I started my first investment in Sacramento 1 year ago and I have been looking to add more since then.
While I have not pull the trigger to invest more in CA, I am interested to learning more about out of state investing.
I looked up areas like Michigan, Austin TX, Joplin, MO and I dont think they are worth investing since the ROI is about the same (probably a little better than what I got in Sacramento).
Anyone can chime in "Why should I invest out of state?".
I personally have that "fear" of putting money so far away and rely completely on PM.
Help me to overcome this fear.
Your ability to succeed out of state depends entirely on your own skill level. It is obviously more difficult and requires you to have a high level of management skills to assemble a competent team and continuously manage that team. If you have that skill set you should have little fear investing anywhere.
Does that help at all.
I work a lot with California investors in Sacramento, and my general advice when it comes to out of state investing for beginning investors is "invest where you know."
Sacramento is a great market for multiple reason... rent growth rent triple the national average, plenty of appreciation coming from Bay Area migration of millennials, tech companies moving out here and tech employees from the Bay Area working remotely out here, and if the high speed rail project gets completed in the next 10-20 years and connects Sacramento to SF in less than an hour the Sacramento market will absolutely EXPLODE.
Plus, beginning investors like the idea they can go and visit the property any time they want, specifically in an emergency situation. God forbid a car crashed into your property or it catches on fire, but do you have the ability to fly out there for a week and meet contractors, insurance agents, etc. if that happens?
Plus, do you have "boots on the ground" so to speak, in the form of friends, family, etc. that can visit the property out of state if needed for some reason? Do you already have a real estate team in place that you can trust? I have about a dozen horror stories of some guy buying in a market he knew nothing about and believing the value some turnkey company placed on the property, and overpaying by thousands (big deal in a sub $100k market).
Not trying to scare you away from the idea, but you have to do your due diligence. It's going to take time, visits to the market, building a team, research, etc. You may already have most of that for the Sacramento region since you're from here, but you're starting from scratch in a market out of state. Much more likely to make a mistake and buy in the wrong area and overpay if you don't do the proper research.
I generally only recommend to more seasoned investors, but it can definitely be done. But with a hot market with long-term potential so close to home, why bother?
I guess I have been reading too much about out of state investing and got tempted. Now that I think about it, I am not comfortable at all doing out of state investing.
@Wes Blackwell would you be able to share a bit of certain areas of Sacramento nowadays? I am interested in class B neighborhood. What area would you recommend?
your fear is well founded. Just search on BP for appreciation vs cashflow for lots of discussions pertaining to this topic.