Has anyone moved to a market to buy rental property??

Question

Hi All:

We see so many posts about out of town investing. Has anyone on this board actually moved to the out of state/out of town market either for a short term or a long term specifically for the purpose of building a rental portfolio? If so, I'd love to hear your feedback. I have a very flexible situation and it is something I am considering (with the market being Charlotte, NC). I live in DC....thinking about moving for a year to 2. Am I crazy? Love to hear any comments other than telling me to buy in the DC market. Prices are too high here and Baltimore is tenant friendly so thats out!

Mike D'Arrigo · Answer

@Chris D. It's always great if you can make your money going in but I think it's also important to look at the long term return if you're doing buy and holds. Be careful not to automatically assume that there's all this built in equity when you do it yourself vs buying turn key. Sometimes there is but that usually depends on the turn key company that you're working with. Some put huge mark ups on their properties to unsuspecting buyers but the reputable ones sell at a fair market value. You want to keep in mind that turn key companies usually buy at a lower acquisition cost than an individual because they have multiple sources of properties rather than just the MLS. Since it looks like you'll be buying with cash, that gives you a little bit of an advantage over the typical buyer on the MLS but also keep in mind that turn key companies have much lower construction costs because of the volumes they do with suppliers and their crews. Then of course, with turn key, you don't incur all of the expenses while it is being renovated and marketed for a tenant. I often find that people end up saving far less than they think when they go the DIY route. I talk about this in one of my podcasts which you can find on our website. If you're interested, look for the 12-13-2014 episode. No matter which way you go, I agree that good property management is critical, especially in a market you don't know well. Good luck with whatever you end up doing!

Chris D. · Answer

@Mike D'Arrigo: thanks for the response. I feel like we are always instructed as investors to make our money when we buy (i.e. buy at a discount). Turnkey is priced at retail and I understand the reasons for that. So, I will probably have to dip my toe in and hire contractors to do renovations. Also, I'd like to hire professional property management. I feel like I'd have a better shot at learning how to manage the manager if I'm living locally..at least for awhile.

Mike D'Arrigo · Answer

I think it depends on how you plan to build your portfolio. If you plan to buy distressed and oversee the renovations, I think it makes sense to move. It's very difficult to effectively rehab properties from afar. If you plan to simply buy already renovated turn key properties, I don't see the sense of moving. So it really comes down to how much of an active investor you plan to be.

Justin Jocewicz · Answer

How willing are you to sacrifice your lifestyle?  Taking a NoVA salary, selling the house, moving to an up and coming and investing nearby could take you leaps and bounds.

If you aren't willing to make it happen, I would be content with using cash or a HELOC and investing out of your direct control in a healthy job market with a PM that has a lower price and good landlord laws.  I'm in Palm Beach County, FL which is still expensive, but not as expensive as up there, great job market and landlord laws.  Let me know if you would like to do something together or want some help here.

Dan Hatch · Answer

I moved from south Florida to Northwest Florida for better cash flow and a more liniar stable market and more affordability

Chris D. · Answer

Hi Deb:

Thanks so much for your response. I know there are others who have moved just to establish in another market.....the Syrios brothers (BP Podcast 121) did a whole podcast on thier move to Kansas City.  Thanks for your feedback!

Chris

Deb Jones · Answer

Hello Chris,

Being from Charlotte you've picked a great place to actually live so it wouldn't be a tough move by any means.  I have actually moved for that purpose but I do have a rental house in Orlando.  I actually moved from there to here.  It's getting tougher in Charlotte to find good deals, they are there but you have to have patience.  Everything is moving rapidly around here and prices are consistently climbing.  You would probably be even more successful investing in areas outside of Charlotte but what's now becoming the suburbs.  Best of luck to you.