SUCCESSFUL OUT OF STATE INVESTORS?

General Real Estate Investing
16yFollow

SUCCESSFUL OUT OF STATE INVESTORS?

Michael Seutin
Real Estate Investor · Vallejo, CA · Member since 2009 · 120 posts · 7 votes

I tend to feed on positive people around me and I have seen a few posts claiming that out of area or out of state investors are not going to be successful.
So I am curious to know who on here is not only an out of state investor like me ( I live in northern cali, where cash flow is not good), and who are successful doing it, especially buy and hold investors. I 'd also like to know where you are from, where you invest and you general plan and profits, details, details.
I have also seen people claiming that paying ppty managers is a risky and takes too much of the profit.
Let me disagree on that, I do believe that even if my properties where a mile away from where i live, I think that managing your own property is inherently bound to fail if your goal is to retire on real estate.
Self managing is very limiting as far as the number of ppties one can acquire and puts a limit on success. As an extrem example, Donald Trumps would never be a billionaire if he self managed his properties.
I believe that delegating properly is what makes one successful.
Plus the 7% management fee I pay allows me less stress, and I would never be able to be as professional as my ppty manager.
Doing it myself I ll go crazy after 2 or 3 ppties. Having a ppty manager, I can sleep good and have 50 ppties or more.

1Reply
165 views

Most Popular Reply

Mike McKinzie
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
16y

I am one of the successful out of state investors here on BP. I live in Colorado and just this year purchased property in Texas, Oklahoma and Arizona. I also have property in California, Virginia and Colorado. My philosophy on Real Estate Investing is just like stock investing. I don't visit a factory or an office of a stock I buy, so why should I visit a property I buy? Even if I owned 51% of a company's stock, I let the professionals run it. I am sure Warren Buffet doesn't visit a Coca Cola plant even though he has billions invested in Coca Cola.

I pay from 6% to 8% for property management and that is more than worth it. I manage the PM companies and they manage the properties. This gives me more time to do what I want to do. If you manage your own properties, it is like a 'ball and chain.' How do you ever go on vacation? You pay someone else to be 'on call' if a problem arises? If so, just have a property manager. My strength is accounting, not fixing a toilet.

Currently, my gross numbers are $30,000 a month gross rental income. About $10,000 in debt service, $2,000 in property management, $1,500 in property taxes, about $500 in insurance. Repairs and utilities can vary. Number of rental units is 30. Dollar amounts are rounded.

5Reply
See this reply in the discussion

52 Replies

Jump to latestLatest
  • Warren Foster
    Real Estate Investor · Abu Dhabi, UAE · Member since 2010 · 48 posts · 16 votes
    16y

    Michael,

    I have to agree on the use of PM's. Not only am I an out of state investor, I am an out of the country investor as I have been living and working in the United Arab Emirates for the last few years. I have several properties back in the states and have not run into a issue yet that I could not fix via email or a phone call with the PM. You just add the cost of a PM from the get go, and run the numbers accordingly.

    Unfortunately, i can't really answer your question about investing from a long distance as all of my properties were bought before I moved. But I will be watching this post closely for ideas as I also plan to significantly increase my investing over the next few years whether i am in the states or not.

    BTW, seeing that you are from Pleasant Hill just reminded me that I am missing my 25th High School reunion down the street in Martinez next week. Sigh.....

    Warren

    1Reply
  • Mike McKinzie
    Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
    16y

    I am one of the successful out of state investors here on BP. I live in Colorado and just this year purchased property in Texas, Oklahoma and Arizona. I also have property in California, Virginia and Colorado. My philosophy on Real Estate Investing is just like stock investing. I don't visit a factory or an office of a stock I buy, so why should I visit a property I buy? Even if I owned 51% of a company's stock, I let the professionals run it. I am sure Warren Buffet doesn't visit a Coca Cola plant even though he has billions invested in Coca Cola.

