Invest where I live or out of area

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Invest where I live or out of area

Michelle K.
Santa Barbara, CA · Member since 2016 · 2 posts · 2 votes

Hello. I am beginning the process of looking for my first investment property. I live in Ca which is very expensive. I am interested in investing in Washington state as well. My questions are, is it a good idea to invest out of the area and SF vs multi family as a first investment. Any advice will be greatly appreciated.

Thank you!!

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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
9y

My thoughts on this are always this: if you can't find a deal in a market you know, what would lead you to believe that you could find a deal in a market you don't know? I suspect you ask because it's really expensive to buy investment property there. You might consider moving somewhere cheaper so that you can learn the market, and then go back to Cali after you've achieved your goals. Or you can buy rehabs or turnkey properties and wing it. If you buy something cheap enough, and can afford to lose your shirt, you may be able to take a gamble in some other state. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    My thoughts on this are always this: if you can't find a deal in a market you know, what would lead you to believe that you could find a deal in a market you don't know? I suspect you ask because it's really expensive to buy investment property there. You might consider moving somewhere cheaper so that you can learn the market, and then go back to Cali after you've achieved your goals. Or you can buy rehabs or turnkey properties and wing it. If you buy something cheap enough, and can afford to lose your shirt, you may be able to take a gamble in some other state. 

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  • James Holland
    Investor/Consultant · Sacramento, CA · Member since 2011 · 175 posts · 41 votes
    9y

    Oh wow. I don't agree with the above at all.  Not to say it is wrong or right. I respect everyone's business structure.

    As far as local or out of state: I think there are pros and con's for both.  Lots of factors to think about.  I find that with myself and clients that when they invest locally, and particularly in a long term rental (or even a total rehab big project) it ends up totally consuming them when it is local.  

    Let me explain.

    When you live local, you become the bottleneck for all problems. Every leaky faucet, broken window, noise complaint, uncut grass.... etc ... you feel you MUST go by the house and take care of it yourself.  You find yourself on your way home from work or the store thinking "let me just swing by there and see what they are doing".   

    It ends up becoming a full time job. With the potential to drive you crazy... much like a full time job.

    I found that some of my most stress free deals were out of the state. Because if something went wrong, I was forced to hire someone to take care of it, then I just went back about my day. Whereas if it was local it would ruin my whole day because I would go to the location and be yelling at people and/or getting yelled at or trying to solve whatever the crisis is.

    Now I have the discipline to hire a full team and property managers to handle all the "less essential" business aspects so that I can focus on the more profitable tasks - that is finding and putting together more deals. THAT is where the money is made. Not going to fix clogged toilets.

    So my advice, if you DO invest local because you know the market better, be wary of what you spend your time doing and ask if it is a HIGH PROFIT activity or a time drain someone else could be doing. 

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  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Michelle K.:

    Hello. I am beginning the process of looking for my first investment property. I live in Ca which is very expensive. I am interested in investing in Washington state as well. My questions are, is it a good idea to invest out of the area and SF vs multi family as a first investment. Any advice will be greatly appreciated.

    Thank you!!

    The advantages of investing local or nearby are numerous and the disadvantages of investing 1000 miles away are numerous. This is obvious. One poster created a false dilema, they could also have someone local manage. Who do you think would be able to manage that manager better...a local or a person stuck 1000 miles away? Good luck!

    0Reply
  • Michelle K.
    OP
    Santa Barbara, CA · Member since 2016 · 2 posts · 2 votes
    9y

    Thank you all for the quick responses. I actually am familiar with the out of state area I am looking in to. I also have connections and family in the area. Everyone brought up valid arguments for both side. I will search both areas and see which deal is best. Any advice on the self storage properties? Also, multi family vs SF??

    Thanks again.

    0Reply
  • Tim Soto
    Realtor · Ventura County, CA · Member since 2012 · 126 posts · 61 votes
    9y

    Hi Michelle,

    Based on my personal experience, there's different ways to making it work for you. I've invested in Santa Barbara and out of state, so I understand what you mean by being priced out of the market. Choosing the right market for you depends on your investment tolerance, available capital, team, and ultimately your investment goals. By evaluating your current financial situation, you can get an indication of what path (investment strategy, budget, property types, location, etc.) best fits your personal situation and ultimate goals. Hope this helps. Best of luck!

    Tim 

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  • Timothy Tooker
    Real Estate Agent · Puyallup, WA · Member since 2012 · 240 posts · 95 votes
    9y

    @Michelle K.

    What part of Washington State?

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    Well something that no one has really brought up yet about WA is the numbers. You're going to be hard-pressed to find cash flow in most of WA. Just be sure as you look that you run everything pretty thoroughly so you can accurately project whether you should be expecting cash flow or not and whether whatever the cash flow amount is, whether it fits your buying/investment goals or not. 

    For help on running the numbers-

    https://www.biggerpockets.com/renewsblog/2013/01/1...

    Goes for SFR or MFR.

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  • Ken Teng
    Sunnyvale, CA · Member since 2016 · 77 posts · 26 votes
    9y
    I would define local as within 2 hr drive. Beyond that, it's not any different than out of state. If you cannot find good deals near Santa Barbara, which is likely, then you may go to anywhere in the country.
    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    9y
    Originally posted by @Michelle K.:

    Hello. I am beginning the process of looking for my first investment property. I live in Ca which is very expensive. I am interested in investing in Washington state as well. My questions are, is it a good idea to invest out of the area and SF vs multi family as a first investment. Any advice will be greatly appreciated.

    Thank you!!

     Hi Michelle,

    Investing out of state is a great way to see a larger ROI while living on the costs. I have worked with, and heard from, many investors who live in NY or CA and they cannot get the kind of returns they want in their market. Investing in other markets can produce much more for you. Turnkey properties are a great way to go since everything is done for you and home will be managed for you. I recommend doing your research to make sure the turnkey provider is not just a "middle man" Many times these "providers" simply act as an agent by finding you a home they think is a turnkey.

    To answer your other questions regarding SFR and MFR that all depends. Sometimes MFRs come with many more expenses that owner's did not think about. Like plowing the driveway or cutting the grass, these expenses will fall on the owner. Sometimes homes are not separately metered and can also make utilities more complicated. Sometimes SFR come with less complications and you can see a great ROI since these extra expenses are not included.

    Feel free to send me a message if you have any questions. I'd be happy to help.

    0Reply
  • Rick Snow
    Investor · Sacramento, CA · Member since 2015 · 65 posts · 33 votes
    9y

    Hey @Michelle K.

    A wise investor once told me "Enjoy where you live. Invest where it makes sense".  I personally only do flips within a 2hr radius of where I live and will only invest in buy/hold assets where I already frequently travel.  Buying properties out of state could quickly turn into a nightmare - if A) you don't have the right team in place locally or B) you aren't interested in having a physical presence.  Being what I call a "surrogate real estate investor" is a terrible idea. If you're planning on buying out of state you'd better have an awesome/experienced turn-key operator in place, or plan on building your own team and adding quarterly visits to the property into your budget. 

    I have experience building remote teams. If you need help just shoot me a note. 

    Hope this helped. 

    Good luck, 

    Rick 

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