New to investing- different state

Member since 2022 · 10 posts · 14 votes

I've read all the reads. I've searched all the search. I have obsessed on the obsess. I am paranoid to take the dive. All the what ifs. All the potential disasters. All the nail biting.

So tell me... what would you have told yourself your very first time buying out of state? What would you have done differently? Would you please feed me some knowledge and positive vibes?! I've got one toe in the water. I need to jump on in!

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Luke CarlPro Member

Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes

A constant drum beat of pessimism will drown out any triumphant song

Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
4y
A constant drum beat of pessimism will drown out any triumphant song
Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
5 Reply
Alicia MarksPro Member
Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes
4y
Keep a regular point of contact with your property manager.Set alerts on google for the area as well as weather alerts. It helps you keep track of important things that may affect the area. If you are using a PM and check in with them regularly, they know there is a level of accountability you will hold them to, which makes things less likely to slip through the cracks.
[email protected]Podcast Guest on Show #204
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Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Luke Carl:

A constant drum beat of pessimism will drown out any triumphant song

Ugh. So true and wise! It is a scary thing! But if what you're doing doesn't work you need to try something new, right?! Thank you so much for this! I needed to hear that!
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Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Alicia Marks:

Keep a regular point of contact with your property manager.Set alerts on google for the area as well as weather alerts. It helps you keep track of important things that may affect the area. If you are using a PM and check in with them regularly, they know there is a level of accountability you will hold them to, which makes things less likely to slip through the cracks.

Are the PMs that deal with STRs?!
and google alerts?! So much knowledge there! I'll look more into both of these! Thank you!
1 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
4y
It's all about the numbers. If you find a good one put it under contract with contingency clauses. Then really analyze it, get it inspected etc.
This will give you time to back out if it doesn't make sense.
Start making offers!
2 Reply
Scott AllenBusiness Member
Real Estate Agent · Columbus, OH · Member since 2020 · 449 posts · 471 votes
4y
@Angela Jones
Sounds like analysis paralysis.
Do your research but always keep it simple and get your feet wet.
[email protected]614-698-1227
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Alicia MarksPro Member
Fort Worth, TX · Member since 2020 · 1k+ posts · 2k+ votes
4y
There are PMs that do short term management but the percentage fees really vary by location. I've seen 10% on the very low end up to 50%. 25% has been common in my search.
[email protected]Podcast Guest on Show #204
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Michael BaumPro Member
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
4y
Hey @Angela Jones. Welcome to the forum! Yes, things can get hectic when you are trying to decide what to do. We live WA state and bought our lake house Idaho. I will say that I grew up there so I was very familiar with the area and had a good real estate agent.
And that brings me to a good point, get a good real estate agent in the area you are interested in. Someone who is savvy in real estate investing and STR's specifically. They will be the best resource in your search.
Spend time on VRBO and AirBNB looking at areas to check the rental market. Is there a lot of inventory? How's the nightly rate vs purchase price? Occupancy? That is real time info that can help make decisions. That will help narrow down the area you want to invest in. Do you want to use the place occasionaly? Strictly a profit investment? We use ours but it is making money for us!
Don't get too caught up in your own head. Bounce deals off us here! Many folks on here have knowledge that they share willingly!
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Chris Anderson
Member since 2021 · 18 posts · 3 votes
4y
I think the first step is just jumping in. If you have done your research and DD, then you should be ready. The first purchase is the hardest and scariest.

Make sure your cash flow covers all your expenses including vacancy and cap ex and repairs. If it does, you should be good. Your first property doesn't have to be a home run, hit the ball first...
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Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @John Underwood:

It's all about the numbers. If you find a good one put it under contract with contingency clauses. Then really analyze it, get it inspected etc.
This will give you time to back out if it doesn't make sense.
Start making offers!

Yes! I've been using all the BP tools and airdna. I will have to look closer since it's been on the market for awhile. I think that's my biggest mental block. Why? It's too good to be true. I need to dig deeper! Thank you!
1 Reply
Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Michael Baum:

Hey @Angela Jones. Welcome to the forum! Yes, things can get hectic when you are trying to decide what to do. We live WA state and bought our lake house Idaho. I will say that I grew up there so I was very familiar with the area and had a good real estate agent.
And that brings me to a good point, get a good real estate agent in the area you are interested in. Someone who is savvy in real estate investing and STR's specifically. They will be the best resource in your search.
Spend time on VRBO and AirBNB looking at areas to check the rental market. Is there a lot of inventory? How's the nightly rate vs purchase price? Occupancy? That is real time info that can help make decisions. That will help narrow down the area you want to invest in. Do you want to use the place occasionaly? Strictly a profit investment? We use ours but it is making money for us!
Don't get too caught up in your own head. Bounce deals off us here! Many folks on here have knowledge that they share willingly!

