Long Distance Investing
Specialist · Austin, TX · Member since 2017 · 42 posts · 16 votes
Do any investors in the Austin area invest primarily out of state? Finding deals in Austin seems to be extremely difficult and even though I know of people that have success in DFW and SA I'm still interesting in discovering other markets that can provide both cash flow and appreciation. Kansas City has come up a lot recently but I'm curious to as to what y'all may know.
David Greene's book on long distance investing was a great help to me tackles most questions. Best of luck to you.
There are many markets across the US that can provide both cash flow and appreciation. The questions is, in which markets can you build a team that can enable your success? Are there any markets that you have existing relationships in that may give you a leg up in building your team?
@Austin Joseph I am currently evaluating this same scenario myself right now. Since I frequently travel for my primary W2 job, I am free to live anywhere that I want to. I have spent an extensive amount of time traveling the country so I already have a good idea of the types of places that I would be willing to live and invest, and I am currently evaluating the numbers to see which locations make the most financial sense. Being free of any location restraints will also allow me the ability to pack up my toys and head to the next location if the economic conditions so dictate. Since some of my core construction and design team members will be moving with me, I will be able to quickly assemble a reliable team as @Kris Wong mentioned and can further reduce my learning curve by hiring a knowledgeable local real estate agent. I will also be hiring local skilled laborers, whenever financially prudent, instead of having to rely on unproven subcontractors. I'd love to know where you are considering investing and see if any of those locations overlap with any of the locations that I am considering. It would be great to share some information and insight with others so that I can further narrow down investment location.
David Greene's book on long distance investing was a great help to me tackles most questions. Best of luck to you.
@Mike Castellow Some of the areas that I'm interested in are Columbus, OH, Cincinnati, Omaha and Kansas City but I'm really open to anything. I'm a new investor so I'm just trying to find a growing market that'd allow me to get in with less capital than say Austin, Orlando, ect.
@Rita Medeiros I read it about a week after it came out and I thought it was fantastic. May have to reread it soon
@Ted Klein I'm working nights at the end of a refinery outage in Alaska, and it's winding down so I have pockets of free time throughout the night. I actually cut my post off shorter than I wanted because I had to take care of some business, and I just didn't get back to talking about my potential plans.
A little backstory on why we are looking to move from the Austin area. My wife was recently diagnosed with an electrical issue with her heart and the new medication has made her far more susceptible to several allergens. She has always had issues during cedar fever season and now is going to be tested this week to find out which other allergens are causing her current severe allergic reactions. This will be a major factor in the region we relocate, but I will also be choosing the metropolitan area based on current and future real estate investment opportunities, the ability to match my investment style with the local market, tax implications, and the ability for me to lead the type of life that I want to live. I have a long list of potential investment locations, and I will be narrowing my list down over the next few weeks with most of my research taking place after I complete my current project this coming week.
I have mainly concentrated in real estate around my home in San Marcos, TX, and I have just begun researching opportunities to invest in other locations. If I am to remain in state, I plan to primarily invest in rental properties in and around San Antonio, Victoria, Corpus Christi, or I'd really enjoy focusing on old dilapidated homes in small Texas towns that have outstanding school districts.
For out of state, I will be focusing on metropolitan areas that exceed the national population growth and closer to the 1% rule than I can find around Austin. I've just begun researching cities such as Kansas City, Cincinnati, Fayetteville, several coastal cities in North and South Carolina, couple of places in Oregon, and numerous college towns scattered throughout the country. Like I said, I'm just starting my research outside of Texas, but I have previously traveled for weeks and even months at a time to almost every destination that I'm considering so I at least have some basic idea as to the culture of most of these areas. I have many more hours of research before I am ready to make a move, but I will be heading in my chosen direction within the next month or two.
Thank you for the well wishes.
I also like the potential in Kansas City and would love the opportunity to do some major renovations on some of the 100 year old homes in the area. A lot of investors typically avoid these because of the initial costs and length of time it takes to do the work, but I enjoy the challenge and would much rather do a major renovation on a historic home than multiple cosmetic remodels for the same amount of initial capital and return on investment.
@Austin Joseph Dont know much about DFW and SA, but KC has been great for me. Currently have 2 rentals and looking to expand through either turnkey or light cosmetic BRRRR (no walls being moved, etc.) but as I continue to scour through deals from agents/wholesalers, etc., it appears the market is super hot and im getting deals 75-80% ARV so it will leave me with a good chunk of money still left in the deal, but if its a good property and #s are right, im still buying those.
As an investor in Kansas City, I can tell you it's getting pretty expensive here too. Although it's still a lot less expensive than Austin of course.
@Ted Klein I've already learned through trial by fire that dealing with a historical district committee can be a major pain but as long the holding cost for the extended timeframe is accounted for in your budget there's usually not much of an issue. Unless the interior of the house is considered historical, they typically are only concerned with preserving the original exterior details of the house which can include everything from the porch to the roofline so additions and exterior changes can create a major delay or even totally disrupt your intended plan.
For me there's fewer unknowns with an old property when I already plan to upgrade everything and am pleasantly surprised when something is in better condition than expected, as opposed to purchasing a cosmetic rehab with tight margins and then later finding out that the plumbing or electrical needs to be replaced or the foundation needs repair.
The best thing about real estate is there is a niche for everyone's personality and experience.
I can't remember posting anything like that. Maybe you're talking about my article on GIS software; https://www.biggerpockets.com/renewsblog/an-introductory-guide-to-esri/, but that didn't evaluate the whole city.
