenses/value as long as things are well managed?

Thanks in advance!

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Cody Barrett
Phoenix, AZ · Member since 2015 · 345 posts · 138 votes
10y

Hey Ben. I live close by here in Racine.  

I wouldn't eat everything those realtors are feeding you.  Deals always have a number and depending on what you bring to the table, anything can happen!!  I don't care where you are.  I actually could only qualify for a 100k loan with a bank and was exactly in your position these past few months.  I actually closed on a duplex here in Racine just last Friday, 2 days ago, lol... It was my first one ever, never purchased a property for myself and became a Real Estate investor all because of Bigger Pockets.  I learned everything that I currently know, (so much more to learn lol) right here and from these awesome experienced investors.  

SO to say that you can't find a duplex or solid investment on the foreclosure market or MLS is not the truth. I found my duplex on the MLS for 97k and after negotiating for a week, got him down to 89,500 and it is in wonderful shape too!! Just some updating but the repairs are extremely minimal. I got lucky, one can say, or I just searched every day until I finally found the winner. I crunched numbers with the BP calculator all day on multiple listings. It only takes 1, my friend, to get started! Keep looking in Kenosha and Racine and of course where ever you wish to hunt.

To answer your question:

Distance definitely won't make it easier on you as a first timer.. Ask yourself how you would handle a maintenance call, repairs, an emergency, doing quarterly walk throughs, managing the tenants, and researching the market area to figure out local rent rates and what other properties look like inside/what they charge, etc... If the distance would take you away from growing your business  then it might be too much at this stage.  Personally I would stick close by since there is a lot to offer in my opinion as far as prices go.  The markets are getting warmer in Racine and Kenosha as the weather warms too ; ) but I wouldn't say that takes away all the deals under 100k..  The economies aren't booming here like that... Hopefully soon though once Gov Walker takes a fricken hike!!! haha!

Well good luck, PM me if you need anything! 

Cody B

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  • Craig Wilcox
    Investor · TN · Member since 2014 · 508 posts · 167 votes
    10y
    Hi Benjamin Ertl The decision of where to invest is going to be different for everyone. Personally, I think it is best to start where you are most familiar. If you are priced out of your local market, it may be best to look a little farther. If you have a local team that you trust, the distance may not matter much. There is a group of investors in Rockford that meets on the first Thursday evening of the month if you want some local info. You can search events for WIN for Winnebago Investor Network. Let me know if you have any questions about the Rockford market. The inventory is low right now but prices are still pretty good. Craig
    2Reply
  • Cody Barrett
    Phoenix, AZ · Member since 2015 · 345 posts · 138 votes
    10y

    Hey Ben. I live close by here in Racine.  

    I wouldn't eat everything those realtors are feeding you.  Deals always have a number and depending on what you bring to the table, anything can happen!!  I don't care where you are.  I actually could only qualify for a 100k loan with a bank and was exactly in your position these past few months.  I actually closed on a duplex here in Racine just last Friday, 2 days ago, lol... It was my first one ever, never purchased a property for myself and became a Real Estate investor all because of Bigger Pockets.  I learned everything that I currently know, (so much more to learn lol) right here and from these awesome experienced investors.  

    SO to say that you can't find a duplex or solid investment on the foreclosure market or MLS is not the truth. I found my duplex on the MLS for 97k and after negotiating for a week, got him down to 89,500 and it is in wonderful shape too!! Just some updating but the repairs are extremely minimal. I got lucky, one can say, or I just searched every day until I finally found the winner. I crunched numbers with the BP calculator all day on multiple listings. It only takes 1, my friend, to get started! Keep looking in Kenosha and Racine and of course where ever you wish to hunt.

