Looking into first multi-family out of state--thoughts?

26 Replies

Hi, I live in southern CA, which I'm sure you know is quite expensive. I have family in NC and I was thinking about property out there. (5 year plan might include moving out there) I realize I would need someone to manage the property.

What are your thoughts? Is there a better state to start in?

Thanks for your help!

Cindi

Hey Cindi!  I live here in SC (not too far from NC). Do you happen to know what city in NC you're thinking of? Or not yet?

Question: Did you ever do Single Family homes before jumping into Multifamily?

I ask because it's a topic I'm sort of interested in.

While I'm from SC originally, my fam and I were in SD/MN for about 10 years and - similar to you - slowly made it a dream to return to the South. It finally happened. The south is a great place (just hot and muggy, but NC is better than SC for that).

Hi Brian!!

Mooresville, that's where my cousin lives.  Yes, I'm originally from NJ, so I'm familiar with the hot and muggy.  We visited last July and brought our CA weather with us, my cousin was in disbelief!

When we got married we each had a property.  We are renting the condo out, after about 6 years it's finally breaking even.  Not really a good comparison though, because we didn't buy with the intention to have it be an investment.

My husband is leary of buying a property so far from us as our first investment.  I'm a bit more of a risk taker ;)

Well at least you have some feet on the ground if your family is in North Carolina.  If the numbers work, and you can not find a local investment a North Carolina property might work for you.  If I bought there I would find a property that did not need renovation and was a newer property. 

You should be looking at your breaking even property and making plans to turn it over.  You could use the money from the sale of that property toward something tht gives you some cash flow

This post has been removed.

I live in NC. I'm in the triangle area (Raleigh, Durham, Chapel Hill). People invest out of state all the time. There are many California entities (LLCs) who purchase real estate here in NC. 

Prior to purchasing an investment, you always need to do your due diligence. It is best to find a good property management company and have them manage your property(ies) in this area. You shouldn't try managing a property from California. If you are planning to buy in NC, I would suggest you come for a visit a few times to make sure you are not purchasing blindly. 

thank you. I have to get used to the notifications, I didn't know you all responded!

My husband says if it looks too good to be true it probably is.

I don't know the proper etiquette on details, seems like someone could snatch up your ideas, but here we go..

Asking price 599k

All units rented out.

If I did 20% down and mortgage 

DS? 3k

R 5.1k

MNTC 5%

PM 10%? So 510 a month

Insurance was low. It seems like instant cash flow. Units are a bit older. I asked why they are seeking because it seems like a good income property. Realtor said they want the cash for a bigger commercial property..

Is this too good to be true?

Originally posted by @Henri Meli :

I live in NC. I'm in the triangle area (Raleigh, Durham, Chapel Hill). People invest out of state all the time. There are many California entities (LLCs) who purchase real estate here in NC. 

Prior to purchasing an investment, you always need to do your due diligence. It is best to find a good property management company and have them manage your property(ies) in this area. You shouldn't try managing a property from California. If you are planning to buy in NC, I would suggest you come for a visit a few times to make sure you are not purchasing blindly. 

Thank you Henri, yes, a trip to visit would be in order. 

Is there really a Mooresville and a Morrisvile? 

Originally posted by @Cindi Boyer :

Is there really a Mooresville and a Morrisvile? 

 Yes.  Mooresville is about 25 miles from Charlotte.  Morrisville is between Raleigh and Durham.

Mooresville and Morrisville are about 220 miles from one another.

Originally posted by @Randy E. :
Originally posted by @Cindi Boyer:

Is there really a Mooresville and a Morrisvile? 

 Yes.  Mooresville is about 25 miles from Charlotte.  Morrisville is between Raleigh and Durham.

Mooresville and Morrisville are about 220 miles from one another.

Thanks Randy. So is my detail posting foolish?

Where is this place?  NC?   How many units or apartments and what do they all rent for? Is it near your family?

Have you been there?  How old is it?

Originally posted by @Barbara G. :

Where is this place?  NC?   How many units or apartments and what do they all rent for? Is it near your family?

Have you been there?  How old is it?

