Invest in my own backyard or another state?

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Invest in my own backyard or another state?

Chelsea Price
Homeowner · DMV · Member since 2023 · 28 posts · 25 votes

Hi! New to this site as well as investing. I recently inherited $200,000 cash and thinking about investing in a STR. I live 24 minutes from the White House and within a 3 hour radius from many viable tourist area options. However, beach towns down south that I would have to fly to if I wanted to check on my property are really pulling at my heart strings. What say you? Invest in my own backyard since I'm new at this or go grab my " cheeseburger in Paradise"?




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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
3y

Invest locally. It reduces your risk greatly, no matter where you are located.

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  • Lauren Kormylo
    Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
    3y

    Chelsea, just so you know, most of your hospitality to guests will be through texts, with an occasional phone call. Guests generally prefer not to meet hosts in person. I also recommend joining Facebook groups for STRs, both national Airbnb/VRBO focused, and local groups to your area. You’ll learn a lot about problems and how to handle them.  

    3Reply
  • Chelsea Price
    OP
    Homeowner · DMV · Member since 2023 · 28 posts · 25 votes
    3y
    Quote from @Lauren Kormylo:

    Chelsea, just so you know, most of your hospitality to guests will be through texts, with an occasional phone call. Guests generally prefer not to meet hosts in person. I also recommend joining Facebook groups for STRs, both national Airbnb/VRBO focused, and local groups to your area. You’ll learn a lot about problems and how to handle them.  

    Good advice, thank you!
    1Reply
  • Cassidy BurnsBusiness Member
    Investor · Alexandria, VA · Member since 2016 · 860 posts · 460 votes
    3y

    I prefer to invest locally first, and then once experienced you can start moving outside of driving distance.

    good luck!

    [email protected]540-960-1507
    2Reply
  • Jeffrey Reyes
    Member since 2023 · 43 posts · 20 votes
    3y

    If you want to invest in a STR in the DMV area , I'd go with the Virginia area. It's more diverse, close to the nations capital, nearby airports, very diverse, etc...

    I'd stay away from Washington D.C because the STR regulations seem a little complicated and Maryland I believe doesn't bring in too much traffic. But that'll also depend on how unique your property stands out from the others and the exact area.

    With $200k you can invest in multiple properties.

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Jeffrey Reyes:

    If you want to invest in a STR in the DMV area , I'd go with the Virginia area. It's more diverse, close to the nations capital, nearby airports, very diverse, etc...

    I'd stay away from Washington D.C because the STR regulations seem a little complicated and Maryland I believe doesn't bring in too much traffic. But that'll also depend on how unique your property stands out from the others and the exact area.

    With $200k you can invest in multiple properties.


     a) What do you mean by diverse...?

    b) I believe the OP only wants to use cash and not carry a loan. Not sure her reasoning is sound, but that's what she wants.... :-)

    2Reply
  • Matthew DrouinPro Member
    Developer · Rochester, NY · Member since 2016 · 411 posts · 339 votes
    3y

    @Chelsea Price

    If your goal is to find enjoyment in this venture and meet people then your own backyard would be probably ideal.

    Attractive areas in DC that are popular for tourists and business travelers would be have good for demand year round.

    And then hopefully, if it makes money, you can reinvest that cashflow into traveling to your beach town and pay for your travel there.

    The biggest mistake I see most STR operators do is they buy in far away places that they like to travel to with the idea that they will use it for themselves and then rent it out.

    I think the better option is buying an investment that pays for your travel to whether you want to go that you can have the optionality of going wherever you want when you get the travel itch.

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    1Reply
  • Jeffrey Reyes
    Member since 2023 · 43 posts · 20 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Jeffrey Reyes:

    If you want to invest in a STR in the DMV area , I'd go with the Virginia area. It's more diverse, close to the nations capital, nearby airports, very diverse, etc...

    I'd stay away from Washington D.C because the STR regulations seem a little complicated and Maryland I believe doesn't bring in too much traffic. But that'll also depend on how unique your property stands out from the others and the exact area.

    With $200k you can invest in multiple properties.


     a) What do you mean by diverse...?

    b) I believe the OP only wants to use cash and not carry a loan. Not sure her reasoning is sound, but that's what she wants.... :-)

    A) Racial Diversity

    B) Oh okay, I understand that. Although, me personally thats the way I would do it. Its not bad thing to have to take out a loan. 

