Is out of state investing worth it?

General Real Estate Investing
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Is out of state investing worth it?

Sara W.
Investor · Boston MA · Member since 2015 · 50 posts · 18 votes

Hi everyone :)

I have been doing some research on investing in out of state properties. However, after reading and factoring all the hassles and risks of investing long distances and knowing that there are investments out there that are completely passive and yield a standard 7 to 10% returns, now I am wondering if it's worth it to invest in out of state at all.

For newbies, I think a lot of people on this forum recommend to start with turnkey properties. When I looked at some of the TK websites, the properties they featured are generating around 8 to 9% on average. If that's the case, are there any upsides of investing out of state instead of just doing passive investments like Multiple Equity, Crowd Street etc? Or am I missing something?

I know that you can probably get a higher returns if you assembly your own out of state teams and get some off market deals. But what is the ROI for doing that vs. investing in TK? Is the return significantly enough comparing to the risk and work you take.

Would appreciate your thoughts and want to hear your stories about investing in out of state vs. passive investing in funds and notes. Thank you all in advance!

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Simone G.
Flipper/Rehabber · San Diego, CA · Member since 2016 · 26 posts · 86 votes
5y

@Sara W.: asking if investing OOS is "worth it" is like asking a room full of hungry first graders what snack they want - you'll get unlimited and diverse responses, and each response will be genuine, well-intentioned, and vehement. Same with OOS investors; based upon each investor's location, experience, capital and risk tolerance, you'll get a smorgasbord of feedback. 

Unsure if it helps, but instead of asking if the best play is OOS, TK or whatever, ask yourself how much of your life you want to dedicate to managing your assets and what amount of money is worth it to you to delegate that management - then reverse engineer that play. 

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  • Sara W.
    OP
    Investor · Boston MA · Member since 2015 · 50 posts · 18 votes
    5y
    Originally posted by @Aj Parikh:

    @Sara W. I invested in Cleveland and Memphis and I am seeing Cash on cash returns above 12%. The memphis property that I closed using Roofstock is COC at 18%. Let me know if you want to connect and chat about it.

    That's awesome. How is your experience like with Roofstock? This is the post I read before posting on this forum and makes me a little hesitant to use Roofstock. I have heard that there is some sort of guaranteed now that Roofstock placed on its properties so maybe it will help mitigate some of the risks of investing from a long distance. 

    https://www.biggerpockets.com/...

    0Reply
  • Sara W.
    OP
    Investor · Boston MA · Member since 2015 · 50 posts · 18 votes
    5y
    Originally posted by @Adam Lendi:
    Originally posted by @Sara W.:
    Originally posted by @Adam Lendi:

    @Sara W. I don't know your local market, however, I can imagine it is probably as challenging or more challenging than Denver, where I live. This is why I partner and I have changed asset classes and we are working on RV parks, rather than residential. We both have a background in single family, multifamily, and apartments. It could be as simple as changing what you invest in.

    Hi Adam, very interesting proposition. I have been thinking about RV parks and mobile home industry recently and been talking to someone from Four Peaks. It's a very different landscape than residential. What your experiences have been like? 

    The reason why I am looking to do OOS is also because I am planning to do a 1031 exchange. I don't think there are mobile or RV park that take in 1031 exchange investors yet.

    Hey Sara! My partner and I landed on RV parks, as investors in residential single family and apartments, as RV owners ourselves. The industry has been growing, with the largest group of RVers now being millennials. Last year saw an explosion of new RV travelers and parks have seen great growth, most of which is expected to remain into 2021 and beyond. Whether you look at RV parks or another asset, its good to keep your options open. I'm happy to chat further about RV parks if that is a path you want to learn more about. You'll need to check with your CPA and 1031 intermediary, however, you may be able to reinvest your gains into RV parks and other commercial assets.

    Thanks Adam! I think I can reinvest the funds into RV parks directly as a replacement property but I am not sure if I want to do so. As you know RV parks is a whole another beast that require some specific industry knowledge. I am open to learn more about it but I think I would want to invest in a RV park/mobile home funds instead of owning it directly myself. Will love to chat with you about it and learn from your experience! 

    2Reply
  • Adam Lendi
    Investor · CO · Member since 2017 · 60 posts · 44 votes
    5y

    @Sara W.

    That's exactly why we should talk! My team and I are doing just that. I dropped you a personal message with my calendar scheduler. Let's connect soon.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    - investing in passive crowdfunding you will almost guaranteed lost money if the sponsor is bad and you invest at the wrong industry: eg hotels. It's the fastest way of losing money
    - Investing in direct REI at least you know you will not losing principal
    - For OOS, result is hit or miss, but for long term you will not lose the princial although you may not hitting the advertised target. So yes it's 50:50.
    - If you want truly passive, invest in best private syndication deals/ Funds (not crowdfunding). 

    0Reply
  • Zachary Beach
    Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
    5y

    @Nick Dunin I'm finding 20% CoC in vacation rentals. I have a property I bought for 196k all in at 240k including furniture At the time ARV was about 300K closer to 400K now and we have  revenued 25K on the property to date in 2021 not counting future booked payouts. So in 50 days. It's more of a business than a rental property and more about management than the property itself.

    1Reply
  • Nick Dunin
    Real Estate Investor · Longview, TX · Member since 2009 · 111 posts · 28 votes
    5y
    Originally posted by @Zachary Beach:

    @Nick Dunin I'm finding 20% CoC in vacation rentals. I have a property I bought for 196k all in at 240k including furniture At the time ARV was about 300K closer to 400K now and we have  revenued 25K on the property to date in 2021 not counting future booked payouts. So in 50 days. It's more of a business than a rental property and more about management than the property itself.

    Thank you sir!

    0Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    5y

    @Sara W. The property I purchased through Roofstock has been cash flowing positively and no complaints so far. The neighborhood ratings, tenant ledgers and property valuation reports help in analyzing a property. They have a 30 day buy back guarantee so that is a good cushion for an investor. 

    1Reply
  • Jim Paulson
    Boise, ID · Member since 2014 · 121 posts · 73 votes
    5y

    Another factor to consider is investing on where you like to go vacation/visit.  Being able to write off your airfare, rental care, meals, etc., while you check on your investment is priceless. 

    0Reply
  • Cher Gosney
    Member since 2019 · 4 posts · 1 vote
    5y

    I am a licensed Realtor and a Project Manager for an out of state investor. Prior to taking on the job as a Project Manager I did 2 flips on my own giving me some experience in the field.  The key for you is to find a Realtor like me.  I had all of the contractors and monetary numbers in my pocket, as well as knowledge of the different areas.  I also had in my pocket a good property management company.  My investor never steps foot in the homes I find and I handle the whole rehab.  I then list it or hand it over to the property management company.  Because the investor has to pay me for my work, that is outside of the scope of real estate agent, the numbers are a little tighter.  The totally trashed homes don't make the cut (because we produce home inspection worthy homes) nor do the wholesaler homes that have exorbitant fees attached to them. 

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