Military Investing

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Rookie: Out of State Investing

Posted Jul 12 2022, 10:44

Hello,

I'm Will and am located in Wilmington, NC. I've been in the military just over 10 years and currently 18 months into my real estate journey with 2 rentals. I purchased a 2 bed 2 ba 600 sqft/side duplex in February of 2021 that cash flows $750/month. In December, I closed on a 1 bed 2 ba beach condo (sleeps 6 w/ bunk beds and sleeper sofa) acting as a vacation rental, intending to role into 6 month lease in winter months (average $1,000/week in season). The duplex was purchased for $218K, now estimated at $300k. The condo was purchased at $210, now estimated at $219K. I currently have $75K liquid that I want to put to work. 

My current goal is to continue investing for the remaining 10 years of my military career to reach $60K annual cash flow. The market where I live is primarily overpriced single family homes that I don't have enough liquid to put a downpayment on and still have reserves for my 2 properties. I really like the multi-family/apartment strategy, but there is little to no opportunity in my area. I'm using my previous agent to look for a property that has a detached garage/in-law suite as I need a place to keep my things permanently and try to get away from living in friends attics between deployments, but am willing to keep downsizing personal belongings and couch surfing if it gets me closer to my goal. I've never invested out of state. I just finished the Real Estate Rookie Podcast with Sarah Weaver and can't figure out the Agent Connect or honestly where to start looking in out of state markets. If I need to upgrade my account, happy to do it, I just don't know what I don't know. Any advice, guidance, or resources would be extremely helpful and I look forward to getting to know more of you as I learn. Cheers!!!

-Will

Southeast NC, North Carolina

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Justin Moy
  • Investor
  • Kansas City, MO
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Justin Moy
  • Investor
  • Kansas City, MO
Replied Jul 12 2022, 10:53

Congrats on where you've got to already! Have you considered things like syndications or private funds? Not sure how hands on you want to be given the unpredictability of a military schedule or your capacity to manage properties especially out of state. 

These can be good options because they're 100% passive and the group you invest in handles the management and gives you regular updates. You also have access to larger properties that you wouldn't likely have the ability to invest in by yourself. 

If you want to be more hands on, I'd definitely focus on one concentrated area so you can hit some scale with property management. One of the things to consider with SFH or the smaller multifamily (below 50 units) is property management options can be limited sometimes, so if you at least have a cluster of properties you'll have access to better scale.

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Drew Sygit#3 Managing Your Property Contributor
  • Property Manager
  • Birmingham, MI
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Drew Sygit#3 Managing Your Property Contributor
  • Property Manager
  • Birmingham, MI
Replied Jul 13 2022, 04:17

@Will Smith

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
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Joe Hammel
  • Real Estate Agent
  • Metro Detroit, MI
Replied Jul 18 2022, 19:23

@Will Smith

Metro Detroit

(my rental portfolio is here)

Purchase: $80k-$130k

Rent: $1200-$1500

ROI: 10-14%

Cash flow: $250-$350/door

Appreciation: Double digit (for past 10 years, will gladly send data)

Location: C, B- (suburbs and certain markets)

We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare, Auto, mortgage, Amazon fulfillment, and more jobs.

The bad reputation comes from OOS investors wanting $20k D market properties. Don’t buy those lol.

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James Wenzel
  • Investor
  • Texas
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James Wenzel
  • Investor
  • Texas
Replied Jul 18 2022, 19:33

Im an old military vet myself.  Have lots of friends that have rentals from their old military days.  Investing out of state is not as difficult as you think.  Lots of programs that you can sign up for that will actually find you a property, guide you on the reno, as well as help you set up management co etc...  

Another opportunity is look at passively investing in commercial real estate syndications (apartments, storage, developments).  Basically those deals are fully passive.  You give 25k, 50k, 100k+ to the deals and you should typically double your money after taxes every 3-6yrs.  You will also get cashflow during the life cycle of those deals.  

I basically stopped investing in SF rentals and now focus on STRs, and passively and actively investing in apartment syndications.  Was able to build a 6 figure cashflow in 5 years on those models.  

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Jacob Brenyo
  • Real Estate Broker
  • Florida
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Jacob Brenyo
  • Real Estate Broker
  • Florida
Replied Jul 18 2022, 19:36

@Will Smith 

Investing out of state is very doable with the right team in place. I see a lot of investors jump quickly into what they want to buy without taking the time to establish a relationship with an agent and property manager. Those relationships will be key to successfully investing out of state.

Personally I’ve had a lot of investors find success in FL. Specifically sub Tampa and Orlando markets.