    Also, if owner wants to invest in a property out of state, you'll most likely have to hire a STR property manager

    1Reply
  • Chelsea Price
    OP
    Homeowner · DMV · Member since 2023 · 28 posts · 25 votes
    3y

    “b) I believe the OP only wants to use cash and not carry a loan. Not sure her reasoning is sound, but that's what she wants.... :-)”


    Today I emailed a real estate agent with some of my investment questions. They can explain to me the pros & cons of cash vs loan. Until I hear back from them my “reasoning” is that I don’t have a job. Haven’t had one in several years. So my assumption is a bank wouldn’t loan me the balance anyway. If they did, I’m sure it would be for a crazy high interest rate and then I’d have a mortgage hanging over my head with no job and no guarantee that my rental would cover it each month plus a profit. So that’s where I’m coming from. I understand the concept of making my debt work for me but I don’t think I have that type of circumstance. A good agent can guide me if my assumptions are incorrect. 

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Chelsea Price:

    “b) I believe the OP only wants to use cash and not carry a loan. Not sure her reasoning is sound, but that's what she wants.... :-)”


    Today I emailed a real estate agent with some of my investment questions. They can explain to me the pros & cons of cash vs loan. Until I hear back from them my “reasoning” is that I don’t have a job. Haven’t had one in several years. So my assumption is a bank wouldn’t loan me the balance anyway. If they did, I’m sure it would be for a crazy high interest rate and then I’d have a mortgage hanging over my head with no job and no guarantee that my rental would cover it each month plus a profit. So that’s where I’m coming from. I understand the concept of making my debt work for me but I don’t think I have that type of circumstance. A good agent can guide me if my assumptions are incorrect. 


    You will have a job. You are going into business and your new job is running a rental property business. Some banks will even loan using the projected income as your income basis. If you use the $200k to buy several properties, you will have the same job but with a much larger income (and a much larger debt of course).

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y
    Quote from @Jeffrey Reyes:

    A) Racial Diversity

    B) Oh okay, I understand that. Although, me personally thats the way I would do it. Its not bad thing to have to take out a loan. 

    Also, if owner wants to invest in a property out of state, you'll most likely have to hire a STR property manager


    a) Explain why just simply racial diversity is always a good thing? I would suggest that only a good racial diversity is a positive. But that's probably what you meant...it just sounds like you're throwing out buzz words...

    b) I agree with you 100%.... Use that money to get OPM, then let it work for you...

    0Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    You have been given outstanding advice thus far. I know it sounds sexy and very cool to say you have zero debt but as people mention, it can extensively be used to your advantage. I assume you study a lot of Dave Ramsey. I do understand your situation and the notion you may not qualify for a loan, still, people were explaining how carrying the debt on it may be more beneficial. All forms of REI is risky and if you sink 200k into something like that and it goes south, it sucks. Also, by giving up that degree of capital, you have to evaluate the return you get on it. If you drop 200k but you are pulling in maybe 1 percent you would be much better off with a mutual fund. Someone mentioned shady lawyers; that is also another thing you may want to consider. People love to find others with that kind of equity and sue the hell out of them with bogus or loosely liable type ambulance chasing suits. When you have little to no equity many wont bother. As a new investor I feel you are doing the right thing. Keep asking questions and evaluate everything. Take your time and dont just run with something. Currently, the buzz word is STR. Just query this site. Everyone and their Momma wants STRs. Millions of people wake up daily and declare themselves STR operators. It's a great gig but it depends on so much. Because millions of people jump in this asset class all over the place it's over saturated. It's a high failure rate as well. Open yourself up to other approaches, not just one. I do STRs in addition to many other forms of investing. It's a marathon not a sprint so you can take your time. Either way I wish you the best. This is a great place to be because no matter what you ask, someone here has or is doing it! I'm from the DMV as well!

    2Reply
  • Chelsea Price
    OP
    Homeowner · DMV · Member since 2023 · 28 posts · 25 votes
    3y
    Quote from @Mark Cruse:

    You have been given outstanding advice thus far. I know it sounds sexy and very cool to say you have zero debt but as people mention, it can extensively be used to your advantage. I assume you study a lot of Dave Ramsey. I do understand your situation and the notion you may not qualify for a loan, still, people were explaining how carrying the debt on it may be more beneficial. All forms of REI is risky and if you sink 200k into something like that and it goes south, it sucks. Also, by giving up that degree of capital, you have to evaluate the return you get on it. If you drop 200k but you are pulling in maybe 1 percent you would be much better off with a mutual fund. Someone mentioned shady lawyers; that is also another thing you may want to consider. People love to find others with that kind of equity and sue the hell out of them with bogus or loosely liable type ambulance chasing suits. When you have little to no equity many wont bother. As a new investor I feel you are doing the right thing. Keep asking questions and evaluate everything. Take your time and dont just run with something. Currently, the buzz word is STR. Just query this site. Everyone and their Momma wants STRs. Millions of people wake up daily and declare themselves STR operators. It's a great gig but it depends on so much. Because millions of people jump in this asset class all over the place it's over saturated. It's a high failure rate as well. Open yourself up to other approaches, not just one. I do STRs in addition to many other forms of investing. It's a marathon not a sprint so you can take your time. Either way I wish you the best. This is a great place to be because no matter what you ask, someone here has or is doing it! I'm from the DMV as well!


