anxiety over out of state investing

19 Replies

I've been planning on getting a deal done. initially I was going to invest in an airbnb (out of state with people I know) but those plans fell through. 

After reading David Greene's book on Long distance real estate investing I wanted to give this another shot. I'm planning on investing in Florida (Tampa) - but I'm now having some anxiety over the process -- primarily finding a contractor. I have had difficulty having people come to my home for work, how will this work in another state where I don't know anyone! 

I think I just wanted to vent and say this out-loud (or type onto this forum). I'll take some deep breaths and try to trust the process and hopefully not lose any money

Amit, I'm in no position to give you advice, so I will tell you there are lots of discussions about first time or new investors doing OOS deals. Do a search and then decide if doing an out of state rehab is in your best interest. Check into a Turnkey company too. That may be a better solution. Good luck! and deep breaths. Liz

@Amit Kumar I am not one of them, but there are a lot of investors on here who have been successful investing out of state. You're in the right place for advice and if you find someone who has success doing what you want to do, reach out to them with a question or two, most people on here like helping.

Originally posted by @Amit Kumar :

I've been planning on getting a deal done. initially I was going to invest in an airbnb (out of state with people I know) but those plans fell through. 

After reading David Greene's book on Long distance real estate investing I wanted to give this another shot. I'm planning on investing in Florida (Tampa) - but I'm now having some anxiety over the process -- primarily finding a contractor. I have had difficulty having people come to my home for work, how will this work in another state where I don't know anyone! 

I think I just wanted to vent and say this out-loud (or type onto this forum). I'll take some deep breaths and try to trust the process and hopefully not lose any money

 Going it alone with an OOS investment can be very stressful and difficult. Others mentioned it here, but have you looked into Turnkey? That is an investment that is very passive for you and everything has been done. The Turnkey Provider should own, renovate, and manage the property all in house so all of the heavy lifting is done for you. 

Try looking at:

The Best Types of Markets for Profitable Turnkey Properties

and

What to Ask When Working With a Turnkey Provider

Well, soooo.... to me it sounds like you are jumping in too fast and without a specific aim point. Like if you were playing darts and closing your eyes and throwing the dart, hoping it at least lands on the board somewhere. 

What is your goal ultimately with an investment property? What are you hoping to achieve?

I'll wait until I know more to say much else, but I can tell you that trying to rehab a house out-of-state is very much jumping into the deep end of the pool...without swimming lessons (or a snorkel). It can be done, for sure, but if you are just beginning...I'm actually glad you are feeling anxiety over that idea, because you should be. It's advanced stuff!

I did my first OOS deal last year, it was one of the most stressful periods of my life, and everything got delayed, took 3 months (instead of 2). I knew throughout the whole process that I trusted the numbers, market rents but it didn’t stop the stress. I wouldn’t want to deal with a contractor being out of state. Definitely wouldn’t have done it without a management company. If you’re going to go out of state, make it worth your while. I don’t see a point in going through all the stress of an OOS deal to acquire a 100-200k property, go big enough that a management company won’t break the bank.

Originally posted by @Amit Kumar :

I've been planning on getting a deal done. initially I was going to invest in an airbnb (out of state with people I know) but those plans fell through. 

After reading David Greene's book on Long distance real estate investing I wanted to give this another shot. I'm planning on investing in Florida (Tampa) - but I'm now having some anxiety over the process -- primarily finding a contractor. I have had difficulty having people come to my home for work, how will this work in another state where I don't know anyone! 

I think I just wanted to vent and say this out-loud (or type onto this forum). I'll take some deep breaths and try to trust the process and hopefully not lose any money

You don't necessarily need a contractor. No reason you would need to buy a home that needs renovation. Grab yourself a Realtor/PM & pick something off the MLS that move in ready or very close to it. Your PM company should be able to usher your new tenants in there after a very minor rent ready refresh.

I agree it's a big undertaking. I did look into turnkey investments like @Tom Ott and

@Ali Boone do. I get concerned if that's the best way to invest. I think the trap that I fall into on this website is all the podcasts and stories make real estate investing sound a lot easier than it really is. 