Haven't been there yet, 10 minutes from my cousin, I pm'd you :)

Like you Cindi I am in California, but Northern California and the San Francisco Bay Area more specifically. I cannot tell you about NC but I do own property out of state in NY, Mi, and Pennsylvania. One thing I can tell you is that owning real estate out of state can present an entirely different experience and also very different expectations. We get so used to living, working, and owning real estate in our area that we think it will be very much the same in other areas. As one example here in the Bay Area where I live if I found a property I could in fact purchase and generate a cash flow of 5% I might think that is great but in other areas it may be common for properties to generate from 8% to 15% and there may be many properties that will produce this result instead of very very few. Generally you can buy allot more square feet for your money and that might seem great at first but remember you also have to maintain that. As one example and not in NC but in Chicago I found a decent 24 unit multifamily building for $350,000.00. I first thought to myself wow! that is unbelievable because lets say in San Francisco we cannot even find a single studio apartment that will sell for that low. This one particular building I am referring to here is cash flowing even at 50% occupancy. I thought to myself oh wow! that is great but I did not consider how long is has been operating at 50% occupancy and if there is any realistic expectation that I will ever be able to fill the occupancy at a much preferred rate let us say between 75% and 90%. Because of what I am finding if I found a multifamily building that was lets say 75% occupied I may now question if this has been the norm or if this is possibly the one and only time the building has ever has such a good occupancy rate and I would question what the future and long term expectations might be. 

You definitely want to check with the local municipal offices about there property owner policies. Here if we do not personally order garbage pick up for example you will neither get or or be billed for it. In some out of state areas the Municipality may charge you for garbage pick whether you ordered or not or use the service at all simply because that is their policy and ordinance or law. You for sure want to familiarize yourself completely with local Landlord/Tenant laws, rent control, and virtually think of anything and everything possible. Lets say you purchased a multifamily building and be thinking its up to you where and when you put a new roof on the building. It is possible that the local building department goes around inspecting the roofs of multifamily building and has the power to decide if you should pay for and have a new roof put on your building and it can happen at a time when you are not prepared to deal with that expense. Well this happened to me once with an out of state property and because I thought to delay the roof work the local municipality had my building torn down. There were no leaks in the roof mind you, none. 

Just know that owning and operating real estate in other areas especially out of state can present you with an entirely different experience, responsibilities, liabilities, etc. 

Once completely informed you can make your new knowledge a part of your real estate buying criteria. 

Great post.  Thanks for sharing. I'd like to find out more about your investment objectives and see if I can't be a resource for you or pint you in the right direction. 

Hi @Cindi Boyer just to give you some encouragement I know and work with a couple of California based investors who own and "manage" properties right here in the Charlotte area (just outside of Mooresville your target market). With a solid plan and the perk of having boots on the ground I think it can really be a solid move for you. Best of luck to you!

@Cindi Boyer Cindi, let me know if we can help you in the Chicagoland area at all.  We manage and invest here and thru BP I advise a lot especially on local smaller markets.  

@Cindi Boyer , good luck with NC.  I'm out of NY and invest out of state for the same reason.  I agree with @Jasmine S. that by having boots on the ground will really help with the learning and neighborhood screening pieces.  Some of the larger markets in NC have definitely gotten competitive the last couple years but, I do think there is a lot of opportunity still available in the outskirts of those core NC markets.

Best of luck!

@Cindi Boyer I'd need a lot more info before I could even offer an opinion on this deal, although from what you've written it looks like you're looking at a potential gross income of around 61k for a purchase price of around 600k. I certainly don't think that's too good to be true, in fact I would be very careful there, unless there are extenuating circumstances and you could get a better price or make some improvements that would boost the rents. Now, I don't know the NC market -  so I am just responding in a general way to your post

How many units is this, what type of unit? What is the occupancy %? What is the typical local vacancy rate, and is it going down or up? What are the rents? Are the rents at or below market? Who pays utilities and water? 

 There are a lot of costs that you need to be certain of to seriously analyze a property. What are the taxes? What will they be when they are reassessed under the new sales price? (you need to find out the mill rate and do the math) Why is the insurance low? Will it be that low for the new buyer? ( and from my experience the answer to that is always no, but you don't know until you've gotten quotes) 5% maintenance is too low unless your building is new and perfect. 10% PM is too low if your property is lower income. It is almost impossible to run a smaller multifamily with professional management and keep your expenses (not including debt service) less than 50% of the gross.

