Investor · Denver, CO · Member since 2017 · 41 posts · 21 votes
Hello everyone!
I'm curious to know what you all think about a brand new investor (I own one condo and rent out the extra room) looking to out-of-state rentals to get started.
I live in Denver and don't want to let my lack of cash keep me from getting started. I've spoken with an investor who has had a lot of success with a vacation rental in Isabella, Puerto Rico (still US real estate). He raves about it but I'd like to hear what some other experienced investors think about this. Seems a little risky to me.
I've also considered buying in Florida, where I know duplex prices are relatively low compared to rent.
My biggest concern is that I'm new to this, and buying out of town seems like it could present quite a few extra challenges. Does anyone have thoughts to confirm that concern, or to encourage me otherwise?
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Evan Miller There have been no further comments on Puerto Rico so I would say this. Although it is US Real Estate, what I've read here and learned from others, it's a completely different world than what you are used to. If I was to invest there, I would 10x my due diligence.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
9y
If you go through with this, I would encourage you to visit the property before you close on it. Don't depend on pictures, or the word of a good salesman. There's many success stories investing out of state, but also many horror stories. Is there no way to gain more experience/knowledge in your own backyard before you branch out?
Real Estate Broker · Palm Bay, FL · Member since 2017 · 175 posts · 89 votes
9y
Hello Evan,
I think everything revolves around your comfort level. I think you are on the right path (as bp is a great place to start networking). If you are able to connect with some people in the areas that you are interested in investing, they can help point you in the right direction. Honestly it is hard to confirm or denounce your initial thoughts. My wife and I own a few properties in several places in Florida and just sold our North Carolina properties. The key is finding the right people to help steer you and that are willing to be a part of your team. I personally think it is fine and have helped several bp members find great investment properties out of town (as far away as Hawaii).
Investor · Denver, CO · Member since 2017 · 41 posts · 21 votes
9y
Thanks Dwayne and Nick!
Nick, visiting the property sounds like a smart move. To answer your question - there are certainly plenty of ways to gain experience/knowledge in my own back yard. For starters, I live in Denver so BiggerPockets is literally in my back yard! I'm certainly leaning toward keeping it local first, since that seems a lot easier to manage risk. The market in Denver is just a challenging one, and while I'm excited to find people to help me here, I'm also curious if there are other spots that might be more within my current financial reach. Hence I posted this post, and am so grateful for your response!
Dwayne, thanks for your thoughts. It makes sense that if I'm going to invest in properties far away, I should make sure I'm not a stranger to the area.
Thanks again guys! One day in and I'm already loving this BiggerPockets place. If you don't mind, I'll definitely keep you both on my radar in case I do end up looking to invest in Florida.
Investor · San Jose, CA · Member since 2017 · 343 posts · 102 votes
9y
@Evan Miller - I would start looking from your back yard to 4- 5 hours driving distance before jumping on to FL and vacation rentals. Deals are certainly hard to find these days but keep looking.
Gaithersburg, MD · Member since 2017 · 127 posts · 23 votes
9y
Although Im new to REI I think investing super far away from where you live can be difficult, possible but difficult for us newbies.
I think you should look in places that you can drive to or even possibly fly to.
Vacation rental or cross country places, to me seem to be good for people who know the ropes, if you have the ability to invest that far away my opinion you should look 2-5 hours away instead of 10 states away.
For instance, I live in Maryland but Im open to DC Va and even PA because their all within a few hours driving distance.
Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
9y
Investing out of state with just one or two units can be tricky; it gets more practical as you scale up. You will have to go out and visit your properties even if you have good management and those costs can really take a chunk out of your cashflow when it's just a property or two.
Yes Denver is tough right now, but you might consider another condo (maybe turn your current one into a full rental and do another owner occupied loan to keep your out of pocket costs down)
A house with an accessory unit that you could rent out might be practical. If you find the right area, short term rentals can be more lucrative than long term leases
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Evan Miller There have been no further comments on Puerto Rico so I would say this. Although it is US Real Estate, what I've read here and learned from others, it's a completely different world than what you are used to. If I was to invest there, I would 10x my due diligence.
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
The first thing you need to do is figure out why you lack cash and fix that problem at its root. And no, the root problem is not that you can't afford to invest. Do not try to shortcut around this problem. Going to a market that you know nothing about, that is thousands of miles away, with very little hands on experience, where you will need to give up control and be 100% reliant on complete strangers to make or break your investment for you while keeping your best financial interests at heart is not the answer.
Real Estate Investor · Rincón, Puerto Rico · Member since 2017 · 25 posts · 6 votes
9y
I live in PR and have been looking for vacation rentals. You can find a lot of houses that are very cheap especially compared to US standards but one of the big issues is there isn't much demand in places like Isabela (taken from airdna report) and a lot of supply (lots of Puerto Rican's putting to their house on airbnb)
Investor · Clifton, NJ · Member since 2017 · 45 posts · 15 votes
9y
@Evan Miller I would second what @Nick C. and @Vivek Khoche said. Try to find property that you can go and see yourself. I know there are a lot of People from Denver on the forums so it might be useful to ask for a place to invest within driving distance.
The other idea which was also mentioned I believe and I strongly encourage - it is always talked about on the BP Podcast - find your "boots on the ground". It could be a partner. It could be a property manager or in same rare instances the real estate agent. I would be careful with the last one as they are incentivized to get the deal through. Network. Reach within your personal network as well. I have a coworker here in NJ who invests in Naples FL. Far reach but she's making it happen. She does end up traveling there often though, which may not be something you can afford.
