Out Of State Investing 101: Establishing Trustworthy Connections?

19 Replies

Hi BP,

I am making my first moves onto picking a market to invest out of state in cash flowing properties. The down payment I will be using is 20k. I think having a trustworthy team of realtors, property management,etc is paramount. How do I even begin establishing a relationship with these people and what can I do ahead of time to pick a reliable teammate. Also what role is the most important and should find first for my team (realtor,property manager, lender, contractors etc)? If anyone could recommend any of these organizations to me it would be greatly appreciated as well.

Hey Cody,

Referrals. They're huge in this field and they're going to be very important in establishing connections with potential team members. I recommend starting by doing a search for investors in your area on the BP website. Then, choose a few who have properties in your market of choice and shoot them a message. Ask if they have any reliable contractors, relators, etc. that they'd recommend. That should give you a solid foundation to start with.

As far as priority goes amongst your team members, it depends on what type of investing you plan on doing. Anything involving repairs and I'd recommend putting a lot of effort into finding a trustworthy contractor. Doing turnkey investing? Try to ask around for a good turnkey company or wholesaler. 

Hi Dan,

@Dan Turkel

I know it may seem simple to you but your Comprehensive reply is very helpful. On another note you said search for local investors in my area but I am investing out of state so does this still apply? Why would I ask people in my area? Would I be better off asking people in markets I plan on investing in? I know the answer might be both but I want to know why you say ask investors in my area since I am new to this so I don't necessarily make the connections that seems obvious to you. 

Am I correct when I say: If I want to structure my own deals where I find an OOS market and start from the ground up then I should find a good contractor first.

@Cody Evans , glad to be of help! 

I actually meant to say "search for investors in your market of interest on the BP website." Since you pointed this out though, it's worth mentioning that there's nothing like an in-person meeting with someone. While you should prioritize networking with investors in your market of interest, it certainly can't hurt to also establish connections with people you can actually meet with in person. There's something special about face to face interactions... especially if you're just starting out

Can you elaborate on what you mean by "structuring your own deals?" What type of deals? What niche do you plan on pursuing? Do you plan on flipping, BRRRR'ing, buying and holding, wholesaling, etc.?

@Dan Turkel

What I mean by structuring my own deals is not paying a premium for Turn Keys. I will take a referral from investors in my market of interest and use that person plus other investors to help build a team(Real estate agent, contractors, property management, etc) of competent people in a market. I will then buy a deal under market value(since I didn't use Turn Key), have my property manager rehab it with reputable contractors(that's why I pay my PM in the first place right?), PM finds my tenants, and now it's smooth sailing from here on out and I repeat the process by recycling my cash flow until I'm a millionaire. I plan on using 4-plexes as my vehicle to get there. How realistic is this plan? I am sure if everyone could do what I plan on doing they would do it. I am a newbie so if you can bring reality unto me I'd appreciate that haha! 

@Cody Evans I would suggest that you go through different forums. While you're at them, look for replies with people who have a lot of posts and likes. click on their profile and read it through. If you feel some good vibes, send them a connection request and ask what markets they go for. Furthermore, go search those markets and search the providers that told you about. Google the providers and go through all the reviews. Call the provider yourself and start asking questions. Have them send you their inventory and check for deals that actually make sense. You can ask the BP community if that deal is feasible. There you have it. Your first ever deal! P.S. you are looking for a financed deal so the appraiser would be more than enough to assess the house. Plus, you will have an inspector check the whole house. They both check houses for a living and they are a lot better than most of the investors. Now you have a completely checked house without having to leave your bed. Now, compare both of their' s results and remarks with what the provider said. If they match or are super close, you have a good provider. You can stick to them, but keep getting inspectors checking your prospective deals every single time. You can never be too sure. Hope I helped.

@Cody Evans , that can certainly work in theory. In practice however, you'll undoubtedly face many challenges you (or anyone else first starting out, for that matter) could have never foreseen. 

