Tips for Getting Started?

Question

I just bought a single-daily home for 250,000 in Boise, Idaho that is to be my primary residence. However, with population growth exploding here, I want to turn around by this time next year and buy my first rental property. There appear to be some promising deals all across this state... any tips for moderately long-distance investing? This is in “innovative strategies” because I want to invest here in town but margins are low here.

Justin Hannah · Answer

@Michael Duke i understand what you mean when you says margins are slim in the treasure valley.  i ended up buying 12 units in Mountain Home.  it is a small town as you know and it only really has a couple major employers, but the main one that im interested in is the Air Force base.  First, on base housing has gone private. They tore down more old housing on base than they replaced, which has caused a shortage. Pushes more people to off base rentals. Second, they are no longer allowing Singapore Air Force personnel to occupy houses on base, pushing them back to off base rentals.  There also has not been any major development in the area. So if you want to look there let me know, i have a great agent and property manager.

James Wise · Answer

Most people go turnkey in this situation. Tons of turnkey markets & companies are out there doing this stuff. Many are well represented by sellers & turnkey operators here on BiggerPockets. The most popular markets are

• Cleveland, Ohio
• Toledo, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Indianapolis, Indiana
• Detroit, Michigan

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• 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.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Don Spafford · Answer

@Michael Duke In my case I prefer to buy them in decent condition to begin with in good areas where they are already rented and usually under market rents. Then over time I raise the rents and when one moves out, we then start making updates as needed and raise the rents to market rates. But they cash flow day one as-is and don't require a huge renovation to pour into it either. I have my agent or another trusted person to a walk-through first for me to take additional pictures or video and then an inspection to know if I want to continue or not. Then I always get the seller to pay for a one year home warranty. You can get them on 1-4 units. I've been able to use them as something fails withing the first year, I just replaced a very old stove and put in a new $1k range which by itself basically paid for the warranty, that I didn't pay for. But that way you're at least covered a little if something major goes wrong in the first year with appliances, plumbing, or electric to save you those unexpected costs while you work to improve the cash flows.

Michael Duke · Answer

@Don Spafford Thank you for the insight here, its good to have other Idaho investors to talk to for advice. I am not planning on managing this one, at least at first. I'm curious about the properties out of state that you have never been to... did you fix them up first before tenants moved in? If so, how did you accomplish this? Are they turnkey?

Don Spafford · Answer

@Michael Duke it would depend if you want it close enough where you can drive for an hour or so around you to possibly manage it yourself or not. If not, then being in state or another state wouldn't really matter as long as you have the right people in place. A good agent to help you and a good Property Manager. I manage my own within a 45 min drive and I also manage for others, but I also have properties out of state that I have never been to.