@Amit Kumar
There are equal number of success And horror stories on OOS investing
It’s your money at stake in any investment
If you don’t have confidence in turn key operations or willingness to develop your own team, you should invest locally only. Plenty of deals in riverside and San Bernardino county.

I agree with @Ali Boone.. first you have to figure out  what kind of investing do you want to do ?  Do you want to flip ?  Do you want to buy and hold ? Once you know your strategy  you simply have to vet out  the ones who cannot help you .  There are good and bad providers  in every part of this process .  Simply do your due diligence  and you'll be fine !

@Jeff Schechter I want to be a buy and hold investor.
@AJ Singh I’ll look into the IE. perhaps I’ll find something there that will be better suited for me.

@Amit Kumar Like others on here have said, you may want to look in to turn key at least until you get some experience under your belt. It is very hard for an inexperienced investor to manage an out of state renovation. It's hard to keep contractors on track when you're right there monitoring what they are doing but far more difficult when you are thousands of miles away and you are just one more client to them. You should really consider why you want to go the do it yourself route rather than buying turn key. I'm presuming it's in an effort to have built in equity from the start. The reality is though, most inexperienced investors can't do it for less that a turn key. Here's why.

  1. Turn key companies have significant cost advantages. They are not buying on the MLS. They buy further upstream at auctions, tax sales, through wholesalers so their acquisition costs are much lower. Their construction costs are also much lower. They buy materials in bulk at substantial discounts and are buying big ticket items like hvac systems wholesale, not at big box retail stores. Turn key operators also have more control over their construction crews and labor costs since they usually keep them fully employed.
  2. You don't have any cost overruns when doing the rehab. It's very rare that a rehab comes in on budget. There are often cost over runs in a renovation project and when you do it yourself, you take on all of the risk.
  3. When you buy turn key, the property is cash flowing the day you close so you are not paying a mortgage, taxes, insurance and utilities the whole time the property is being renovated and marketed for a tenant with no rent coming in.
  4. The first tenant is placed for free with a turn key property so therefore, you don't have to pay the lease up fee (often 1 mth of rent) to get the first tenant.

You should be nervous! 

Investors all over the world lose money with doing deals out of state.

Build your infrastructure locally. 

You are new, when you get to the higher level is when you venture out.

Let me know if you have any further questions. 

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@Amit Kumar when I lived in Ca. I had local and OOS investments. I kept the OOS investments really simple; duplexes that required nothing and were PM'd. That worked with no problems and I slept great! 

OK  I am going to be a contrarian here.. I personally and that is PERSONALLY cant agree at all with the  advice of thinking for a first time investor its as simple as finding an out of state team to do rehab etc. I think this has a better than 50% chance of losing big money.

it sounds great and it sells books and is a popular pod cast I mean who does not want to do this and save money.

This is simply not reality..  

the chance you can ONE off find all these folks at a PRICE you need to .. is remote at best.

I just cringe at that pod cast and book.. but again personal opinion and i am sure many think i am nuts.. LOL

@Mike D'Arrigo thanks for your input. I think ultimately every podcast and (most) stories are building wealth with the BRRRR strategy.

@Lana Efremova I'd prefer to do local deals it's just entry price point is so high it's a bit frustrating!

@Jay Hinrichs good to know I'm not alone. I got the book and listened to the podcast and part of me thought I was "over thinking" the whole idea but I remember over a year ago trying to get a contractor out to my house and only 2 contractors returned calls and showed up! doing this out of state seems impossible so I'm perplexed (not to mention jealous) of all these stories I read on here.

You should be a little anxious with out-of-state investing. It comes with a lot of risks and is something you should approach very, very carefully. If you decide to go for it, you should be very active in overseeing the process and visit plenty.

Originally posted by @Amit Kumar :

I agree it's a big undertaking. I did look into turnkey investments like @Tom Ott and

@Ali Boone do. I get concerned if that's the best way to invest. I think the trap that I fall into on this website is all the podcasts and stories make real estate investing sound a lot easier than it really is. 

I would 100% agree that is the case. But it's true for all of the strategies....not just one or another. So if, for example, you had a 40% difficulty rate to any strategy that is talked about to make it more realistic, that 40% increase in difficulty would make them all harder at the same rate. (did I just make any sense or did my engineering spreadsheet brain just take over my typing for a second and ramble?)

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