I'm not sure if you've ever seen this blog post but it basically describes exactly what you're trying to do. I highly recommend reading through it if you haven't already. 

Since it will be critical for you to obtain properties at a discount, I think the most important person on your team will be a quality wholesaler. The problem is that quality wholesalers don't just throw their best deals out there for just anyone - they first share them with people who have proven that they're not tire kickers. They give them to people who consistently buy the properties they've gotten under contract. It takes time to develop this type of trust so be sure to keep that in mind. 

Wow! @Dan Turkel

What a striking observation; that is exactly what I intend to do put into words. I imagine that to begin finding a wholesaler(even a terrible one) I need to do a keyword search on Bigger Pockets for "Wholesaler". How would I go about beginning a relationship with this type of person or becoming this type of person myself?

Thank you, you deserve the up vote.

@Cody Evans check out the recent BP podcast for tips on that. The biggest key is referrals. If you're still picking a market check out my blog post: https://www.biggerpockets.com/blogs/10145/66160-how-to-identify-emerging-markets

@Cody Evans , I'd suggest getting to know some wholesalers before trying to do it yourself. Your best bet will probably be to find them on BP. Shoot them a message and try to begin a conversation with them. Ideally, you'd be able to meet with them in person by taking them out for a coffee or something. I also suggest going to a REIA at some point to begin developing your network/team to get your name out there.

It's all about providing value. You don't want to just say that you'd like to pick their brain. Offer help in whatever way you can and try to have a friendship develop. At that point, the person would ideally want to help you out.

Sorry for the late reply all. 

@Jaudat S.

That sounds like a good tactic. To be specific: How do you define "providers"? 

You are essentially saying to ask the experienced BP members for referrals in those markets they recommend which I'll then use as the basis for my own research on those providers(contractors, agents, PMs). After a deal closes do I close my eyes and pray or send inspectors out every once in a while to check to make sure the PM company is doing their job?

@Todd Dexheimer

I will check the podcast and your blog. Thank you for those sources.

@Dan Turkel

That sounds like a plan of action to me. I won't be investing in my area so do you still think talking to wholesalers in my area and visiting the local REIA will be a good way to network?

Originally posted by @Cody Evans :

Hi BP,

I am making my first moves onto picking a market to invest out of state in cash flowing properties. The down payment I will be using is 20k. I think having a trustworthy team of realtors, property management,etc is paramount. How do I even begin establishing a relationship with these people and what can I do ahead of time to pick a reliable teammate. Also what role is the most important and should find first for my team (realtor,property manager, lender, contractors etc)? If anyone could recommend any of these organizations to me it would be greatly appreciated as well.

 Are you looking for a Turnkey Company? It kind of sounds like that would be a fit for you. They often will own, renovate, and manage the property all in house for you. It sounds like it woulda little bit of everything you are looking for. 

Good luck!

I would say your undercapitalized.. to do what your trying to do with 20k in cash is going to be pretty tough.

your explaining the BRRR method and that involves usually paying cash.. and or if you need to get HML to buy and get reno money there goes your buying below market as your holding cost will be significant add to your purchase price then add on your refi costs and it could easily be 10 to 12k extra just for financing.

Not to mention the risk of getting royally screwed by some low hanging fruit wholesaler who talks a great game has a lot of posts on BP and gives you a dud.. LOL..

I would rethink this whole equation..

If your anti turn key thinking they charge too much then .. FIND and great broker and simply buy some mom and pops house that they lived in for 30 years in the market you want to be in .. and put it in service.. do a home inspection make them fix the honey do's and let your broker find you a deal.. then hand over to a competent PM.. take special note when you do home inspection on the major componants like heat and air  roof .. plumbing electrical..  try to find listings were these are update or near new.. if you do that its not mandatory to buy a completely fresh reno.

Plus most turn key companies simply don't have 4 plex's they deal in SFR's you may find some that work the really rough areas of the mid west and sell low end duplex's but those will eat your lunch over time.