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Brian Rogan
  • Lender
  • Wilmington, NC
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Brian Rogan
  • Lender
  • Wilmington, NC
Replied Jul 21 2022, 18:41

Hey Will,

I also live in Wilmington. I have acquired a couple decent rental properties in the area (Hampstead / Holly Ridge area) through buying a primary residence (with rental property #s in mind) and moving after a year or so (when my life situation warrants a move). This affords you the opportunity to do some cosmetic improvements / tenant proofing using sweat equity on your own time. This also allows you to pay for a "future rental" with low / no $ down (you can use that VA loan). I'm sure you already know this stuff, but I really think our area is going to appreciate significantly in the next 10-15 years so I am a proponent of investing in this area (since it sounds like you are looking to hold long-term). You could also use this strategy while simultaneously investing out of state, as this strategy requires much less liquid $. Just a thought.... it's not fast, but it would definitely contribute nicely to the long term goal that you have. Good luck!

-Brian
   

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Humberto Marquez
  • Real Estate Agent
  • Texas
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Humberto Marquez
  • Real Estate Agent
  • Texas
Replied Jul 29 2022, 08:27

Hey Will, understanding remote markets takes some time especially if you're doing it yourself. I would use Awning Real Estate platform to do due diligence on additonal markets.

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Steven Wilson#5 Starting Out Contributor
  • Rental Property Investor
  • Columbus, OH
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Steven Wilson#5 Starting Out Contributor
  • Rental Property Investor
  • Columbus, OH
Replied Jul 29 2022, 08:36
Quote from @Will Smith:

Hello,

I'm Will and am located in Wilmington, NC. I've been in the military just over 10 years and currently 18 months into my real estate journey with 2 rentals. I purchased a 2 bed 2 ba 600 sqft/side duplex in February of 2021 that cash flows $750/month. In December, I closed on a 1 bed 2 ba beach condo (sleeps 6 w/ bunk beds and sleeper sofa) acting as a vacation rental, intending to role into 6 month lease in winter months (average $1,000/week in season). The duplex was purchased for $218K, now estimated at $300k. The condo was purchased at $210, now estimated at $219K. I currently have $75K liquid that I want to put to work. 

My current goal is to continue investing for the remaining 10 years of my military career to reach $60K annual cash flow. The market where I live is primarily overpriced single family homes that I don't have enough liquid to put a downpayment on and still have reserves for my 2 properties. I really like the multi-family/apartment strategy, but there is little to no opportunity in my area. I'm using my previous agent to look for a property that has a detached garage/in-law suite as I need a place to keep my things permanently and try to get away from living in friends attics between deployments, but am willing to keep downsizing personal belongings and couch surfing if it gets me closer to my goal. I've never invested out of state. I just finished the Real Estate Rookie Podcast with Sarah Weaver and can't figure out the Agent Connect or honestly where to start looking in out of state markets. If I need to upgrade my account, happy to do it, I just don't know what I don't know. Any advice, guidance, or resources would be extremely helpful and I look forward to getting to know more of you as I learn. Cheers!!!

-Will


 First off, thank you for your service! 

Congratulations on the first 2 properties. Being in the military you have one of the best loans around. I would make sure you are using that every chance you can. If you are wanting to keep growing no matter where you invest you need to make sure you have your core 4 down, especially since you will not always be present due to deployment (https://www.biggerpockets.com/...). That being said I think a good market that you could get into and would bring good cashflow would be Cleveland Ohio. All of the Ohio markets have been booming. I even have started to expand my investments into the Cleveland market. 

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William Anderson
  • Rental Property Investor
  • Mississippi Gulf Coast
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William Anderson
  • Rental Property Investor
  • Mississippi Gulf Coast
Replied Jul 30 2022, 15:31

Will, 

Consider investing where there are lots of military both active and retired along the Mississippi Gulf Coast. Our property prices are among the lowest in the nation. Property taxes are low and rents are rising. You can still find properties for well under $100,000 however for investment-grade properties you can acquire them for under $200,000. For example, I have a listing for a duplex, 4 bedroom 2 bathroom units for $222,900. Good cash flow and great ROI.

Vacation rentals are a good investment here.  I purchased a house last September for $130k plus $20K in furnishings.  I will earn about $35,000 gross this year.  The Mississippi Gulf Coast is a vacation destination.  If I can help let me know.  

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Katherine Serrell
  • Investor
  • Raleigh
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Katherine Serrell
  • Investor
  • Raleigh
Replied Aug 14 2022, 09:53

Hi Will - just PM'd you. First off, thank you for your service! I saw your post and just wanted to reach out. Id love to connect and help in anyway I can. I think the NC market is still so hot right now that it makes sense to stay in state at least for the next few years if possible. I have several units in Raleigh (long term rentals and short term rentals) id be happy to connect and share what worked for me

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Martin LaBelle
  • Rental Property Investor
  • Sanford, NC
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Martin LaBelle
  • Rental Property Investor
  • Sanford, NC
Replied Aug 15 2022, 08:07

Congrats on this strategy. You will be very pleased with it during your retirement. I work in the Fort Bragg market, which has many benefits for a military investor. Currently we are only modestly invested in multifamily (one duplex), but looking to expand that side of the business. I can however help access some off-market deals in the SFR market. Give me a dm if you're interested. We are investors, not dedicated wholesalers, but occasionally make assignments. We also sometimes sell our rental inventory as part of a 1031 exchange. Reach out if you're interested in our market.