Out of State Investing Success

16 Replies

Tips for finding the right areas out of state to invest in, how to manage your properties, how to do research and create relationships for long-distance landloring success.

long distance land-lording is difficult and more expensive, hence reducing your return on investment. In order to overcome those obstacles you need to make it up somehow. Low acquisition prices with strong rents or development, redevelopment, job growth, population growth, low inventory etc. Management is TOUGH when it is in your own neighborhood. Long distance management can ruin your investment. If you're thinking of doing it, you should spend as much time in that area as possible. You're going to need to find trustworthy people and establish a working relationship with them. I ultimately always stay at the top of the pyramid when it comes to management, long distance or not. I personally keep an eye on things for checks and balances. In my experience, if you don't specifically state what you want and expect, you won't get it. Even if you do state it, you need to verify that it is happening. I also spot check things to keep everyone honest.

Research is pretty similar across the board. From public records, MLS, zillow, etc. Some of the computer systems in the courthouses will vary, but there is staff to help you out.

Best luck!
Mark

Linda, there was some great advice on out of state investing at the summit this weekend. I believe Josh is working on releasing the audio tapes of the sessions. You might consider picking up these tapes as they may help answer some of your questions. Good luck.

I've invested in 9 states so far.
When I find a deal in an area, I find out why someone would want to live there.
Here's one tip: Locate larger cities around the city with your subject property. Let's say Memphis TN, I would use Jackson MS, Little Rock AR, Lexington KY, Nashville TN, and maybe Birmingham AB. Once you have this list, call the 800 # for U-Haul and only ask about one location at a time.
Let's say, how much for a 10 foot truck from Jackson MS to Memphis, write down the amount and say thank you and hang up. Hit redial and do it with the rest of your city groups.
Now reverse the process, example; Call again, ask how much for the same 10 foot truck from Memphis to Jackson MS and write all the amounts down.
If it costs more to go from somewhere to Memphis, it means that people are moving into your subject city, which can mean you will have a better rental/buyer market. It also probably means that U-Haul is having to pay someone to get there and bring the trucks back. This is why it cost more going one way than the other.
Also check with the city planning department and the COC, these guys will know what companies are moving in and how many employees they'll need. This can also be an indicator that you will probably have a strong rental/buyer market in that area for the 3-5 years. It also depends on which companies are moving in and how many employees they are projecting.
Hope this helps.

PS: U-Haul makes most of their money by selling these type reports. It started with renting trucks, but the owner that died some 25 years ago found out he was sitting on a wealth of information that people would pay for. That's why U-Haul is usually cheaper. The reports are not sold under the U-Haul name, and I can't remember the company name that they're sold under. I do know that the cheapest report they sell is over $2000. The 800 # trick is a lot cheaper! And you're only interested in the one cities attrition.
If you plan to perform a search for an entire state, you might consider buying one of their reports. They may be cheaper now, I haven't checked since the late 90's. My trick has worked good for me for over 12 years.

The Uhaul story was very interesting, though it has no or should not have any credibility regarding if a city is good to invest in or not. I would think that there are other more legit with better statistics on why a place is good for investing. Still very interesting, one I have not heard before.

When the economy turned, it was just a good indicator, this way I knew if people were leaving the city or were they moving in.
Just a very small piece of the puzzle, but it has sure helped me avoid certain areas at certain times.

I have invested in 5 states and have had a good experience. It has not always been easy and I will say I've had to fire many property managers to find the ones I have now. As a California based investor, I have no choice but to venture out of state for deals. The cost of buying in California, in the areas I would feel comfortable buying in, is just astronomical. For example, I am in escrow right now on a duplex in West Los Angeles for $490,000 and that is a DEAL ! How is that for crazy... California properties make great long-term buy and holds for generational wealth but for cashflow now, there is nothing like buying out of state.

Originally posted by Curt Davis:
The Uhaul story was very interesting, though it has no or should not have any credibility regarding if a city is good to invest in or not. I would think that there are other more legit with better statistics on why a place is good for investing. Still very interesting, one I have not heard before.