I think you should step back and reassess.. 20k simply is not enough cash to go out and make this work.. at least IMHO

If I had to start over again, I'd seek out a GOOD PM first. That PM should have connections or even in house to take care of your realtor, they'd also be able to point you in the right direction to look (if you want to search yourself). The realtor, if they are good, should be able to pass you on to a good lender they have a solid relationship with. 

I did mine in reverse and just used a random realtor to do my 1031. It worked, but I had big dose of luck on my side because it almost went really bad with the lender. 

But like said above, I'd be cautious if you're trying to go OOS, it's your first, and you don't have that much capital. The main reason people go OOS is because it's cheaper than local market, but if you wouldn't be comfortable investing in lower class assets locally don't even think of trying it OOS no matter how good the returns look on paper.

@Cody Evans , I think your priority should be to network with people in the market you plan on investing in. However, if you have the time now, it can only help to start networking with people in your area now. 

@Jay Hinrichs

That would be quite the fail to end up with a wholesaler like that! Lol!

I see you have a turn key investing podcast. Any recommendations on which podcast I should watch first? I haven't completely ruled out any strategy as of yet but trying to  sort through hysteria and true cautionary tales of investing in these companies OOS. 

Is there a reason why that isn't enough money to get started? I'm no worshiper but the plan I am using is written by Bigger Pocket's own Brandon Turner and he states you only need 20k for this plan while saving 10k from their own personal income each year after. I would think that would at least be enough to get me a SFR somewhere in the U.S. and I plan on saving/investing 20k each year from my own personal income rather than just the 10k the plan recommends.

 Thank you very much for your honest opinion; I watched part of the podcast you had on bigger pockets and it was informative (I believe you started at 18 selling land). 

@Matt K.

What do you consider lower class assets? 

Also, I see you live in Walnut Creek right by me; my new real estate buddy lives up there. Do you attend Meet-ups in the area?

you said 4 plex now your saying SFR.. you can do a SFR this way in many markets.. but your right on the cusp of buying something that is too low in value and will just drive you batty.. I am a proponent in buying the top 1/3 of a given rental market not the bottom third.. when you starting out.. more experienced and cashed up investors can take those risks..

you buy your first one and it does not perform then what..

I would never counter Brandon's advice although I have owned 350 of these homes so I do have some experience.

This is just from my experience in KC... and be aware there's ALWAYS exceptions to the rules but I speak to what's more common. 

20k, get's you sub 100k (you still have closing costs). Now this gets you a few different things:
MFH is going to be rough. Probably old, bad area, poor schools or if you're unlucky all 3. These could work if you were local, but you're not. You'll have a harder time getting someone to manage these.

SFH: You'll probably be able to find something that works, but it's likely going to have something missing that makes it come in at that price point. You might be able to get it in a more working class area and find a good tenant with stable job, but again you increase your risk. You're likely going to have sacrifice quality of house, area, schools, or size to get it at this price point.

Condos/Town home: This is probably where you'll have your most luck getting something worth while, but again you have to deal with HOAs. These can cause headaches and make life difficult, again not impossible, but just another hurdle.

Even bumping up to like 110-150k get's you way better properties and tenants. You'll get good/better schools, you'll get places people want to live vs have to settle for. MFH is going to be tough because it's popular and plenty of people are looking at it to invest. General rule of thumb is about 1% of purchase price for list. If you're going in rough areas you might get 2% on paper but less likely to see that in real life.

@Jay Hinrichs @Matt K.

You guys are real dream crushers and I love it! Lol

I now figure I will be better off saving a little while longer to get a better property. Either that or build some more income. If you have any suggestions for a good way to invest income in the meantime or a good paying side job I can do on weekends that would be well appreciated but otherwise you really helped me get a more realistic grasp on what would be my money well spent.

Thank you 

@Cody Evans just get a lot of data point talking with lots of other fellow investors that lived on the west coast and bought in turnkey land

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