Investing Outside Your Own Market

General Real Estate Investing
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Investing Outside Your Own Market

Jeff Petsche
Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes

Hello BP Community.

I will admit that I am a NEWBIE to the real estate investing game, and sometimes I fell I'm late to the party, but then I change my mindset and say it's never too late.

Quick Back Story:

I've been in real estate since 2003, but as a retail real estate Broker, so I'm not completely foreign to the investing game. I just have not yet purchased any investment properties. I tried back in 2004-2005, but due to some "marriage issues", my credit got jacked up and I was unable to get financing. At that time I was not really educated on other finance options, so I never pulled the trigger.

Currently I've been doing everything I can to gain more knowledge about RE investing options by reading books, listening to podcast, attending local investing groups, talking to other investors, etc.

This brings me to the current subject: "Investing Outside Your Own Market".

I've decided that my focus is going to be Buy-and-Hold SFR and up to 4 plexes.

I live in the Southern California market, so it's very very hard to make buy-and-hold properties cash flow, so I'm looking outside my market. I know some say they will only invest where they can drive to their properties, but so far none of those people have been CA investors, at least none I've talked to.

As a Broker for Keller Williams Realty, I have a lot of contacts with agents across the country who could help me assemble a team on the ground in an area I'd like to invest.

I'd really like to hear from other BP community investors who invest OUTSIDE THEIR MARKET and the pros, cons, types of systems in place to make it effective, etc.

Again, always wanting to learn from those who have walked before me.

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Ritch Bonisa
Specialist · Indianapolis, IN · Member since 2016 · 841 posts · 480 votes
9y

@Jeff Petsche Definitely, remote investing can be done and it can be very effective.  You need solid boots on the ground.  You also need great technology for reporting.  It is important to not just put your remote investment on auto-pilot.  Stay involved and be thinking about it on a daily basis.  You should be hearing from your boots on the ground on a weekly basis (minimum).  

I think the scariest part is buying a property without seeing it.  This creates a difficult situation in understanding any rehab or renovations costs.  You most certainly need someone in your target market that can give you solid numbers to go on.  You also need someone that will tell you "No, don't do this deal."  If you don't have that, then your risks are considerably higher.

If work with remote investors on a daily basis.  If you have questions, feel free to PM me.  I'd be happy to help with contacts and at least give you my perspective. 

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  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    @Kurt Pauley Thank you for the comment. I totally agree and yes I have been making contacts with several agents and hard money lenders in the markets I'm researching. Being a Keller Williams agent/Broker here in CA, it's easy to pick up the phone and call any KW agent across the country and get them to respond. The challenge is finding the ones who are willing to 'work' at finding off market properties that meet my criteria. So far, a few of the agents who I started making conversation with don't seem to be taking me serious and are flaking on getting back to me, so they have now missed an opportunity to earn my business because I/we are ready to go.

    My goal and criteria: Purchase SFRs or duplexes in emerging markets that are add value properties in B+ to C neighborhoods with a good school district. On the SFR I am looking for 3 bed/1 bath or 3 bed/2 bath that need deferred maintenance. Light REHAB on the property, identify a PM company to market the property for a renter, hit the 1% rule based on ARV and then REFI with a local bank (no seasoning if possible). Ideal price points would be ARV between $120K to $150K (maybe a bit more for the duplexes) and determine acquisition price based on condition of home and motivation of seller.

    I have not investigated the Minneapolis market, so not sure if this is even possible???? How and what are you investing in in the Omaha market?

    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    9y

    @Jeff Petsche As an OOS investor myself, I can tell you it is possible to be successful at it, but as others of said it is all about either putting together or identifying the right team (as in turnkey investing). And this part can be harder than it looks at first. Also many of these markets have grown much more competitive as shadow inventory has dried up, so there are additional challenges to those just starting out in a market. When investing in individual properties, I always advise visiting a market, even if you know those who have been successful but never done so. Finally there are a variety of passive REI strategies to consider, some more passive than others, and I have written a BP blog about

    Three Key Routes for Passive Real Estate Investing 

    1Reply
  • Bradley De comarmond
    West Hollywood, CA · Member since 2016 · 235 posts · 72 votes
    9y

    Welcome to Bigger Pockets @Jeff Petsche

    BP is loaded with all the information you will need to succeed in whatever niche of real estate investing you wish to pursue and the community is filled with knowledgeable investors and professionals to learn from and connect with.

    BP is what you make it. The more you put in, the more you will get out of it!

    Listen to the podcast for extra inspiration and investing advice and post in the forum for any questions you have. Members here are really eager to help. We're all working to succeed together.

    Also, check the "networking events" tab under "Community" and go out there and meet people. That's the way to build powerful relationships.

    Like you, I am living in CA (Los Angeles), but I focus on investing out of state for the 2x+ cash flow and reasonable cost of real estate. 

    I think if you're going to invest out of state, the criteria should be....

    1) Numbers work for your goals

    2) Market is stable and on the rise for the long term

    3) You have some interest in going there (or at least wouldn't despise going there no matter what time of year) and/or have friends and family there for local support.

    Though it is scarier to invest out of state, I think it's far scarier losing money every month investing locally. 

    My recommendation would be to research the areas that fit the top criteria and spend a week or so in the 2-3 that really interest you. Once you go once, you will feel so much more confident with investing there in the future....and with AirBnB, you can spend $1000 or so on a 4-6 day trip almost anywhere. That's a drop in a bucket for what you will save and make investing correctly.

