Out of State Investing: Where's the Blue Ocean?

Question

Because our Denver Metro market is saturated (top 10 in DOM, rent increase, sale price increase, etc), I am teaching a class July 18 on "Out of State, Out of Mind" Investing.  We have a lot of interest (and $ to invest) in out of state investing throughout Front Range Colorado.

Tell me how your local market is doing and if it's a good place for "carpetbaggers" to invest?  There are some areas that have been "over-fished" (Red Ocean).

We are interested in all exit strategies (Flip, Hold, RTO, and Owner Carry). Can you recommend your market? Why?

Thank you,  John Fisher

Hattie Dizmond · Answer

@John Fisher

RTO is taboo, thanks to Dodd-Frank & the Safe Act.  However, there are lots of opportunities for various flavors of creative sell financing.

Hattie Dizmond · Answer

DFW!!  It's the pits for cash flow, but it's great for flips, with areas of moderate to high desirability 30-days DOM and less.  (< 7-days in some of my favorite Richardson neighborhoods.)  However, prices have NOT gone the way of the Denver market.  You can still get a 2,000 sq ft house, in a great neighborhood for <$300k.

Hattie Dizmond · Answer

That's not correct.     Lease options over 6 months in duration are illegal, but that's governed by state law, not the federal legislation you mentioned.   Additionally, there are ways around lease option limitations to enable RTO legally in TX.

I didn't say it was illegal. I said it was taboo. 2 completely different thought. We just had a thread with this very same conversation. John Jackson, Bill Gulley and Brian Gibbons all weighed in. It's not my area of expertise.  However, there are enough potential minefields, that even the experts stay away from it. That tells me all I need to know. Thus...Taboo.

And, for the record, the state regs were prompted by state level interpretation of Dodd-Frank and the Safe Act.

Liz Brumer-Smith · Answer

@Steve Burt yes we are and the cost is adjusted for each state's foreclosure timeline and costs in our purchase price. Pricing varies by state based on the legal procedure, area, condition, and many other factors.

Steve Burt · Answer

When you are investing out of state particularly for NPNs, are you retaining separate legal counsel, etc in each jurisdiction. It seems like where scaling out would really hurt you is a lot of those admin costs wont scale for example needing Texas attorneys and Florida attorneys to handle foreclosures.

Chris Soignier · Answer

My mentor, Dennis Henson, does RTO all the time, and I'd venture to say he's easily one of the most successful single-family investors in DFW.   Having spent a good amount of time with him, I can vouch for his ethics, and he does it legally and profitably to the best of my knowledge.

John Fisher · Answer

Thanks for your response, Liz. Yes, my investors also work notes. There is more interest in tangible properties, thus our quest: "In Search of Blue Ocean Markets."

Liz Brumer-Smith · Answer

@John Fisher performing, re-performing, or non-performing notes are a great avenue of investing out of state. I invest throughout the United States buying non-performing notes anywhere from 45 - 60 % of the current market value. Have your investors thought about venturing into that arena? I know my company as well as some of my fellow colleagues are always looking for private lenders or JV partners to work with on these types of things and it sounds like a good fit.

Gilbert Dominguez · Answer

The mid west and eastern sub burbs seem to be holding well for both fix and flips and rental(cash flow properties). Bigger city centers maybe not so as those places are the most desirable by owner occupants not investors and you will find very high priced properties there where it will not make sense from an investment point of view for the most part. However if you have deep pockets then you may find good deals in ground ups, value adds, and large multi family residential properties like apartment buildings. If you are really looking at purchasing under market, off market, distressed properties and pre foreclosures you might look into buying discounted non performing notes. However you might want to prepare yourself for a big eviction and foreclosure effort with the properties you can purchase through heavily discounted non-performing notes.

Brian Gibbons · Answer

John Jackson knows Texas lease-option laws better than anyone including lawyers in Texas

@John Jackson

Out of State Investing: Where's the Blue Ocean?

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