You can make out of state investing work, but you have to let go of your "California numbers mindset" about what looks like a good deal. Don't jump on anything until you've done a lot more comparing, analyzing and learning. 

@Jean Bolger (don't know how to tag you on this)

Thank you for all of the right questions to go over and review, I'll use those for the first property I actually do. I was given the sound advice of practicing on a much less expensive property for the first one. Your analyzing points are prefect, thank you.

Chris Urso, thank you. What markets do you suggest?

Cindi

Originally posted by @Gilbert Dominguez :

Like you Cindi I am in California, but Northern California and the San Francisco Bay Area more specifically. I cannot tell you about NC but I do own property out of state in NY, Mi, and Pennsylvania. One thing I can tell you is that owning real estate out of state can present an entirely different experience and also very different expectations. We get so used to living, working, and owning real estate in our area that we think it will be very much the same in other areas. As one example here in the Bay Area where I live if I found a property I could in fact purchase and generate a cash flow of 5% I might think that is great but in other areas it may be common for properties to generate from 8% to 15% and there may be many properties that will produce this result instead of very very few. Generally you can buy allot more square feet for your money and that might seem great at first but remember you also have to maintain that. As one example and not in NC but in Chicago I found a decent 24 unit multifamily building for $350,000.00. I first thought to myself wow! that is unbelievable because lets say in San Francisco we cannot even find a single studio apartment that will sell for that low. This one particular building I am referring to here is cash flowing even at 50% occupancy. I thought to myself oh wow! that is great but I did not consider how long is has been operating at 50% occupancy and if there is any realistic expectation that I will ever be able to fill the occupancy at a much preferred rate let us say between 75% and 90%. Because of what I am finding if I found a multifamily building that was lets say 75% occupied I may now question if this has been the norm or if this is possibly the one and only time the building has ever has such a good occupancy rate and I would question what the future and long term expectations might be. 

You definitely want to check with the local municipal offices about there property owner policies. Here if we do not personally order garbage pick up for example you will neither get or or be billed for it. In some out of state areas the Municipality may charge you for garbage pick whether you ordered or not or use the service at all simply because that is their policy and ordinance or law. You for sure want to familiarize yourself completely with local Landlord/Tenant laws, rent control, and virtually think of anything and everything possible. Lets say you purchased a multifamily building and be thinking its up to you where and when you put a new roof on the building. It is possible that the local building department goes around inspecting the roofs of multifamily building and has the power to decide if you should pay for and have a new roof put on your building and it can happen at a time when you are not prepared to deal with that expense. Well this happened to me once with an out of state property and because I thought to delay the roof work the local municipality had my building torn down. There were no leaks in the roof mind you, none. 

Just know that owning and operating real estate in other areas especially out of state can present you with an entirely different experience, responsibilities, liabilities, etc. 

Once completely informed you can make your new knowledge a part of your real estate buying criteria. 

 Sorry to copy the entire post. I don't know how to get it so it just links the name. Gilbert!! Thank you so much for your insightful post!!

Originally posted by @Tony Hardy :

Great post.  Thanks for sharing. I'd like to find out more about your investment objectives and see if I can't be a resource for you or pint you in the right direction. 

 I'm looking for buy and hold. Gathering data at this point, not sure what market I should start in..

Originally posted by @Jasmine S. :

Hi @Cindi Boyerjust to give you some encouragement I know and work with a couple of California based investors who own and "manage" properties right here in the Charlotte area (just outside of Mooresville your target market). With a solid plan and the perk of having boots on the ground I think it can really be a solid move for you. Best of luck to you!

 Hi Jasmine! How do I wrote to you so it's blue without having to copy the whole quote? Thank you for the encouragement!!

@Cindi Boyer  best of luck as you search for property here.

To tag someone, use "@?"  Once you place the "?" after "@" a list of posters on that topic will appear just below the dialog box and you can select the person you want to tag. 

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