Buying and Holding out of State Vs In State

General Real Estate Investing
7yFollow

Buying and Holding out of State Vs In State

Kevin M Cooney
Real Estate Agent · Arvada, CO · Member since 2019 · 8 posts · 4 votes

I live just outside of Denver, and I’m looking to buy another rental. Here’s my question. Should I buy in Denver, and focus on larger rents after I pay it off, or should I buy out of state for all cash and get immediate supplemental income?

Here’s a scenario. I can buy a duplex for $500,000 and make about $3,700 a month from that. However I’ll really only make $300 a month until it’s paid off.

I can buy a house out of state for $100,000 cash (my downpayment for a property in Denver) and get $800 a month immediately in rents.

Which one is better?

My end goal is to have enough passive income to retire and not have to work, so I like the greater rents for when they are paid off.

However, I could be scooping up a lot more properties that cost less, and be getting immediate income which would all be put back into investing.

Either way, I’m not taking any money from my investments now. They are purely there to “retire” earlier.

Any advice would be great. Thanks guys.

0Reply
39 views

Most Popular Reply

Tim Herman
Member since 2018 · 2k+ posts · 1k+ votes
7y

@Kevin M Cooney it is the tenants job to pay off the mortgage. Start to use your calculator and see the power of leverage. Abbreviated example. 1 paid off house $100000 or 5 houses with 20% down. 3% growth 1 house grows to $134000 or 5 houses grow to $670000 in 10 years. What about the mortgage. Mortgage paid down to $65073x5=$325365. Equity=$344365. Like the Capitol One commercial"What's in your wallet". This is an abbreviated analysis I did. After the first year net rental income will be greater for the 5 houses growing rents 3% per year. Whatever market you buy in make sure it meets the 1% rule. Many posts on this forum. Indianapolis, OKC, Cleveland and others will meet that standard.

1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Tim Herman
    Member since 2018 · 2k+ posts · 1k+ votes
    7y

    @Kevin M Cooney it is the tenants job to pay off the mortgage. Start to use your calculator and see the power of leverage. Abbreviated example. 1 paid off house $100000 or 5 houses with 20% down. 3% growth 1 house grows to $134000 or 5 houses grow to $670000 in 10 years. What about the mortgage. Mortgage paid down to $65073x5=$325365. Equity=$344365. Like the Capitol One commercial"What's in your wallet". This is an abbreviated analysis I did. After the first year net rental income will be greater for the 5 houses growing rents 3% per year. Whatever market you buy in make sure it meets the 1% rule. Many posts on this forum. Indianapolis, OKC, Cleveland and others will meet that standard.

    1Reply
  • Nicholas Sheridan, Jr.
    Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes
    7y

    @Kevin M Cooney Good question that I think a lot of people think about. It might just come down to what you are most comfortable with. If you are investing out of state there is a lot more "trust" you have to put into your team (property manager, contractor etc.). You won't be able to just drive there and take care of business yourself. I believe it is all about the immediate cash flow. Your goal is to have the least amount of your money tied up into a deal as possible while having the highest cash flow come back. For example for example it would be better to invest $50k into a $25k downpayment on 2 houses vs all $50k on 1

    0Reply
  • Matt Nusbaum
    Rental Property Investor · Annapolis, MD · Member since 2011 · 232 posts · 170 votes
    7y

    @Kevin M Cooney i agree with Nicholas on deciding what you're more comfortable with that matches your goals. Out of state might get you there faster but make sure you have a team in place. 

    0Reply
  • Cassi Justiz
    Rental Property Investor · Edmond, OK · Member since 2017 · 1k+ posts · 1k+ votes
    7y

    Hey @Kevin M Cooney, I agree that it's a lot of comfort level either way. With the cyclical nature of real estate, I personally like homes that fall into the first time home buyer price point. I don't invest in 2% rule "investor houses" that only investors want. The homes I own all fall into the lower end of the average home price for the area. (My rentals are in the 120-150k retail value range and rent for $1150-$1400).  The nice thing about those price points is that that's the price point most first time home buyers are looking in. If I ever decided I wanted to unload properties, I could sell them to owner occupants ALL DAY. I feel like it would be hard to do that with a $500k duplex.

    With conventional financing, you could buy multiple 1% rule houses in the Midwest and cashflow $200+ on a $80k property for less than $20k down.  So your $100k you could buy 2-3 1% rule B-, C+ rentals in the Midwest and get way better cash flow. 

    Again, it all depends on your comfort level and your goals. I personally am looking for solid houses in stable markets with no less than $250k cash flow per door in areas that will most likely appreciate over the next 10+ years. 

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Kevin M Cooney 100k and 800 rent is not very good. If you go out of state, make sure it’s more like 1300 rent and 100k purchase or something along those lines.

    I can tell you I’ve done 2 years of long distance (out of state) investing and about 8 months now of local investing, and I prefer local a lot more.

    There are pros and cons to both, but that’s been my general preference

    0Reply
  • Ryan RomingerBusiness Member
    Real Estate Broker · Indianapolis, IN · Member since 2018 · 340 posts · 144 votes
    7y

    I work with a number of both local and OOS investors and I can say there are usually pros/cons to both. With OOS investors there's usually the obvious advantage of wage-gap between the state they live in (e.g. CA or NY) vs the state they are investing in (interior states), which creates an economic advantage. With local investors I work with, they are able to take a much more hands-on approach, which especially helps during critical decision-points during renovation stages.

    I’m a RE broker and Property Manager in Indianapolis and I specialize in helping investors. I’d love to connect and learn more about what your goals are for investing. I'd love to assist you any way I can.

    [email protected]317-935-0075
    Intrigue Real Estate & Property Management4.6285 Reviews
    WebsiteView Page
    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    7y

    @Kevin Cox my thought is that by making $300/month you mean the difference between the mortgage and rental income. Are you factoring property management, vacancy and maintenance? 

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