    Schedule as many meetings with local investors and other professionals as possible and go during the time where you can attend a REIA and start putting a potential team together. Hope that helps.

    Florida is my state of choice. If you have any questions about out of state investing and in the Florida market, connect with me and good luck on your journey!

    - Brad

    P.S. - Two of the best books you can read (and re-read) are Rich Dad, Poor Dad and The 4-Hour Workweek. Both have been mentioned numerous times by guests on the Bigger Pockets podcast and I have detailed notes to both books. If you would like a copy, just let me know and I'll send them over. (but it's still highly worth buying the books.)

    2Reply
  • Bradley De comarmond
    West Hollywood, CA · Member since 2016 · 235 posts · 72 votes
    9y

    Welcome to Bigger Pockets @Jeff Petsche

    BP is loaded with all the information you will need to succeed in whatever niche of real estate investing you wish to pursue and the community is filled with knowledgeable investors and professionals to learn from and connect with.

    BP is what you make it. The more you put in, the more you will get out of it!

    Listen to the podcast for extra inspiration and investing advice and post in the forum for any questions you have. Members here are really eager to help. We're all working to succeed together.

    Also, check the "networking events" tab under "Community" and go out there and meet people. That's the way to build powerful relationships.

    Like you, I am living in CA (Los Angeles), but I focus on investing out of state for the 2x+ cash flow and reasonable cost of real estate. 

    I think if you're going to invest out of state, the criteria should be....

    1) Numbers work for your goals

    2) Market is stable and on the rise for the long term

    3) You have some interest in going there (or at least wouldn't despise going there no matter what time of year) and/or have friends and family there for local support.

    Florida is my state of choice.

    If you have any questions about out of state investing and in the Florida market, connect with me and good luck on your journey!

    - Brad

    P.S. - Two of the best books you can read (and re-read) are Rich Dad, Poor Dad and The 4-Hour Workweek. Both have been mentioned numerous times by guests on the Bigger Pockets podcast and I have detailed notes to both books. If you would like a copy, just let me know and I'll send them over. (but it's still highly worth buying the books.)

    0Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    @Bradley De comarmond Thank you for your comment. Great advice and unlike some who invest in RE, this is going to be my FULL-TIME focus (aside from my retail/wholesale business locally), so getting on a plane and visiting the markets of interest is a must for my model and a business expense in making the right choice when buying.

    Also, because I have a partner involved who has a 9-5 job, but will be a 50/50 partner, he has already agreed that my time is valuable and should be compensated for finding the deals, analyzing the deals, etc. so I'll be adding in a 5% acquisition fee off the purchase price in our original numbers as compensation for my time.

    Florida was on my radar, but my partner and I are no longer looking at that market. We are not considering Boom-Bust states like CA, FL, AZ or NV..well, Vegas is back on our radar because the Raiders and the new NHL team (the Knights) are coming into town. So, we are taking a second look.

    I like the idea of setting up a trip when their is a REIA meeting going on and making the contacts with boots on the ground.

    Again, great advice and thank you.

    1Reply
  • Jeff Petsche
    OP
    Real Estate Broker · Yorba Linda, CA · Member since 2017 · 154 posts · 114 votes
    9y

    Thank you for the comment @Larry Fried.

    I also believe that investing OOS can be very successful if you have the right team on the ground and I agree that visiting the location(s) is good in the beginning.

    The great thing about that is my girlfriend who will be involved in the journey has TONS of air miles because of her business travel, so I'll never pay for air fare to the locations I'll be visiting. And even if I did, it's the cost of running a business statewide.

    My partner and I are not opposed to the TK opportunity if the right property makes sense for us. But our first approach is going with the ADD VALUE model through my agent contacts on the ground finding off market properties that are distressed and below market value, REHAD the property, put in a renter and REFI.

    We are open to either model if it makes sense.

    0Reply
  • Tyrone Goldstein
    Indianapolis, IN · Member since 2017 · 4 posts · 1 vote
    9y

    ay yo you best stay in cali

    0Reply
  • Account Closed
    Real Estate Investor · Kansas City, MO · Member since 2015 · 222 posts · 121 votes
    9y

    Investing out of state is lucrative if you have a good team in place. I wouldn't count on managing a rehab from a far, it won't end the way you want it to. Investing turnkey is a great option as they are able to do the work for you. Let me know if you need any assistance in your search!

    1Reply
  • Daniel Y.
    Investor · Henderson, NV · Member since 2016 · 227 posts · 86 votes
    9y

    HI @Jeff Petsche

    I skimmed through, so helpfully this may not have been mentioned before. Have you gone to some meetup yet? You can usually meetup with some OOS investors in CA, and potentially create some sort of partnership.

    Daniel

    0Reply
  • Daniel Y.
    Investor · Henderson, NV · Member since 2016 · 227 posts · 86 votes
    9y

    @Account Closed

    Hi, so do you work for or work with turnkey companies? Also, in what cities? I see that you are from Kansas City, MO and I have heard there is a lot potential there.

    Daniel

    0Reply
  • Steve Kontos
    Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
    9y

    @Jeff Petsche

    I am going to echo what various people have said here.  As someone who has been doing out of state investing for a while now, it's about having a solid team in place in your areas of chose as well as in your neck of the woods.  Between that and implementing a good system, you can mitigate some of the risk.  No matter what at the end of the day, the biggest risk will always be the distance BUT as someone who lives in New York this method of investing was a no-brainer for me.

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