Long distance prices are unreal. Can they be true?

58 Replies

I went through the market place, and saw properties in Ohio as low as 12,000. Would it be in my best interest to look and invest in Ohio?

I'm not against investing out of state, but be very careful buying a house for $12k. Chances are it's in a war zone or it's a complete tear down and you're basically buying it for the parcel it sits on.

There's plenty of inexpensive properties around the country. Most of the amazement is with the majority of people in the country trying to wrap their heads around why someone in California would pay a million dollars for a house you could build new in many areas for $150,000 including the property it sits on.
There are certain parts of the country where real estate is very expensive but for most people, it's not that way. I purchased a duplex last month in Georgia for under $50,000. Not an old converted house but a property built as a duplex in 2003. Central HVAC, etc. Now we have lower rents to coincide with that but in many parts of California, if you sold a property you could reasonably expect to be able to buy 5 of the same quality and sized properties somewhere else.
No matter where you are, a $12,000 property is likely to be a money pit.

There are cheap properties around the country that make some really good cash flow. They also have high turnover, lots of Tenant problems, high eviction rates, etc.

If it were all fairy tales and rainbows, don't you think other investors would have scooped those properties up already? Check out James Wise in Cleveland. He regularly sells properties for $60,000 - $100,000 to out-of-state investors and then provides property management. He also sells a lot of homes under $60,000 that he absolutely refuses to manage because he knows how problematic they will be.

$12,000 investments are a Siren Song for amateur investors. They will lure you in with promises of easy money and then dash your brains on the rocks. I would never recommend them unless you are a very, very experienced Landlord living in the area and able to monitor them directly...and daily.

@Javier Rosales where in OH are you looking ? I’m from Cleveland and you can find plenty of houses for that price in East CLE. But you will be buying in the middle of a war zone.

Most cities in OH have similar areas so regardless of whether it’s Cleveland/Toledo/Cincinnati/etc that’s probably the case.

@Javier Rosales If you have a trusted pm, realtor, and contractor then go for it (if they all give you the green light). If not then stay away. I assume that one of those people on your team will tell you it is a trap.

Originally posted by @Javier Rosales :

I went through the market place, and saw properties in Ohio as low as 12,000. Would it be in my best interest to look and invest in Ohio?

 With the low prices of the turnkey markets also comes the highest level of risk. My recommendation is to check out The Ultimate Guide to Grading Cleveland Neighborhoods as it's the most popular turnkey market in Ohio. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides Cleveland, Ohio. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cincinnati, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

I think you get the idea by now that it's too good to be true. You need to spend at least 50k to get something half decent. If it's under that, I'd let the locals handle it.

The cost of housing varies greatly depending on location.  I suggest you look at what the average house price is and compare it to the one you are looking at.  If the average is $100K and the one you are looking at is $25K, chances are it is in need of a lot of work or is in a bad location. 

Out of state investors must rely on competent local property managers.  Every good property manager I know refuses to work with anything under the $50,000 market in my town.  Too much drama for too little reward.

I buy those "little ATM's" though....locally.  I know how to manage them and screen very diligently.  I also "pay" myself the 10% fee I would pay a PM out of the rents and still have a cash profit left afterward.  It can be done, but long distance it will be very challenging.  I do not advise it.

Hi @Javier Rosales , I would make sure you have the right team but yes, Ohio has some great investment opportunities! If the property is only $12k there's a reason, I would check into those details and see if it's a deal that still works for you! 

Originally posted by @Javier Rosales :

I went through the market place, and saw properties in Ohio as low as 12,000. Would it be in my best interest to look and invest in Ohio?

 Many people from OOS invest in Ohio where prices are low and properties meet the 1% rule. To be honest though, anything under $50,000 is either going to need a tone of renovations (which may be difficult for OOS) or they are in a really bad area. Sometimes if the price is too good to be true, it probably is.

A typical price for an SFR in the Cleveland suburbs would be about $75,000-$110,000. I would stick to that in my opinion.

@Javier Rosales ,

As others have said, be cautious.    You don't want to fall in the "Dumb money" category, where you buy off price, and then get surprised when you find out it needs $50K of work.  Even if you hire a contractor, they know you have money are a rich out of state investor.  If you chose to invest in OH, or anywhere else-- get on a plane and go see it!    What is making the area be so cheap?   Is the area really bad, gangs everywhere?     

I'm all for investing in areas where others have kind of given up, but just know-- you aren't the only one with the internet, and there's a good reason everyone else is saying "no."--- are you okay with this reason?

If you want an even cheaper house, there is one nearby  us for $11K! PM me and I can give you the details, and also why I'm not buying it.

@Javier Rosales it's important to keep in mind that if you're seeing a real estate deal in an open forum like the MLS or Zillow, so are thousands of other hungry investors and if a property has been on those sites for a while, thousands of investors likely have a good reason for passing on it.

Sometimes there are good deals to be had on the open market, but if I were you, I'd focus on putting a team of experienced and knowledgeable people together to help you identify which deals will actually pan out for you in their local market.

Happy hunting!

We invested in some areas and bought homes for $15K in indiana. The homes needed new roofs, siding, all new plumbing, windows, etc and everythign cosmetic.  If you are ready for this type of rehab and cost, you can get some good deals, but you've got to know what you are getting. 

Originally posted by @Javier Rosales :

I went through the market place, and saw properties in Ohio as low as 12,000. Would it be in my best interest to look and invest in Ohio?

 Chrissie Hynde went back to Ohio and found that her city was gone and everything was parking spots. That's probably why the house is $12k.

OK, seriously. If you don't know that market you are cruisin' for a bruisin'. I guess it all depends how much you like to lose money. 

Hey OP, I live in Toledo, OH. We do have properties that will cost 12k to purchase which usually are sold by the county land bank. Basically what they want is someone to pay taxes on land that nobody wants. The condition of those properties lead to you spending more than it will be worth to make it livable. Typically expected that these properties will get knocked down. Even once you do get the property in livable condition, it will sit vacant unless you take 100% subsidy and market rent will be low. Once it becomes vacant, you can likely expect to meet some scrappers and squatters. I am ultimately saying these properties are not worth typically worth looking at and the ones that are, are getting picked up by local investors immediately.

I bought a duplex in Ohio yesterday (I live in Maryland) in a very solid rental area, definitely not a war zone.  $40k, $800 total rents. Will make upgrades and raise rents over time. But yeah a $12k property I wouldn't touch.

I invest out of state, but 12k sounds crazy. For sure it would be worth visiting the area and checking it all out thoroughly before you make any further deliberations.

I’ve never paid 12 grand for a single family home .that is a rich mans house . I have bought them for 5500 7000 8000 as some as high as even 10000 but never that much . Your probably thinking those are dilapidated beat up uninhabitable shells in the ghetto . You’d be wrong , in fact you would likely be shocked if you saw some of these homes with no rehab work at all . Yes it’s very possible but I wouldn’t recommend you do it unless your local and have the skill set . Take James wises advice .dont buy out of state and try to play that game where so many fail at .