Buying out of state rental properties

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Buying out of state rental properties

Daniel Pierson
Investor · San Francisco, CA · Member since 2015 · 75 posts · 25 votes

Hi Everyone, I'm just getting started on my investing path, and I've decided to seriously consider looking at single family rental properties out of state.  I know there's some extra risk involved with this route, but as a resident of Los Angeles, I've decided it's the only way to go. I'm wondering if anyone has purchased an out of state property as their first investment and 1)how they identified the right location and 2) any other general advice, success or pitfalls they encountered. 

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Wayne Prentiss
Investor · Bellevue, WA · Member since 2013 · 22 posts · 9 votes
11y

Great topic, with a lot of great responses already. If I could add one thing, I'd recommend you focus on picking the right market first. Some suggestions based on our experience:

  • Step 1: Focus on picking, then investigating 3-5 markets (it is really difficult to go deep enough on more than that and you'll likely just be in analysis paralysis). I'd recommend your first pass is based on ability to find units with rent-to-value ratios that are solid.
  • Step 2: Use jobs and economic growth to narrow down to 2 markets. Use sites like http://www.city-data.com/ to look at detail...
  • Step 3: Build some contacts in those 2 markets. Start with finding 2-3 property managers that are a) interested, b) have good references, b) have an opinion on what you should do. Many turnkey providers have in-house property management, I wouldn't just rely on that (based on experience they can be fantastic or below-average).
  • Step 4: Go visit! Use your contacts in Step #3 to get some properties/neighborhoods lined up. Spend time with at least 2 groups to get different opinions. Rent your own car so you can go by areas at different times of the day/night and can get an independent view.
  • Step 5: Make a decision and get funds invested. Don't go to the markets and then sit back for 2-3 months. Make a call and go for it unless there is a major concern. Don't let the perfect be the enemy of the good!

Best of luck in your search. As a lifetime west-coaster and ex-pat Californian, I think you are headed in the right direction!

Cheers,

Wayne Prentiss

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    11y

    Thanks for the mention @Hattie Dizmond !  @Daniel Pierson best of luck as you get started investigating your next steps.  Feel free to reach out if you have questions about BP as you get going - happy to help steer you in the right direction.  Obviously, I can answer questions about investing out of state too, whatever you need.

    I will be out your way in two weekends.  I am going to be down in Orange County checking in with a lot of our current clients and meeting interested investors as well.  Would be happy to answer questions you come across face to face as well.  Just let me know.

    Best of luck on BP!  

    Podcast Guest on Show #224
    REI Nation4.578 Reviews
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    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    Very little change in demand for our distressed houses. We have 800,000 blue collar hispanics without credit here, tons of demand for affordable owner finance homes. We have done well in booms and busts here for 13 years. 

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    There is a lot more going on in my city than just oil gas. Lots of construction and military, and billion restaurants, which is where 1/2 of our owner finance buyers work it would seem :)

    0Reply
  • Ewa RezaPro Member
    Real Estate Agent · Los Angeles, CA · Member since 2009 · 146 posts · 75 votes
    11y

    @Daniel Pierson Is this your first property you're trying to buy? If not, I wouldn't disqualify LA just yet.

    0Reply
  • Derrick Craig
    Memphis, TN · Member since 2013 · 969 posts · 524 votes
    11y

    @Daniel Pierson 

    Welcome to Bigger Pockets!! I am glad you reached out to Bigger Pockets Community on this forum, we have a lot of newbies that are afraid that they may say the wrong things and that's not the case. LA is a really nice market but hard to find good Cash flowing deals, I love the appreciation in property values the west coast provides..

    I have only general guidance for you, take your time never rush into anything, Investing in state or out of state be patient and verify everything!!

    0Reply
  • Account Closed
    Redwood City, CA · Member since 2014 · 83 posts · 19 votes
    11y

    Hi Daniel,

    Welcome to Bigger Pockets! As others have said in this thread, remote investing is definitely worth your consideration. I also live in California, and have chosen to invest out of state because home prices in my area compared to the rents just don't pan out to a profit. 

    Personally, I chose the markets for my investments by looking at the stableness of the local economy. I looked at how the economy performed on a wide variety of fronts (job growth, median incomes, population growth, etc) in the downturn. I chose the ones that were, IMO, the most stable. These markets may not have promised the highest returns but they do have nice returns and I feel like my downside is protected (as much as possible anyway).

    Hope that helps.

    -S

    0Reply
  • Wayne Prentiss
    Investor · Bellevue, WA · Member since 2013 · 22 posts · 9 votes
    11y

    Great topic, with a lot of great responses already. If I could add one thing, I'd recommend you focus on picking the right market first. Some suggestions based on our experience:

    • Step 1: Focus on picking, then investigating 3-5 markets (it is really difficult to go deep enough on more than that and you'll likely just be in analysis paralysis). I'd recommend your first pass is based on ability to find units with rent-to-value ratios that are solid.
    • Step 2: Use jobs and economic growth to narrow down to 2 markets. Use sites like http://www.city-data.com/ to look at detail...
    • Step 3: Build some contacts in those 2 markets. Start with finding 2-3 property managers that are a) interested, b) have good references, b) have an opinion on what you should do. Many turnkey providers have in-house property management, I wouldn't just rely on that (based on experience they can be fantastic or below-average).
    • Step 4: Go visit! Use your contacts in Step #3 to get some properties/neighborhoods lined up. Spend time with at least 2 groups to get different opinions. Rent your own car so you can go by areas at different times of the day/night and can get an independent view.
    • Step 5: Make a decision and get funds invested. Don't go to the markets and then sit back for 2-3 months. Make a call and go for it unless there is a major concern. Don't let the perfect be the enemy of the good!

    Best of luck in your search. As a lifetime west-coaster and ex-pat Californian, I think you are headed in the right direction!

    Cheers,

    Wayne Prentiss

    2Reply
  • Patrick Capriola
    Rental Property Investor · Jacksonville, FL · Member since 2012 · 31 posts · 5 votes
    11y
    This is a great thread - very helpful. Good question.
    0Reply
  • Daniel Pierson
    OP
    Investor · San Francisco, CA · Member since 2015 · 75 posts · 25 votes
    11y

    @Curt Davis Thanks, Curt! I'm absolutely going to check that webinar out.

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    I like my out of state investments as well, both Kansas City and Charlotte have performed quite well for me, 10-12% returns with my turnkey contacts. Make sure you do your homework on your out of state contacts, this site is a great way to find good people in all markets. 

    0Reply
  • Steven Gesis
    Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
    10y
    Originally posted by @Daniel Pierson:

    Hi Everyone, I'm just getting started on my investing path, and I've decided to seriously consider looking at single family rental properties out of state.  I know there's some extra risk involved with this route, but as a resident of Los Angeles, I've decided it's the only way to go. I'm wondering if anyone has purchased an out of state property as their first investment and 1)how they identified the right location and 2) any other general advice, success or pitfalls they encountered. 

     Hi Daniel-

    Just wanted to follow-up and see how your out of state buying experience played out.

    For others seeking some awesome and simple advice, I recommend checking out this guide, its a real simple answer to many of the items people discussed in the thread:  

    0Reply
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