    I pay from 6% to 8% for property management and that is more than worth it. I manage the PM companies and they manage the properties. This gives me more time to do what I want to do. If you manage your own properties, it is like a 'ball and chain.' How do you ever go on vacation? You pay someone else to be 'on call' if a problem arises? If so, just have a property manager. My strength is accounting, not fixing a toilet.

    Currently, my gross numbers are $30,000 a month gross rental income. About $10,000 in debt service, $2,000 in property management, $1,500 in property taxes, about $500 in insurance. Repairs and utilities can vary. Number of rental units is 30. Dollar amounts are rounded.

    5Reply
  • Account Closed
    Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
    16y

    Though all of my properties are close to home and self-managed, I'll be watching this thread. There are many aspects to out-of-state investing and if you have them under control it seems like a very viable strategy since many are doing well at it.

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Obviously, management (good management that is) is important and not easy to find, it requires some trial and error when venturing into a new area.

    That said, the real key is buying right. If you do, you can cash flow, if you don't look out.

    Many of the successful out of state investors (I have and still own out of state) are successful because they understand the financials associated with the property and know how to hire and manage a good team on the ground floor.

    Some will argue that PM is an overpaid job, something you should do yourself, however, I disagree when it comes to owning out of state. Very difficult to self-manage from afar!

    Podcast Guest on Show #130
    2Reply
  • Michael Seutin
    OP
    Real Estate Investor · Vallejo, CA · Member since 2009 · 120 posts · 7 votes
    16y

    Well Mike M, you seem to be where I want to be in the next few years.
    I agree it's all about the numbers, I now only consider properties with a minimum of 1.6 rent ratio, if I put money down, and that leaves me a good income on each ppties whereever I am at, and including management fees.
    I do believe that Warren Buffet who is an exception in the stockmarket success, did go to plants and was very thorough on all his stock purhases, from the accounting to the quality of the product.
    Mike can you expand on how you finance your ppties, and what numbers you look for.
    The only thing I am willing to do, is to not look at the properties. I made a point to fly and check it out with my eyes, it costs money to do so, but it's a one time fee

    0Reply
  • Warren Foster
    Real Estate Investor · Abu Dhabi, UAE · Member since 2010 · 48 posts · 16 votes
    16y

    Mike,

    I wish I could put eyes on as well, but that just not going to happen from where I am overseas. I am sure I'll get burned a few times but I plan to minimize it by insisting on a due diligence period and paying for a home inspector. Cheaper than a flight.

    By the Way, I just put my first offer in today on a property in Atlanta based solely on pics from the MLS. I guess we'll see soon how well true long distance investing works out for me.

    1Reply
  • Warren Foster
    Real Estate Investor · Abu Dhabi, UAE · Member since 2010 · 48 posts · 16 votes
    16y

    Update.

    Well, the Atlanta offer went nowhere. I asked for a short due diligence period and the reply from the agent was "how are you going to inspect the property from out of the country?" Pay someone to do it for me, duh!

    Of course he made it even worse by adding that two other out of state investors had already backed out of contracts before which lead me to ask (of course) if there was some non disclosed issue with the property and that maybe he should let me know so we did not waste any more of each others time. Surprisingly, I never heard back...

    1Reply
  • Todd Brittingham
    Real Estate Investor · Walled Lake, MI · Member since 2010 · 121 posts · 66 votes
    16y

    Michael,

    You are on the right track. I think a property manager is absolutely the way to go whether your rental is next door, or 2000 miles away. I have a few rental properties that are local, but I have property managers managing the properties. Could I do this work? Absolutely, but I know the time spent managing the properties is time spent away from creating more deals which is much more profitable.

    0Reply
  • Chris Walker
    Real Estate Investor · Port St Lucie, FL · Member since 2009 · 41 posts · 11 votes
    16y

    I had a realtor tell me up front he won't even entertain an offer from me because I wasn't there to see the property myself.

    That being said, I know plenty of people who hold rentals in different markets. With a good property management system, it runs well, as long as the numbers support it.

    I've stopped visiting properties about 3 years ago. I have people do that for me now. I've grown comfortable with the risk.