I can't remember posting anything like that. Maybe you're talking about my article on GIS software; https://www.biggerpockets.com/renewsblog/an-introd..., but that didn't evaluate the whole city.
Good seeing you here Andrew, hope youre doing well.
Your knowledge of the KC market definitely helped me learn much more about where im investing. (got my tax appeal in too :)
@Austin Joseph - we are also made the switch and looking for investing OOS. We are in the process of defining our search criteria and investment criteria and also looking for resources (team) and selecting/eliminating states and locales - OH, FL, AZ seem to bubble up for us based on various factors.
But at this time, a majority of metropolitan areas are overvalued according to CoreLogic....so not sure.
Here’s what we currently have as search criteria (must have):
Ideally (or more flexible criteria):
Values we use in our calculations:
What do you think of this criteria? Reasonable or crazy?
What do you use in your search?
@Costin I. Your numbers seem to be really well thought out from my perspective. The only thing that concerns me about investing in large portions of Ohio or any place that is shrinking in population is the stagnation or potential depreciation of housing prices. Monthly rent doesn't matter if the place sits vacant for extended periods of time or if you want to eventually sell and the monthly cash flow doesn't fully cover the loss of equity. Good luck and it seems like you have a good set of criteria to help you narrow down your options.
@Austin Joseph you can invest in any market, just make sure you do the same necessary sub-market research you would do at home. The evident challenge is time. Now you'll need to quit sleeping or leverage other people's time. Your "on the ground team" (property managers, general contractors, and other service providers) is what will make or break any deal, close or far.
Other core team members can be located anywhere. Thanks to the internet and online software (SaaS) managing a property is becoming faster, cheaper, more transparent and accessible day and night for anyone who needs to know.
I'm remotely building teams in various US markets and partner with co-sponsors, key-principles and private equity investors for mid- to large size multifamily value-add properties nationwide.
You're welcome to join ;-)
@Costin I. I think I'd agree with @Mike Castellow. Your criteria seems to very similar to mine but stagnation of home prices is a concern of mine that I believe can be avoided if you know the market well enough
Do any investors in the Austin area invest primarily out of state? Finding deals in Austin seems to be extremely difficult and even though I know of people that have success in DFW and SA I'm still interesting in discovering other markets that can provide both cash flow and appreciation. Kansas City has come up a lot recently but I'm curious to as to what y'all may know.
Haven't personally looked at Kansas City but generally speaking all of the Midwestern markets like Kansas City, Cleveland, Toledo etc... are very similar.....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.
@Austin Joseph - we are also made the switch and looking for investing OOS. We are in the process of defining our search criteria and investment criteria and also looking for resources (team) and selecting/eliminating states and locales - OH, FL, AZ seem to bubble up for us based on various factors.
But at this time, a majority of metropolitan areas are overvalued according to CoreLogic....so not sure.
Here’s what we currently have as search criteria (must have):
Ideally (or more flexible criteria):
Values we use in our calculations:
What do you think of this criteria? Reasonable or crazy?
What do you use in your search?
Take AZ out of your mix based on your criteria. You will be chasing your tail to find a property under $150K (I could end the sentence there), that also cash flows at least $200 per door AND is 1% ARV. It just doesn't exist in this market.
I suppose if you go to the outer fringe areas, MAYBE. But not in Greater Phx (which includes all the big cities like Phx, Scottsdale, Glendale, Peoria, Chandler, Gilbert, Mesa, Tempe, Cave Creek, Carefree, Sun City, Ahwatukee and more).
Our average cost of entry is $200K for single family dwellings. The properties listed from $170K to $200K are bid up in a fire storm. I just had a cleint put in an offer on a property listed for $175K, and we were 1 of 14 other offers within the first day on market. So, that price range is crazy right now. And for SURE, that property is NOT getting $2K in rent. No way.
There are still deals to be had here, but not based on your criteria.
LOL...that's what we currently have as search criteria, I didn't say that's what we are finding.
OH, FL, AZ seem to bubble up for us based on various factors (like landlord friendly states, property tax, sales tax, income tax, population net migration, affordability).
That's why the questions: What do you think of that criteria? Reasonable or crazy? What do you use in your search?
...because if you can't find SFR deals that cashflow 200$ with a minimum CoC ROI of 8% you are better off investing in stock market index funds...or worse, the RE investing party is coming to a screeching halt and better prepare for a crash.
Great thread!
Austin is a tough market. I have a few OOS properties in Kansas City and I invest locally here in Austin now. I can tell you they both have their challenges.
I believe Austin is much safer if you can find a decent deal. People are not going to stop moving to Austin anytime soon. Austin properties appreciate. If you can find a deal that breaks even on cash flow its a decent deal in Austin, they are even hard to find. To find anything in Austin is going to take a lot of work and typically you'll need money for marketing. You just can't find a deal that rents for what your mortgage is unless you find some value add and beat the thousands of investors to the deal that are trying to do the same thing.
In KC, cash flow is easy to find but IMO there is more risk. The job market is not as strong as Austin. Tenants are more likely to trash your property (personal opinion) but it can happen in any market. Appreciation is slower in KC compared to Austin.
My strategy is to have both. The cash flow from the midwest can balance an appreciation portfolio that has low cash flow and reduce risk.
If I can help anyone in any way feel free to reach out!
@Kevin Kite Just curious, what part of KC do you have properties in?