     All very well said, Mark! And yes, I adhere to Dave Ramsey’s 7 steps all day every day. 😂👍🏾 You made many great points that I’m going to give serious thought to. Didn’t know a mutual fund could be more lucrative than tangible real estate.
    Whatever path I choose, I just want the 2k to honor my grandfather. It’s only because of the sweat of his brow as a humble mailman that I inherited this money. 

    Your Takoma Park neighbor,

    Chelsea 

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    3y

    @Mark Cruse Not only good solid advice (as usual) but funny too  ;-)

    @Chelsea Price 1% is not an admirable goal. Mark was saying (I believe) that if you're gonna have a poorly run RE asset, you might as well just throw your money in a MF.

    I believe you would honor your Grandpa's memory better by being smart with his money. Just my .02 of course, you do what you want.....but best wishes!

    2Reply
  • Lensdarly Dieujuste
    Member since 2023 · 14 posts · 7 votes
    3y

    You want to know something funny Chelsea? I work remotely and and it doesn't matter if I was the Govonor of New York and my entire family lineage was buried within state lines allll the way back from the B.C Era; I still would have chosen the best REI opportunity the world has ever known. So to answer your question, the emotion I felt from FOMO pulled on my heart strings more vibrantly than my consideration for my current backyard.

    0Reply
  • Mark Cruse
    Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes
    3y

    Thanks Bruce, I couldnt have said it better! 

    @Chelsea Price hey there, do I know you from the old neighborhood? 

    Just as Bruce said, no one wants a poor performing asset. Fact is, there is zero shortage of thousands of real estate investors who are now under water or all out collapsed. If you are losing money every month (which so many are) in addition to all the work and hours you put in, on top of the headache it means you are wasting time. You are making nothing and creating debt. Ramsey would not like that lol. Without question, a high yield mutual fund, CD, dividend stock or whatever could be pulling in awesome cash flow off 200k without you doing anything. People whose projects have collapsed, they have lost tens of thousands of dollars with nothing to show. Nearly all forms of real estate is risky on varying levels. If you ask me if Id rather work my azz off and make nothing (or lose it all) or have a fund giving me decent profit, Im going to opt for the latter. Its just how it is. So many come in believing this stuff is an easy get rich quick gig which is a false premise and primary reason so many fail. As stated, just take your time and determine what you want to do. STR is ok but its so much more out there. Check em all out and make Grand Pa smile up there!

    1Reply
  • Chelsea Price
    OP
    Homeowner · DMV · Member since 2023 · 28 posts · 25 votes
    3y

    Great input, @Mark Cruse. Thank you. No, I don’t think we know each other. I just moved here in 2017. 

    1Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    3y

    Try first one in your own backyard, so you can learn hands-on.

    Then, you'll be better prepared to invest OOS.

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    1Reply
  • Jeffrey Reyes
    Member since 2023 · 43 posts · 20 votes
    3y
    Quote from @Bruce Woodruff:
    Quote from @Jeffrey Reyes:

    A) Racial Diversity

    B) Oh okay, I understand that. Although, me personally thats the way I would do it. Its not bad thing to have to take out a loan. 

    Also, if owner wants to invest in a property out of state, you'll most likely have to hire a STR property manager


    a) Explain why just simply racial diversity is always a good thing? I would suggest that only a good racial diversity is a positive. But that's probably what you meant...it just sounds like you're throwing out buzz words...

    b) I agree with you 100%.... Use that money to get OPM, then let it work for you...

     A) What I meant was that there are people of all kinds of races and cultures in the area. So it gives you the opportunity to try out all sorts of new things and meet all kinds of people. 

    2Reply
  • Alex Deacon
    Investor · Pittsburgh, PA · Member since 2015 · 1k+ posts · 1k+ votes
    3y

    @Chelsea Price  The challenge is if you live in an area where the prices are so high it can be difficult to buy because the barrier to entry is too high or the cash flow is nonexistent. Sometimes you need to expand your boundaries. I am a firm believer in knowing your market and that's easier if its close to home. I have helped hundreds of out of state investors here in the Pittsburgh PA market. Its not an easy task especially now with the high demand and low inventory.

