NYC Out of State Investors

32 Replies

I live in New York City and invest out of state in Kansas City, MO. So far, I've had a very good experience. I own 2 duplexes and just sold a single family home, and have been somewhat lucky in the sense one of the first folks I spoke with in KC, @William Robison  , is one of the main folks with whom I still work. 

I'd be interested to hear from other folks in NYC, where do you invest and what has your experience been like.

Just did a deal in Memphis, TN. 

For investors who are employed full time in addition to investing: When New Yorkers, Californians, Bostonians, (insert other expensive metros here) do deals in low cost markets, we get a tremendous feedback effect from high dollar amount we are easily able to put into the low cost market. Wages are high in the northeast, so it's nice to redeem them outside the same economy. In the Northeast, the amount of money you can make is completely normalized by high lifestyle costs. Instead of living opulently or investing here, redeem the value of your money in a much lower cost market. This chart is a great example of the kind of transfer you can get:

http://taxfoundation.org/blog/real-value-100-each-...

Not only is my employer compensating for the lower value of $100 here. I am actively targeting markets where $100 is actually worth more than $100. Not shockingly, these tend to correspond with a lot of the good cash flow markets we like the throw around.

It looks like Atlanta may be a next stop, although I am happy to do another couple of deals in Memphis. Also very interested in Kansas City.

@Riley F.  We are based in New York, and our investors are accredited investors from large cities like New York, Boston, and Tokyo, where returns to real estate are compressed by the amount of money available to purchase real estate.  We invest exclusively in the Southeast, where we can gain an additional 2-3% in returns simply by changing geography.  In essence, our business model, like yours, is to take capital from where it is plentiful and deploy it where capital is scarcer.

Originally posted by @Trevor Ewen:

Just did a deal in Memphis, TN. 

For investors who are employed full time in addition to investing: When New Yorkers, Californians, Bostonians, (insert other expensive metros here) do deals in low cost markets, we get a tremendous feedback effect from high dollar amount we are easily able to put into the low cost market. Wages are high in the northeast, so it's nice to redeem them outside the same economy. In the Northeast, the amount of money you can make is completely normalized by high lifestyle costs. Instead of living opulently or investing here, redeem the value of your money in a much lower cost market. This chart is a great example of the kind of transfer you can get:

http://taxfoundation.org/blog/real-value-100-each-...

Not only is my employer compensating for the lower value of $100 here. I am actively targeting markets where $100 is actually worth more than $100. Not shockingly, these tend to correspond with a lot of the good cash flow markets we like the throw around.

It looks like Atlanta may be a next stop, although I am happy to do another couple of deals in Memphis. Also very interested in Kansas City.

 I saw this chart the other day, and had the same exact thought. Do you buy anywhere other than Memphis? How do you pick your markets?

Connections direct the markets. I try to network and get on the ground. If I develop a good relationship, that's the target. I think Philadelphia is the only market I have been pursuing for more personal reasons (we may move there in the next few years).

My personal connections to markets are Chicago and New York (where I'm from, where I live, respectively). While Chicago does offer some good stock for the price. The tax and regulatory environment in Cook County is dismal. New Jersey has much of the same overhead issues. You know the story with New York. The charts are a good start, but the people get the job done.

I'd much rather invest for a 1% rule with the help of people I know and trust. 2% rule is not worth the gamble, if you don't have a team.

Would love to hear from anyone else who is investing out of state from NYC.

Hey just bought a property in Brighton in the Boston area partnering with my brother

Milwaukee, WI is getting a lot of investors from out of State. Good things are happening in the city that some investors are overlooking. Please contact me if you New Yorkers would like property and city information. 

I am looking into Pennsylvania more towards the poco is area (Monroe county area) although I am a complete rookie....

@Michael Henry how much are homes out there? 

Prices will depend on location and condition of the property. All things being equal (fair location, and fair condition) $30,000.00 - $60,000.00. 

In the next day or two I will be posting four (4) properties for sale in the $35,000.00 rang. Keep an eye out for it in the Biggerpockets marketplace. 

@Riley F. @Michael Henry , and @Trevor Ewen , how did you get started with investing out of state?  I am a newbie, and I think it would be worth it to venture elsewhere, but I am unsure how to get started.  Any assistance wold be greatly appreciated.

@Mary Hasnon

Turnkey was our start. We work with a great provider, but I am also starting to understand the limitations of the C-Class single family market. Still a tremendous way to get started in my opinion.

Our second deal was a syndication. Third deal we did vanilla, worked with a realtor and put our team together. After that, went back to turnkey for 4 & 5, not because we were targeting it, but the right merchandise came through our door. We're a bit pickier about the exact neighborhood we buy-in. Although, ironically, our 'bad neighborhood' purchase has performed well. I think we got lucky with the tenant, and we are eager to keep him happy.

Once the dust settles, you get more concerned with what you can manage long-term. I am not planning to quit my job (I love it, and I am a principal in my business). Instead, I've realized that the best thing I can do to advance in real-estate is work my tail off as I am and provide money for our partners. Long-term, we want to shift away from single and duplex deals and do larger bundles of residential properties or large commercial properties. 

