Out of state investing

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James Mcsweeney
Denver, CO · Member since 2020 · 112 posts · 95 votes
5y

Investing out of state can be difficult when first starting out, if you want the good deals. You can do turn key properties by going with a turnkey provider, just make sure to do your research. Theyll do everything for you, it's really easy. The downside is you wont learn as much. I highly recommend investing locally first, the learning process is priceless. I personally manage locally and invest out of state, so the experience is valuable.

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  • Tracy StreichPro Member
    Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
    5y

    @Hosmar Martinez Find a good Property Manager in the area you want to invest.  If they do not help with purchase they will know someone who can help.   The PM will have a better idea of what the property will really rent for.   Many times a one off agent will just tell you what you want to hear to get their 3%  Good Luck

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  • Lam N.
    Rental Property Investor · Troy · Member since 2017 · 175 posts · 271 votes
    5y

    Good god, man, have you not been paying attention to all the people who got burned by Clayton Morris?  Out-of-state PMs are the worst.  

    Here is a specific example of how your money will just be flushed down the toilet.  There is a leak in the trap beneath the kitchen sink.  The out-of-state PM will call in a team of plumbers, each one with triple phD in plumbing.  They will charge you $150 for about 2 minutes worth of work switching out the trap or tightening it.

    I am not saying plumbers do not deserve their rates.  What I'm saying is PMs view your property as a black box.  They literally have no incentive to save you money since you're the one that's paying.  

    Here is another example.  The tenant plugged in too many things to the kitchen GFI and it popped.  The PM will send out a team of electricians, each with triple phD on electricity.  You will get charged $200 for the team of electricians to press the reset button on the GFI.

    Again, you're the one that's paying, not your PM.  Why should the PM do anything but provide you with the best people money can buy?  A small leak around the pipe on the roof will cost you $1000 for the roofer to spend 20 minutes putting in a boot.  Again, why provide anything less than the top of the line service money can buy?

    2Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    Don't just dartboard states. Make a list of places you've lived (so you generally know the market), places where you have good friends or family (boots on the ground you trust), or places you may want to live and then compare the metrics of those areas. If you just choose an area and say you want to invest there, you will get a bunch of yeahs from local agents, etc. I agree with @Lam N. that inexperienced OOS investors are flushing their money down and into PMs hands all day if they are not careful. And don't choose a state, you should be choosing small towns and cities with recognizable growth.

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  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    Make sure you find a Realtor who knows how to work with investors. I don't think there is any specific position to start. Every member of the team you are building should have knowledge and other connections for your target market. I would just make sure you know what your goals are and how the market you end up choosing matching them. @Hosmar Martinez

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  • Hosmar Martinez
    OP
    Member since 2020 · 3 posts · 2 votes
    5y

    Thank u all for the advice I will greatly consider it in my plans. From what I understood from most of this, is that it's best to have the property near me rather than so far that i must relay on other to manage MY money.

    I want to get started in investing into rentals and @Lam N. Thank u for that eye opening statement about PM's. Is there anyway we can get in contact i would like to talk to u more about my plans and see if I'm taking the right path or if I'm heading to a dead end or pit fall.

    0Reply
  • Lam N.
    Rental Property Investor · Troy · Member since 2017 · 175 posts · 271 votes
    5y
    Originally posted by @Hosmar Martinez:

    Thank u all for the advice I will greatly consider it in my plans. From what I understood from most of this, is that it's best to have the property near me rather than so far that i must relay on other to manage MY money.

    I want to get started in investing into rentals and @Lam N. Thank u for that eye opening statement about PM's. Is there anyway we can get in contact i would like to talk to u more about my plans and see if I'm taking the right path or if I'm heading to a dead end or pit fall.

     Thank you for the compliment.

    There really is no "right path" to REI. Before I got started, I seeked out plenty of advices and read a lot of info in books and online. But what I have done in the last couple years have been completely different than the advices that I was given. Why? Because of the differences in people:

    (1) Goals: everybody's got a different long term plan.  Some people want to buy and hold properties that they bank on appreciation.  Some people focus more on cashflow.  My goal is 100% maximizing cashflow cashflow cashflow.  I don't care if my properties do not appreciate.  All I care about is cashflow.  