    2Reply
  • Mariah JefferyBusiness Member
    Real Estate Agent · Cheyenne, WY · Member since 2009 · 205 posts · 51 votes
    15y

    After closing on 12/31, I will own 23 rental units in South Dakota. I live in Oregon. The reason I chose to invest there is because Portland is very poor for cash flow, and also because my father in law is kind of a fly-by-night handyman. My husband and I have no desire to self-manage so it was a win-win.

    14 units are managed by my father in law plus myself, to the extent I can from afar. We pay him 5%. 9 units are managed professionally and we pay 8%, which is a much better deal than what we have going with my FIL. It's worth the extra 3% to be totally hands off.

    After Friday, monthly revenues will be ~ $14.5K on the 23 units. Debt service around $5.5K

    I'm generally pretty happy how things are going. Not much I would change. We fly back once per year to check on things and that helps keep the team in check.

    2Reply
  • Rolly Dupree
    Residential Real Estate Agent · Saratoga, CA · Member since 2009 · 71 posts · 9 votes
    15y

    Hello Michael,
    Just like you, I live in Northern California and prices have been to high to buy recently. The properties I bought years ago in my area (Bay Area) I manage myself but the 90 units in Vegas and the 20 units in West NY have PM and it's working for me.
    Make sure to do your DD and that there is no city codes or requirements before you close.
    The hands off management is totally worth the extra money. I plan to keep doing it for myself and my buyers.
    Good luck,
    Rolly

    1Reply
  • Steve Crawford
    Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes
    15y

    I have about 80 properties and 250 Lessees. I am not an out of state investor, but I have many properties in state, that I have never seen. Probably 20% that I have never seen.
    I have had many that I purchased, operated and sold and still never saw them.

    Then again, I have many sgl fam houses that i personally mowed the yards last Summer after work.

    PM works great for me on the properties that I can't easily handle myself. 5% for tenants that require maintenance is a great deal. I wouldn't even consider multi fam w/o PM. But NNN commercial tenants are a breeze via phone.

    My biggest problem with out of state properties is banking them. My lenders rarely consider loaning me money on an out of state property. Moreover, I am less and less confident in my ability to fully assess the property the farther away it is, e.g. the neighborhood, growth trends, comps, etc.

    Annual revenues 1.1M, debt 850K.

    0Reply
  • Rich Weese
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    15y

    I started buying out of state before most BP members were born. A lot of syndication on properties in TX, CA, AZ, OR, OK,CO and UT before I was 30. I lived part of the time in CA and part in CO. I've owned over 1000 sfrs, and thousands of apts. Currently own a total of about 800 units consisting of sfrs, apts and self storage units (majority of 800 are little storage units. Values of around 10 million .Mortgages of under 1 million and high 5 figure monthly net. Rich
    I currently domicile in SD and own in TX, FL, AZ, UT, and a piece of crap in NJ!

    3Reply
  • Dave Charron
    Investor · Syracuse, NY · Member since 2010 · 166 posts · 76 votes
    15y

    Any tips on how to find a "good property management company"

    0Reply
  • Account Closed
    Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
    15y

    Dave that's a great question, but you may want to ask in a separate thread it will get more exposure.

    Finding good property managers for out-of-state properties though is essential.

    0Reply
  • Doug Haisten
    Mobile, AL · Member since 2010 · 238 posts · 44 votes
    15y

    Happy New Year all,

    How are you out of state investors finding your deals/properties?

    Doug

    0Reply
  • Michael Seutin
    OP
    Real Estate Investor · Vallejo, CA · Member since 2009 · 120 posts · 7 votes
    15y

    Personnally I first google property managers and reltors preferably who cater to investors, then I talk to them on the phone, you can get a good sense of how professional they are by talking to them and see if they follow up on what they say.
    Once I have a trusted realtor or property manager they can help find properties, or sometimes I use wholesaler listings but I sometimes end up by passing the wholesaler by contacting the seller directly. Honestly my experience with wholesalers is not good, they offer cheap properties that have problems they don't mention. And I felt they want to rip me off by asking right away for $1000 non refundable earnest money, before inspection. So I don't mind using them too is I can and end up using their listing but not going through them.
    If I found one who is staightforward and won't hide facts then I 'd pay his commision. Plus the ones I delt with, they never even saw the properties, not even living in the same state..