    1Reply
  • Gary Swank
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 822 posts · 255 votes
    3y

    Your backyard might be more difficult to invest in especially STR. The price point in DC is obviously higher than other outside areas. But I wouldn't discount certain beach town price points either. For example, in Rehoboth Beach, real estate is very pricey. With that said, in general, try looking at other less saturated markets, talk to the locals, zero in on specific properties, calculate costs especially the added-on ones if deciding to OOS invest and run your numbers again and again till you find a lucrative opportunity. Best of luck to you....Gary

    0Reply
  • Sara Frank
    Realtor · Baltimore, MD · Member since 2020 · 255 posts · 182 votes
    3y
    Quote from @Chelsea Price:

    Hi! New to this site as well as investing. I recently inherited $200,000 cash and thinking about investing in a STR. I live 24 minutes from the White House and within a 3 hour radius from many viable tourist area options. However, beach towns down south that I would have to fly to if I wanted to check on my property are really pulling at my heart strings. What say you? Invest in my own backyard since I'm new at this or go grab my " cheeseburger in Paradise"?





    Depends on what your priority is. If you want true "passive" income, airbnbs/STRs are NOT it, they can be a full time job. I highly suggest staying local for your first deal, it will be far less stressful than making the long term thing work. When it goes well and you learn the ropes, then branch out into your dream beach town. An option I would consider is a midterm rental in the DMV area, it's less management than a STR but affords you more cash flow than long term. Theres a lot of demand for ~90 days-6 month rentals due to hospitals and gov't positions. Plus its good training wheels for your beach house STR

    1Reply
  • James Carlson
    Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    3y

    @Chelsea Price

    Welcome! And congrats on the nice position you're in. First off, you can't make a mistake so big that it will hurt you. (I think some new investors get hung up on not looking like a fool by making a "big mistake.") It's really just a matter of weighing the priorities.

    I like investing in our backyard. We have medium-term rentals in Denver and Colorado Springs, both cities where we've lived and where we work in real estate already. We know it well, we can manage it better ourselves.

    That said, investing in a beach town has a lot of allure. For instance, despite what I said above, Erin and I are also buying a home in Mexico where we love to vacation. So it's part rental, part personal interest. (We're either going to do an Airbnb/short-term rental or a midterm rental there.) We're willing to do a little more work to manage from afar because we want to have a place to visit in a beach town.

    Is this going to be your one and only investment? If so, choose what matters to you most -- beach town STR with maybe a little more work, or hometown with no beach but maybe easier to understand the market and manage.

    That's not a definitive answer, but I hope it helps. Wish you the best. 

    0Reply
  • Austin Gardner
    New to Real Estate · Louisville, CO · Member since 2017 · 1 post · 0 votes
    3y

    We've invested in a STR cabin in the Smoky Mountains, about 4 states away from where I live.

    I'm set up on AirBnb/VRBO and have our own site.

    I have a strong network (thanks to My Short Term Shop) of contractors to help. It's totally do-able to do remotely, and I rely heavily on my cleaners, maintenance, and contractors. I've also gone 2x in the last 6mo to do work on the rental and meet contractors face-to-face.

    0Reply
  • Michael BaumPro Member
    Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
    3y
    Quote from @James Carlson:

    @Chelsea Price

    Welcome! And congrats on the nice position you're in. First off, you can't make a mistake so big that it will hurt you. (I think some new investors get hung up on not looking like a fool by making a "big mistake.") It's really just a matter of weighing the priorities.

    Ok, so I disagree with not getting hurt. There are a lot of ways to go bankrupt investing in real estate. You can get hurt real quick by not planning.

    Maybe I am misunderstanding this comment.
    0Reply
  • Cassidy BurnsBusiness Member
    Investor · Alexandria, VA · Member since 2016 · 860 posts · 460 votes
    3y

    @Chelsea Price I truly believe owning property in the DMV and more particularly in Washington DC and some locations in Northern VA will be one of the most valuable and stable assets in our portfolio long term.

    This question is very situation dependent, but I'd recommend allocating that $200,000 over 2 different assets.  New primary residence (again depending on your living / lifestyle situation) with 5% ($25,000- $50,000) down and then a $400,000 investment property with 25% down ($100,000).  

    Keep the remaining $50k as a reserve fund.  Hope this helps.

    Best of luck.
     

    [email protected]540-960-1507
    0Reply
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