    (2) Resources available: Unlike a lot of investors, I did not start with a lot of money.  I also didn't have a lot to show, so I've been completely self-funded.  I personally know some investors that got backings and partners.  Some investors hold their full time job while doing this on the side.  Some people like myself quit their jobs and do this full time.  

    (3) Levels of knowledge: Before I became an investor full time, I was a structural engineer.  I worked in the construction industry for a very long time.  So, I went into this already knowing a lot about renovations and whatnot.  I know plenty of investors that don't even know how to switch out a light fixture.  And that's ok.  There are plenty of ways to get to China.

    (4) Risk tolerance: Some people don't want to take any risk, some people only want to take minimal risk, some people want to take moderate risk, and some people have no problem going all in.  I happen to be on the part of the spectrum that is all in.  I have given my business all that I have.  I don't recommend this to anyone, by the way.  So, I will either swim or sink.  Most investors invest part time so they have backup plans if things go south.  I've had people wanting to partner up with me but don't want to take any risk or do any work.  I tell them all no thank you.

    The point is there are many pathways to success.  And everybody has different resources, knowledge, etc. to work with.  Not to mention the market that's available.  What works for me might not work for you.  And vice versa.

    Makes sense?

    1Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    Yes CA is a primary market and the Rent-to-Value Ratio of more than 1% is needed to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. 

    It it would be better to go to Birmingham, Atlanta, Indianapolis, St Louis, Kansas City, Memphis, Little Rock, Indianapolis, Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

    3Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Hosmar Martinez:

    I'm from CA and I don't have the money to begin investing here i want to look in to Wisconsin or Oaklahoma is this a good idea? If so, what addtional steps should I take?

    It depends on what you're goals are in investing in RE. I really like Columbus OH because it's beginner-friendly (in the sense that prices are appreciating so almost anything you buy is worth more the next month) and there is a huge tenant pool to choose renters from.

    1Reply
  • Cole Simpson
    Rental Property Investor · Columbia, SC · Member since 2020 · 302 posts · 186 votes
    5y

    Investing out of state is a really powerful tool,  I recommend David Greene's book Long Distance Investing as I think it gives good guidelines.  Overall the idea is to build a team in that market as your "boots on the ground".  You will need:

    1. A deal finder (usually an agent or a wholesaler)

    2. Property manager 

    3. Contractor 

    4. The Lender 

    This article: https://www.biggerpockets.com/...is not as detailed as the book but is still very helpful.  I wish you the best in your investment journey!

    4Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y
    Originally posted by @Lam N.:

    Good god, man, have you not been paying attention to all the people who got burned by Clayton Morris?  Out-of-state PMs are the worst.  

    Here is a specific example of how your money will just be flushed down the toilet.  There is a leak in the trap beneath the kitchen sink.  The out-of-state PM will call in a team of plumbers, each one with triple phD in plumbing.  They will charge you $150 for about 2 minutes worth of work switching out the trap or tightening it.

    I am not saying plumbers do not deserve their rates.  What I'm saying is PMs view your property as a black box.  They literally have no incentive to save you money since you're the one that's paying.  

    Here is another example.  The tenant plugged in too many things to the kitchen GFI and it popped.  The PM will send out a team of electricians, each with triple phD on electricity.  You will get charged $200 for the team of electricians to press the reset button on the GFI.

    Again, you're the one that's paying, not your PM.  Why should the PM do anything but provide you with the best people money can buy?  A small leak around the pipe on the roof will cost you $1000 for the roofer to spend 20 minutes putting in a boot.  Again, why provide anything less than the top of the line service money can buy?

    Lam, I'm not sure what the relevance of Clayton Morris is to pit of state property management. Clayton Morris is not a property manager. He was selling what was supposedly turn key properties to unsuspecting out of state investors. Morris Invests problems went far beyond over charging on maintenance. They were selling D class properties and passing them off as C class or better and not doing the rehab that they said they were doing even though they charged the buyers for it. 