    To answer your question:

    Distance definitely won't make it easier on you as a first timer.. Ask yourself how you would handle a maintenance call, repairs, an emergency, doing quarterly walk throughs, managing the tenants, and researching the market area to figure out local rent rates and what other properties look like inside/what they charge, etc... If the distance would take you away from growing your business  then it might be too much at this stage.  Personally I would stick close by since there is a lot to offer in my opinion as far as prices go.  The markets are getting warmer in Racine and Kenosha as the weather warms too ; ) but I wouldn't say that takes away all the deals under 100k..  The economies aren't booming here like that... Hopefully soon though once Gov Walker takes a fricken hike!!! haha!

    Well good luck, PM me if you need anything! 

    Cody B

    3Reply
  • Benjamin Ertl
    OP
    Kenosha, WI · Member since 2015 · 2 posts · 2 votes
    10y

    Thanks @Craig Wilcox and @Cody Barrett for your well thought out responses.  Just reading them reminds me that I have a lot of time to play with before having to make any sort of decision.

    I actually work from home/remotely which is partially why real estate investing sounded interesting to me as a side-business with all of my free-time (we're talking 8 free hours each day).

    I'll have to keep my eyes open for deals in my local area over the next month or two and see if it's simply a matter of patience.

    1Reply
  • Joshua Malik
    Flipper/Rehabber · Racine, WI · Member since 2016 · 41 posts · 26 votes
    10y

    Great post @Cody Barrett and quite right. I have my eye on several Racine and Kenosha Duplexes in this price range - all on MLS. That's plan B for me, though, as I'm looking for a 4-plex first. But there It sounds like the realtors that you have been talking to have a focus on owner occupied - which stands to reason since most buyers are not investors. Keep thinking like an investor and use the calculators to make sure the numbers make sense.

    1Reply
  • Paul Timmins
    Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
    10y

    @Benjamin Ertl

    Welcome. Fill in the foundation below.

    Check out the Start Here page http://www.biggerpockets.com/starthere

    Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

    Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Find them through Google and meetup.com

    Two Great reads, I bought both J. Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook

    Consider checking out HUD homes for small multi's owner occupied gets first crack.

    To find out about the local market go to IREM.org search for ARM certified property managers. Call 5 ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. What are the market rents? Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal.

    You can also search NARPM.org for the RMP (Residential Management Professional) and MPM (Master Property Manager) certified.

    Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

    http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

    Good Luck

    Paul 

    1Reply
  • Kyle N.
    Construction Project Manager · Sycamore, IL · Member since 2015 · 91 posts · 109 votes
    10y

    @Benjamin Ertl

    I live about an hour away from where I invest in Machesney Park, which is just north of Rockford.  I hire out the day to day management, and I just manage the manager.  Yes it costs a little more to do it this way, but as long as you have it in your price, you will be ok.  I agree with every post on this chain so far, and if I were you, I would start small with something in your back yard, and work up from there.  But if you are feeling the itch to come to Rockford, get ahold of me... I'll tell you which property manager NOT to use!  I have also attended a couple of the BP meetups with @Craig Wilcox, and they are very informative, and a great group of local investors.  Feel free to attend one!

    Best of luck!

    Kyle

    0Reply
  • Nico Viola
    Investor · Cleveland, OH · Member since 2016 · 3 posts · 5 votes
    10y

    Ben,

    I agree with all the above statements. For a first timer your own back yard is the best place to start. You already know your local market, the nice areas and the places to avoid, so it makes it easier on you to know if it is a good deal or not. Start close and expand outwards. With time diversify outward and acquire in different areas. 

    Personally for a first timer a single family or duplex is the way to go. Less headaches dealing with less residents. I own/manage a mixture of properties in the Cleveland, OH area and the single families are the ones that give me the least amount of headaches.

    Lastly, never discount your gut. More then once I have looked at properties that on paper were very appealing but just gave me a bad feeling for one reason or another. If you feel uncomfortable with a deal, there is probably a good reason.

    0Reply
  • Nick Patterson
    Real Estate Agent · Chicago, IL · Member since 2013 · 386 posts · 218 votes
    10y

    Stay local.  Big difference between price and value.  

    If you are able to get a good enough deal the money is easy to get from investors, etc..

    0Reply
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