Thank you so much! We really haven't done str's before. We use them all the time though! I see the value in places that are neglected. We have accidentally flipped a few places and thought "hmmm... well, maybe since gravity is pulling us in this direction, maybe we should just go with the flow?" BUT... I'm nervous! We have 4 kids. We have pulled the short stick more than once. We've learned a lot but really aren't fans of the hard lessons. I love to chat and get ideas and learn from people so experienced! Thank you so much!
2 Reply
Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Chris Anderson:
I think the first step is just jumping in. If you have done your research and DD, then you should be ready. The first purchase is the hardest and scariest.

Make sure your cash flow covers all your expenses including vacancy and cap ex and repairs. If it does, you should be good. Your first property doesn't have to be a home run, hit the ball first...

Yes! I love that! I'm going to go home after work and make my husband read all these! Just as paralyzed as I am- he is even worse!
Step by step! I will do my DD! For sure! Thank you!
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
4y
@Angela Jones
forget mindset for a second. there is way too much focus on it on BP.
do you already own a primary residence, or do you rent?
do you have 6-12-18 months of savings for living expenses?
do you have a down payment for an investment property?
do you have reserves for an investment property?
are you pre-qualified for a loan?
are you working with an agent?
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Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Nicholas L.:

@Angela Jones
forget mindset for a second. there is way too much focus on it on BP.
do you already own a primary residence, or do you rent?
do you have 6-12-18 months of savings for living expenses?
do you have a down payment for an investment property?
do you have reserves for an investment property?
are you pre-qualified for a loan?
are you working with an agent?

We just sold our primary.
We have 6 months savings.
We have a down payment for investment (str hoping), but we are also both veterans so we are planning on purchasing zero down for our next home (house hack hoping).
We do have reserves- small, but it's there.

We are about a month out from pre-qual for our primary. We don't know exactly where we are moving and are open within reason. We are holding off for another month just so it doesn't expire and gives us time to find where home will be. As far as qualifying for an investment- I have no idea how second mortgages work. I've been reading a lot but wouldn't be against buying a str first and getting that underway prior to a primary. I know it seems backwards but we really have no idea where we are moving yet.
I have contacted a few agents in some locations for where we may move- keeping them informed we are considering but not set in stone. I have also reached out to one regarding a str that we are considering in a state we are not going to use as our primary.

we are really in a position where anything is possible and trying to make sure it sets us up for success. We don't have very supportive families so that isn't a problem for us either. We really are our own people... we just need guidance on how to kick start this adventure and become financially free.

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
4y
@Angela Jones
just to make sure I understand - you're going to move, but you don't know where yet? and you want it to be a market that you can also invest in?
great job reaching out to different agents - that seems smart to me
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Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Nicholas L.:

@Angela Jones
just to make sure I understand - you're going to move, but you don't know where yet? and you want it to be a market that you can also invest in?
great job reaching out to different agents - that seems smart to me

Yes! Moving... no idea where 😂. We also want to invest but it doesn't have to be in the same market we live in. We are gypsy-like lol
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
4y
@Angela Jones got it! Well... my recommendation is always to start investing where you live, or a couple hours away, not because you can't invest long distance, but just because it's easier to get started when you can go to REIA meetings in person, network in person, meet agents in person, view houses in person, etc.
So, can you live in Phoenix and Hawaii and invest in Ohio? Sure. It's just harder as a beginner. Check out Spencer Cornelia's BP podcasts as a really nice case study. I believe he was living in Las Vegas and starting up in Cincinnati.
So - your move - where do YOU want to live?
1 Reply
Angela Jones
OP
Member since 2022 · 10 posts · 14 votes
4y
Quote from @Nicholas L.:

@Angela Jones got it! Well... my recommendation is always to start investing where you live, or a couple hours away, not because you can't invest long distance, but just because it's easier to get started when you can go to REIA meetings in person, network in person, meet agents in person, view houses in person, etc.
So, can you live in Phoenix and Hawaii and invest in Ohio? Sure. It's just harder as a beginner. Check out Spencer Cornelia's BP podcasts as a really nice case study. I believe he was living in Las Vegas and starting up in Cincinnati.
So - your move - where do YOU want to live?
I totally get that! And if we find "home" first then that is how we will do it! For sure! I will definitely put those on my listen list! I have sooooo much more to learn lol!

