I’m an new investor interested in acquiring rentals from out of state, specifically properties in Memphis, TN from Denver, CO. I have the hustle to make it happen because I’m hungry but not the knowledge or money, thus, what strategies could I implement while on a tight budget?
You’re an inexperienced investor on a tight budget, looking to get your feet wet as a long distance landlord? I’ll save you a lot of time, money, and heartache - Don’t do it!
Starting out of state with limited funds typically isn't the best strategy, you might be better off learning in your current area and purchasing a house hack property, you will learn most of what you need along the way that way while having a place to live, in the worst case scenario. You could also work for a property management company or other investors in your market if you wanted to learn more.
Great advice above from both contributors. I second that long distance landlording is not for beginners. Regardless of your experience or cash position, house hacking is the PERFECT way to get your feet wet.
Sweat equity can go a long way when funds are short. I've helped an out-of-state investor purchase a property in which he drove to Memphis and completed much of the renovation work himself. Most landlords aren't willing, or able, to do this, but in his case, it did save him a considerable amount of money.
For a tight budget, the BRRR method is worth considering. You can use a private lender to purchase a distressed property, renovate it, rent it out and then pull 75% of the appraised value out during a refinance. Chances are you will still have to put your own capital into the deal, but this method, if done properly, can minimize the amount of capital required.
This strategy is difficult to do even more difficult considering an out of state buyer.
You should save up so you can purchased doing 20% down and buy a home already renovated.
@Tyler Hockett you don’t mention what your budget is but I would be leery of starting right now if you have a right budget even in somewhere like Memphis, which is very affordable.
You want to be able to buy a couple rentals at a time or very quickly, it’ll minimize your risk and help you when things get tough.
I was thinking of using lease option strategies. Any suggestions on that?
Get educated. If money is tight start with learning about personal finance and getting your money right. Study as much about real estate as you can. Network with professionals. Read books and listen to podcasts on real estate investing. Money without knowledge is like water through your fingers.