    0Reply
  • Mike Jakobczak
    Real Estate Investor · Toronto, Ontario · Member since 2010 · 413 posts · 114 votes
    15y
    Originally posted by Chris Walker:
    I had a realtor tell me up front he won't even entertain an offer from me because I wasn't there to see the property myself.

    Well when buying out of state it's very important to appear as if you are not from out of state. Even tho an agent is suppose to present all offers to the sellers, they will give their negative opinion on your offer and sellers wont even consider it.

    Ways to do this, is have a local number that is forwarded to your business line. Or 1-800 number. If you have a website, make sure you put the area you are trying to buy into, is mentioned.

    1Reply
  • Robert Littke
    Commercial Real Estate Broker · St. Petersburg, FL · Member since 2009 · 47 posts · 23 votes
    15y

    I had a very successful commercial developer tell me early "Find the type of property and people you like to work with and stick with it" I believe you can be successful at with either model if the numbers work and your comfortable with it. I have owned out of state property and I didn't care for it. I'm a bit of a control freak and I like to see whats going on, but that's just me. I know that making the numbers work is what its all about. It all comes down to a level of involvement your comfortable with.

    0Reply
  • Jerry Jones
    Multi-family Investor · San Diego, CA · Member since 2011 · 29 posts · 0 votes
    15y

    Hi, for those of you have multiple properties in different states, do you setup a LLC for each state?
    I have rentals in CA, WA and AZ and I am thinking about set up a LLC for asset protection and I really don't like the hassal of having too many LLCs.
    Considering the LLC setting up is quite expensive $800/year here in CA, I am wondering if I can set up a LLC in either WA or AZ and put all 3 rentals in that LLC?
    thanks in advance for your advice!

    0Reply
  • Albert Fiorillo
    Monroe Township, NJ · Member since 2011 · 14 posts · 2 votes
    15y

    I have been doing some research on the Delaware Series LLC. Where you have one main LLC and each property would be a separate sub LLC within that one. From my basic understanding each series acts as its own LLC and can even have its own EIN number.

    Has anyone had any expierence with this?

    0Reply
  • Robert Littke
    Commercial Real Estate Broker · St. Petersburg, FL · Member since 2009 · 47 posts · 23 votes
    15y
    Originally posted by Albert Fiorillo:
    I have been doing some research on the Delaware Series LLC. Where you have one main LLC and each property would be a separate sub LLC within that one. From my basic understanding each series acts as its own LLC and can even have its own EIN number.

    Has anyone had any expierence with this?

    Albert, I would open a new thread with this question, you will get a lot of great answers if you do.

    0Reply
  • Albert Fiorillo
    Monroe Township, NJ · Member since 2011 · 14 posts · 2 votes
    15y

    Robert,

    I will create a new thread with this question.

    thanks,
    Al

    0Reply
  • Greg Lewis
    Real Estate Investor · Member since 2011 · 10 posts · 0 votes
    15y
    Originally posted by Rolly Dupree:
    Hello Michael,
    Just like you, I live in Northern California and prices have been to high to buy recently. The properties I bought years ago in my area (Bay Area) I manage myself but the 90 units in Vegas and the 20 units in West NY have PM and it's working for me.
    Make sure to do your DD and that there is no city codes or requirements before you close.
    The hands off management is totally worth the extra money. I plan to keep doing it for myself and my buyers.
    Good luck,
    Rolly

    Rolly,

    I am in Western NY myself, Rochester actually, and have been looking for a good property manager. Would you mind telling me who you use?

    0Reply
  • Brian Charles
    Member since 2011 · 2 posts · 0 votes
    15y

    Has anyone purchased their FIRST property out of state, or is that left to the more seasoned investors? The prices and cashflow analysis in my market don't make much sense to me, but I'm a bit intimidated on having my first property out of arms reach.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free