Your goals may be different. If you are trying to quit your job, I think re-locating and doing a live-in flip is very desirable. Doing it in Brooklyn is too capital intensive for my blood.

I only invest in Milwaukee. First, deal I did was with was with a partner with Seller financing $2,500.00 down. 

Originally posted by @Trevor Ewen :

Instead of living opulently or investing here, redeem the value of your money in a much lower cost market. 

Great to see advice extending beyond RE, and into sensible personal finance habits. I live in Queens myself and currently save over 50% of my salary. In the process of developing my initial REI plan, I've already ruled out the boroughs due to entry level pricing/poor value. I'm sure money can be made, but I figure why not keep pumping money into index funds and allocate a smaller chunk of my capital into lower cost RE markets?

I've just begun looking into Syracuse because I'm not at the point where I feel comfortable with out-of-state investing, but this thread may lead me further in that direction. Great post. I'll be checking out your blog. 

I live 6 months in Manhattan and 6 months in The Woodlands, Texas.  My investments are in Texas and Arizona, however I just invested in a deal in an RV park (I am limited partner) in Illinois.  

@Christopher Rodriguez , I'm from the Poconos (originally from Philly, but then the Pocs, and Pittsburgh, before moving to Denver in '94). You might want to talk with @Stephen Franco about investing in that area.

@Sean Tracey

I think you have the right idea. For my part, I am a little worried about long-term prospects in Syracuse. I tend to prefer Rochester as upstate markets go. And I know a few other investors who feel similarly.

The the rustbelt northeast has a lot fighting against it. Cold weather, high taxes, and little or no industry in the near future. I see a moderate southern migration as a bit inevitable. The question is just knowing when these markets have hit real rock bottom and are ready for some new investment.

@Trevor Ewen , if you don't mind me asking, what concerns you about the Syracuse Market?

Thanks

Originally posted by @Trevor Ewen :

@Sean Tracey

I think you have the right idea. For my part, I am a little worried about long-term prospects in Syracuse. I tend to prefer Rochester as upstate markets go. And I know a few other investors who feel similarly.

The the rustbelt northeast has a lot fighting against it. Cold weather, high taxes, and little or no industry in the near future. I see a moderate southern migration as a bit inevitable. The question is just knowing when these markets have hit real rock bottom and are ready for some new investment.

It's Funny you mentioned a Southern Migration. I recently read a report that might take place sooner than expected due to Southern Water Demands.  Possible may be a shift back to the Great Lake States. 

@Greg B.

To your comment. I grew up near Chicago and most people try to get me to return on the freshwater premise.

It's a real concern in the macro view, but I think jobs and quality of life will be the bigger stories in the decade. I hope you prove me wrong, because I would love to start investing in Illinois again.

@Trevor Ewen , my only response to your well thought out remarks is your ending...

"There are other reports very bullish on regional migration to Syracuse, and in 5 years, I may be trying to invest there"

Why buy for $10 in 5 years when you can buy for a $1 today?

@Riley F.

Hi Riley

I am in Putnam county, about an hour north of you.  AS you well know, the taxes, insurance,  and cap rates here are abysmal.  I was blessed to partner with a friend who moved to Knoxville, TN.  

I floundered her for years and years, buying only a few properties.  I started buying with my partner in Feb 2013, and we have accumulated 675 units since then.  I only say this to encourage other NYers to look outside their market.  

It has given me the opportunity to leave my current business and move my entire family to Jacksonville FL, where i intend to continue expand the portfolio.  And this is all from purchasing a run down 25 unit property.  The moral of the story for me was to replicate what other successful people were doing and take a chance.

hope you continue to buy in KC

All the Best

Gino

@Greg B.

I agree with the assessment from the perspective of a local. 

As an out of area investor, the risk premium is just too high for me. Chances are I would end up buying $0.01 per dollar invested, only based on a lack of local knowledge. 

I know why there is a lot of Detroit-bashing, for instance, on Bigger Pockets. It's because out-of-state and out-of-country investors have been snookered by local fast-money deals with no reliable exit. That being said, if I lived in Wayne County, I would be a fool not to take advantage of some of the great opportunities present. 

I can only imagine Syracuse exhibits much of the same on a smaller scale. The local economy and players (like yourself) can and should get first dibs on the good merchandise. As you build your businesses, people looking for more modest and safer returns (like me) will come knocking.

For the record, I am completely bullish on mid-sized metros because I think the big cities are too pricey for young families and professionals to build lives for themselves. This article outlines a lot of what the young generation feels about the big MSAs.

Upstate New York will be a popular option as people start telecommuting more towards the city. I already have a few colleagues who have decided (against wiser judgement, IMO) to take once weekly flights to NYC from Rochester, and still have a huge home upstate. It's clear that the opportunity will force good money to go great lengths to get utilized. This is not be discounted.

The only reason that I think this is unwise is because I hate spending all my time commuting. I would rather take a different job or have a smaller home. Despite that, there are some who disagree, and their money is as good or better than my own. 

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