Curt -

Dave Stech has been talking about this for years in his presentations, but even he says this is relatively minor indication of a markets strength. You can get the same date from most Chamber of Commerce simply asking if a market is growing or shrinking over a set period of time.

The best way, imo, (which is also what Jeff Brown mentioned) was to study the overall region on a macro level and then dive down to the micro level if the macro checks out. You always want to see what the job situation (and future job situation) is going to be as that is the biggest driver of real estate values. I've found a decent portal to be [http://ecodevdirectory.com/]

That portal can take you to the economic development team for just about any region in the country. From there you can find lots of good info about jobs, real estate, etc.

Management of course, is the second most important decision for a long distance investor. They will make or break you. To find that, you're going to have to be willing to make a trip to the market you want to invest and spend some time finding out who your team is going to be before buying anything at all. Once that is set, then you can find properties. I invest out of state and have done fine. Certainly, there have been some bumps (as with anything), but overall, I've done better than I could had I invested locally.

Linda, I do understand. I actually moved from Long Beach to Cheyenne just for real estate. Buy and holds are good there, but you have to hold. I've got one in Victorville, which I might have to dump if things don't start looking up.

I wish I could have made, but I missed the whole thing.
I was out of town taking care of some stuff.

PS: That's another bad thing with owning out of state, sometimes you might need to travel. Even though I use property managers in most places, they can have some really high estimates for repairs. Since I do all my own rehabs, it kills me to pay someone something I know I could do for a 3rd of the cost.

Originally posted by Robert Lett:
I've invested in 9 states so far.

Here's one tip: Locate larger cities around the city with your subject property. Let's say Memphis TN, I would use Jackson MS, Little Rock AR, Lexington KY, Nashville TN, and maybe Birmingham AB. Once you have this list, call the 800 # for U-Haul and only ask about one location at a time.
Let's say, how much for a 10 foot truck from Jackson MS to Memphis, write down the amount and say thank you and hang up. Hit redial and do it with the rest of your city groups.
Now reverse the process, example; Call again, ask how much for the same 10 foot truck from Memphis to Jackson MS and write all the amounts down.
If it costs more to go from somewhere to Memphis, it means that people are moving into your subject city, which can mean you will have a better rental/buyer market. It also probably means that U-Haul is having to pay someone to get there and bring the trucks back. This is why it cost more going one way than the other.

Pretty clever thinking

Linda- I've had good success buying out of state for many years. I do it a bit OCD, though. I've actually moved to AZ twice, UT twice and Fl, TX, CO and OR once to buy real estate. I told you I'm nuts! Currently in AZ for 2 months and then back to UT, where I'm currently building 3 homes. Most can't do this, or wouldn't want to, but for me, it works. Rich
p.s. I hire or train all mgmt people.

Rich said:
I've actually moved to AZ twice, UT twice and Fl, TX, CO and OR once to buy real estate. I told you I'm nuts! Currently in AZ for 2 months and then back to UT, where I'm currently building 3 homes.

Wow, I fly out for a few weeks from place to place with my tools to do flips and I thought I was nuts! Or at least that's what I've been told. So far, just CA, FL, NC, SC, and well WY. WY was when I wasn't living there. I finally had to move to WY due to my wife was missing me, I'm not sure why. Lol.

Owning for out of state can be a challenge, but rewarding as well. A lot of the advice here is on point. Expenses will be higher if you are investing in SFRs or small multis. Never plan on getting more than 50% of gross rent as income. Management can run 10% and leasing can cost 1 months rent. Maintenance will run 10% at least. Vacancy can be a big factor if your manager is not good a marketing. I have managed to sidestep some of this by buying rehabs at a great deal, fixing them and then lease optioning them. This gets me good tenant-buyers that are in place for 2 years or more and they take care of the property. Good luck and feel free to contact me for advice at any point

Thanks everyone, as a publisher of a real estate investment magazine, I"m always looking for new ideas for articles that help long distance landlords, i got some great ideas from you all.

Thanks,
LInda Pliagas