Best of luck. Just because it's hard to find a deal, do not be discouraged. Success only comes to those continually seeking it.
Investor · Denver, CO · Member since 2017 · 41 posts · 21 votes
9y
Thank you to everyone who has replied to this thread! I'm amazed at how much useful feedback you all have already given me. It sounds like investing far away could prove to be successful, but it's by no means going to be easier than finding a way to invest in Denver. Thanks to @David Faulkner for pointing out the real problem that needs to be fixed. Working a little harder to fix my current cash problem now is probably a much less risky move than trying to find a "short cut" that will only cause head aches later.
I echo most individuals on this forum. I have been investing out of state for years now and while it can be a great way to invest, you do need to be properly equipped. I highly recommend talking with an out of state investor about what your goals are and seeing how he/she can help you get there. You will definitely need to work with someone like that initially before going off on your own. Best of luck!
Real Estate Agent · Denver, CO · Member since 2015 · 1k+ posts · 858 votes
9y
@Evan Miller I would stay away from Puerto Rico just because of their debt crisis. That's a macro level issue that you have no control over and no local insight. Why take the risk?
Investor · Denver, CO · Member since 2017 · 41 posts · 21 votes
9y
@Chris Lopez That's a good point, too. The PR idea is just from a coworker of mine who's currently enjoying tons of cash flow on his vacation home there. He is not a sophisticated investor by any means though, and also has a whole bunch of cash reserves. So he's really just playing around and having some fun with it. He raves about it though, and conversations with him are what got me really thinking about real estate investing in the first place. So the idea has been in the back of my mind and I wanted to see what full time RE investors thought. It's definitely good to see how you all look at it!
Investor · Indianapolis, IN · Member since 2014 · 208 posts · 137 votes
9y
I've done this before. If you can arrange it so that your properties are in a place you visit a lot or have some other reason to go to, that's a good way to do it. With your first couple properties it's nerve-wracking to have them halfway across the country. You can easily buy a property without ever seeing it and turn it over to a management company and never deal with anything but your monthly checks, but I do think at least for your own peace of mind it's a good idea to fly out and see it, say before you put your offer in. Among other things it's good to get a chance to drive around the area and figure out where good and bad neighborhoods are. If you're going to be a long-distance landlord then I also highly recommend purchasing a property with no maintenance issues that already has decent tenants in it. I've tried to oversee a total turn-over of a trashed property from across the country, and I regretted it. Overall, though, this is totally doable. Make sure you get a good property manager who puts good tenants in the properties, as that will make all the difference.
I was in the same boat you were in a few months ago and finally just decided on KC. For me it was closer to Minnesota(where I live) than some of the other areas I was looking(Arkansas, Florida, Ohio, and Indiana). When I close on the 2 TK properties in August I can make the 5-6 hour drive to see the places during the inspection.
The other thing I would HIGHLY recommend is to talk to anyone and everyone that is willing to talk to you. For me, that was other investors, Turnkey companies, financial consultants(there are a lot of those on this site that basically act as a referral for TK companies)but they are worth talking to because they can verify if a company is solid. I started by doing that and seeing which companies got mentioned a lot...some companies I talked with I could tell I was just a number and they wanted my money.
I would settle on 2-3 areas and then start getting ALL the info available.
I was in the same boat you were in a few months ago and finally just decided on KC. For me it was closer to Minnesota(where I live) than some of the other areas I was looking(Arkansas, Florida, Ohio, and Indiana). When I close on the 2 TK properties in August I can make the 5-6 hour drive to see the places during the inspection.
The other thing I would HIGHLY recommend is to talk to anyone and everyone that is willing to talk to you. For me, that was other investors, Turnkey companies, financial consultants(there are a lot of those on this site that basically act as a referral for TK companies)but they are worth talking to because they can verify if a company is solid. I started by doing that and seeing which companies got mentioned a lot...some companies I talked with I could tell I was just a number and they wanted my money.
I would settle on 2-3 areas and then start getting ALL the info available.
Good Luck!
Investing out of state with a Turnkey company can be a great way to go. It all depends on the market and the company you go with. Make sure they are a true turnkey company. By that I mean they own, renovate, and manage the property all in house. Anything short of that is just an agent.
Investor · Bushnell, FL · Member since 2016 · 456 posts · 224 votes
9y
if you decide to go forwad .. I would certainly look for a boots on the ground type of person .. one who will look out for your best interests .. whether you buy a property or not .. there are a few companies or people i might recommend here in Central Florida if you send a request .. I actually work with out of state investors but, I am really focused on flips right now and my plate is full .. when looking for that boots on the ground person , make sure they are familer with technology also .. with all the latest tech advances you can use them to your advantage .. ie.. video updates , pictures loaded on google drive , taking pics of receipts and sending right after a purchase, Facetime ( you can walk the property like your there ) .. certain apps allow you to see spredsheets and edit in real time .. there are a bunch more ..
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y
Hey Evan! I'm a little late to the game but thought I'd offer some thoughts.
Out-of-state is totally fine as a new investor...it's how I started and all I've done since I'm in CA (no cash flow)...but it is 100% dependent on how you do it. If you're trying to rehab or BRRRR properties, that can be risky. If you're doing rent-ready, those are doable but success will depend on the team you have in place to help you.
Market-wise, you want to be sure you understand the numbers. A duplex in FL may be better priced, but it's fairly unlikely to cash flow. You'll want to understand numbers, for sure, but then the harder part than learning numbers is learning what makes a solid market (or neighborhood) to invest in. Lastly, you'd have to understand how to build the team.
This article is old but it starts the conversation on out-of-state investing-