We are open to where but preferably west coast because that is what we are accustomed to. Those prices though 🤢 thank heavens they are dropping!
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William Anderson
Rental Property Investor · Mississippi Gulf Coast · Member since 2022 · 206 posts · 168 votes
4y
Angela, your fear of investing at a distance is very common. Speaking as someone who has often invested many states away and in Europe as well, it comes down to making the right choices. There are two major hurdles, finding the property that will cash flow and finding a good property manager who will keep it rented and maintained.
You need a real estate agent who specializes in income property. I am speaking of an agent who actually owns investment property and understands all aspects including how to analyze it for profitability. Interview the agent in person or phone. Ask for references, call the references.
When you have nailed down a good agent, ask the agent to refer to you a good property manager. Real estate agents are the best sources for this information. For example, I work on the Mississippi Gulf Coast. The state requires property management companies to be affiliated with a licensed real estate broker. Essentially the brokers license helps to protect you in the sense that there is something on the property managers side at risk. It's not likely they will refer you to a poor manager.
Now that you have your real estate agent and property manager in place, it's time to go shopping. Set your goals e.g. one single family home in an area that can bring in 20% COC. Determine the amount you can spend for the purchase, closing costs and furnishings. Run your numbers and you will know how much house you can afford. There is much more to this as you probably know from the forum.
I ask my real estate agent to drive by the property about every six months just to look at the outside. This helps as a double check on the property manager.
The Mississippi Gulf Coast is a great place for an STR. We have an all year market because of our beaches and 12 casinos. In fact, we get many visitors from Texas. Prices are among the lowest in the country. The cost of gas about as low as Texas but our property taxes are far lower than Texas. I own several STR's that all generate impressive income. I am part owner in a property management company so I know that the property manager is taking good care of mine and their clients properties. Good luck
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
4y
@Angela Jones
We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊
[email protected]248-209-6824
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Wale LawalBusiness Member
Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
4y
@Angela Jones
Investing out of state requires specific attention to various factors like understanding the local market, cap rates, rents and other critical information.

Do market analysis on current rents, potential rents, appreciation, etc.

You need a team of local professionals like property managers, contractors, agents etc.

A local Investor-Agent can help shorten your learning curve and save you a lot of headaches as they tend to understand the market better.

Dos and Don'ts
Buy in an area with some similarities to the area where you live, such as climate, demographics, or property age so that you have some idea of what you're dealing with.

Don't buy a high-risk property. Buy in a primarily owner-occupied neighborhood to attract tenants who are a lower economic risk. A high-quality property will typically have less maintenance and upkeep, he notes. "These properties also rent more quickly, as they usually have modern layouts and an adequate count of bedrooms and bathrooms."

Finally, as mentioned earlier, it's crucial to build a great network of professionals to help you and to occasionally visit your property yourself.
All the best!
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Lucie Tighe
Property Manager · Tampa, FL · Member since 2022 · 147 posts · 66 votes
4y
Make the plunge. It might just all work out great, and you are worrying about something that will never happen. The most important step is to decide. If that's what you wanna do, do it. After that, everything is "figureoutable" ;) You got this!
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Aj Parikh
Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
4y
When I decided to invest out of state, I chose a property under 100k so the downpayment would be under 25k with all the closing costs. The reason of choosing that budget was that I wasn't sure about the state and area I was investing in. If the investment didn't work out, 25k was not a huge amount to be worried about and I could make that money back in 2 years. But real estate is also very forgiving. Eventually most of the properties end up working out. I worked with a turnkey company to get started out of state and I would go with the same strategy if I had to do it again. Let me know if you want to connect and chat!
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
4y
Quote from @Angela Jones:

I've read all the reads. I've searched all the search. I have obsessed on the obsess. I am paranoid to take the dive. All the what ifs. All the potential disasters. All the nail biting.

So tell me... what would you have told yourself your very first time buying out of state? What would you have done differently? Would you please feed me some knowledge and positive vibes?! I've got one toe in the water. I need to jump on in!

If you follow the punch list below, you'll probably limit 99% of the out of state investing mistakes I see newbies make.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area.
- 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.
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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
4y
All of my STRs are 1100 miles away from me. I self managed for several years. I got sick of it around 2009 and hired a PM. Then I bought the PM. ;)
Self manage if have TIE. Time, Energy, and Interest. It sounds like you do. If you don't have one or more of these, hire a PM or don't buy a STR.
[email protected]806-672-7102
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