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Hosmar Martinez:

    I'm from CA and I don't have the money to begin investing here i want to look in to Wisconsin or Oaklahoma is this a good idea? If so, what addtional steps should I take?

     Have you considered house hacking? You can put as little as 3% down on a multifamily property. That is what I did here in Columbus, Ohio to get started.

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  • Hosmar Martinez
    OP
    Member since 2020 · 3 posts · 2 votes
    5y

    @Lam N. It does make lots of sense, but I'm not afraid of risk either i know that whatever I put in i may lose. But like wise I don't want to have partners in business. I would tho like to be more self funded is there anything that u have read like a book or web site that  you recommend that could offer a better in sight to doing so?

    0Reply
  • Ronnie Galindo
    Realtor · Napa, CA · Member since 2018 · 112 posts · 77 votes
    5y

    @Hosmar Martinez, don't let neigh-sayers get you scared! Education and knowledge can make out of state investing less risky. Could you get burned, yes. Could you pay more money than you should, yes. Will it be worth it in the end because you will learn lessons that will follow you and help you overall get to financial freedom, YES! I am not saying be naïve and just throw your money away, but if you live in a market that does not make sense for your financial position, then you may have to find another market, as others have said. With that being said, I agree with @Cole Simpson, reading David Greene's Book on out of state investing will help along with reading blog posts here on BP and attending webinars. 

    If you are serious about starting down this path, I suggest two things: 1) become a PRO member here (don't worry, I don't get any $$$ for suggesting this). The reason why I say become PRO is, you get access to all the webinars, which Knowledge=power. Also, you get the calculators. The quickest way to kill your mojo in REI is doing a horrible deal. Use the calculators to run the numbers and become confident in seeing what makes sense for you. 2) stay active here on BP and learn from those doing it! Network, don't be scared to chat with people and rack their brain to learn. Who knows, you may find a partner! Take care and good luck!

    "Those who say they can't and those who say they can are usually both right." -Will Smith!

    0Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Hosmar Martinez:

    I'm from CA and I don't have the money to begin investing here i want to look in to Wisconsin or Oaklahoma is this a good idea? If so, what addtional steps should I take?

     I would reach out to some realtors in those areas. I would pick several from each market and interview for the best. If it's a good realtor, they will be able to get you connected with all the other contacts you would need. Columbus, OH is a good market to invest in as well. 

    3Reply
  • James Mcsweeney
    Denver, CO · Member since 2020 · 112 posts · 95 votes
    5y

    Investing out of state can be difficult when first starting out, if you want the good deals. You can do turn key properties by going with a turnkey provider, just make sure to do your research. Theyll do everything for you, it's really easy. The downside is you wont learn as much. I highly recommend investing locally first, the learning process is priceless. I personally manage locally and invest out of state, so the experience is valuable.

    6Reply
  • Matt Maurice
    Property Manager · Milwaukee, WI · Member since 2014 · 113 posts · 144 votes
    5y

    I always suggest to folks that house hacking and/or investing in your local market is THE only way to get started in REI. Real estate will always be skewed to the local market expert. Investing out of state is more difficult than most folks realize. If you have a track record of vetting top-level vendors, managing regular KPI's and willing to spend countless hours to become an expert on that market... then go for it. If it's attractive solely because you can't afford a house in your local market, I'd suggest saving up a bigger down payment. Low money down out of state goes bad real quick.

    If you insist on the OOS investing model, then it all starts with your property manager.  Agents tend to be transactional, but your manager will be with you for the long haul (if they are good).  Vet them, get referrals specific to what you are trying to achieve, and be patient.  Despite what a few folks here have said, there are good PMs out there but like any vendor, the good ones are the minority.

    Sincerely wishing you the best of luck!

    2Reply
  • Jorge De Jesus
    Real Estate Agent · Houston San Antonio Dallas/Ft. Worth, TX · Member since 2020 · 5 posts · 1 vote
    5y

    @Hosmar Martinez I don’t know about those markets but if you’re interested in Houston where people are relocating in droves What I would do is be your boots on the ground, show you property and we would analyze it together. After a while, hopefully, I would analyze it and just present you the opportunity and you would say yes or no.

    0Reply
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