Expanding portfolio out of state

Rental Property Investor · New York, NY · Member since 2015 · 16 posts · 3 votes

Can anyone share first time experiences in acquiring properties out of your regional area. I currently own a complex in Los Angeles but that area is saturated and properties rarely cash flow for me to seek to expand here. However, through research of other markets, I've noticed the higher cap rates in other cities that align with my goal to increase my passive income w/possible appreciation. For now, I am looking to be a passive investor. Have others had good experiences with having a realtor buy and manage properties for an out of state investor?

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Account Closed

Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes

10y

Higher cap rate equals higher risk. Are you sure you want your higher risk investments thousands of miles away?

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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Higher cap rate equals higher risk. Are you sure you want your higher risk investments thousands of miles away?
1 Reply
Adrien C.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
10y
I'd work with a property investor who can find, rehab, and manage a property for you similar to a turn key company but on a smaller scale and better cash flow.
0 Reply
Scott England
Rental Property Investor · OK · Member since 2015 · 316 posts · 216 votes
10y
Hey Marco,
If Okla City is a market you are looking at, please let me know. We have turnkeys available. We can also assist in purchase, rehab and leasing a targeted investment.
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
10y
@Marco Campos -- The challenge as you've discovered in coastal markets, and other "bubble" markets, is that it is hard to achieve attractive rates of return. (You'd be looking for the needle in the haystack with lots of active participation on your part to find them. )
As I'm sure you've discovered, there are many markets around United States where you can achieve favorable rates of return and be in a healthy market and in desirable neighborhoods.
Working with a professional to help you identify those markets in neighborhoods would be my best advice. You can work with a reputable turn key property provider, or very knowledgeable local real estate agent who also is an investor.
Note that the great majority of real estate agents do not work well with investors because they simply don't understand investors and their needs; and they are usually limited to properties on their MLS ( which often is not the source for the best deals).
Having invested myself out of state since 2003 I've come to learn what to look for and can talk about this extensively. And having helped hundreds of other investors do the same, I believe I've nailed down a successful system. (To this day I still have not seen many of the properties I own over 2000 miles away.)
So the short answer to your question would be: gather the right knowledge, work with the right team, ask the right questions, and don't be afraid to move forward when you feel you have enough information to make a decision.
Continued success!
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Kevin M. Rooney
Turn Key Supplier · Indianapolis, IN · Member since 2015 · 111 posts · 21 votes
10y
Indianaplis is a great market. Low entry price, high ROI, cash flow and great rental area.
I have been investing there for 15 years from Jersey.
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Ron Hansen
Commercial Real Estate Broker · Portland, OR · Member since 2010 · 8 posts · 1 vote
10y
Anyone doing turnkeys in Kansas City, KS or Kansas City, MO? Thanks.
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Brie SchmidtBusiness Member
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Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
10y
If you want to be totally passive, I would suggest buying turnkey. I invest out of state, and have a full time team, and it is anything but passive
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Marco Campos
OP
Rental Property Investor · New York, NY · Member since 2015 · 16 posts · 3 votes
10y
You are right @Account Closed , Higher cap rate investments are likely to present greater risk. My though is more in line with lower entry barrier but yet good size cash flow.
@Scott England I will continue to do my research to see were I move from here but I will connect in case OK city gets on my radar.
@Marco Santarelli thank you for the informative reply, my forward thinking is on how to invest after say 4 acquisitions since I know the rules start changing in the financing department. I have the income and savings to aquire a property every 3 months more or less in the $150K range but how do I handle growth from a far? Can REI be trully passive? Is a small commercial acquisition in which there is less competition a better second investment? These are the questions I tinker with right now.
@Kevin M. Rooney Thanks for the tip, I saw on @Marco Santarelli website how that's a strong rental market with low entry barrier. Have your investments been truly passive? How are the vacancy rates in your area of investment?
@Brie Schmidt My concern is that I can launch my investments horizontally and acquire many sub $150K properties with good cash flow. However, managing them from a far will be much more difficult than a commercial 5-10 unit property of the same value. My current complex is truly passive and my recent visit left me a good impression of the tenants and management. I think PM are more likely to stay and do good work when the project has many units under one roof vice spread across town.
Can anyone shed some light on their investments horizontally vice vertically. I am looking into a few good profitable multiplex or apartment buildings over 20 houses spread across many states. Yet, I rather get perspective from those that have done either or. Thank you all for your time in advance.
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
10y
Originally posted by @Ron Hansen:

Anyone doing turnkeys in Kansas City, KS or Kansas City, MO? Thanks.
Yes, what would you like to know Ron?
The numbers work better in MO than KS.
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
10y
Originally posted by @Marco Campos:

@Marco Santarelli thank you for the informative reply, my forward thinking is on how to invest after say 4 acquisitions since I know the rules start changing in the financing department. I have the income and savings to aquire a property every 3 months more or less in the $150K range but how do I handle growth from a far? Can REI be trully passive? Is a small commercial acquisition in which there is less competition a better second investment? These are the questions I tinker with right now.
1) The rules change a little after your first for mortgage loans. Generally, your down payment goes up by 5% and the rate will be slightly higher. You can still get up to 10 conventional mortgage loans, followed by an almost unlimited number of portfolio loans. There are other growth and mortgage strategies that we use with our clients depending on their needs. In short, it is not an issue provided you have the credit and income to qualify for financing.
2) I don't believe there is any such thing as a truly passive investment. Everything will require a little time and attention from you. Income property offers some of the greatest upside with the least amount of time and involvement from you but is not a hands-off investment.
Continued success!
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
10y
I second everyone's posts about the turnkey opportunity! That's what I buy, living in LA and buying out-of-state. There's a lot of good value in them in my opinion.
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Kevin M. Rooney
Turn Key Supplier · Indianapolis, IN · Member since 2015 · 111 posts · 21 votes
10y
Yess they have been passive but of course you will always have an issue sometime or another no matter what or where you buy. Pros have far out weighed the Cons. They have been minimal however. PM me if you would like to talk more.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
@Marco Campos Be sure to be aware of the lack of appreciation and rent growth. A lot of CA people assume rents and values will go up like in CA.
https://www.rentjungle.com/average-rent-in-indiana...
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
10y
Originally posted by @Account Closed:

@Marco Campos Be sure to be aware of the lack of appreciation and rent growth. A lot of CA people assume rents and values will go up like in CA.
https://www.rentjungle.com/average-rent-in-indiana...
Good point Bob!
Many investors from the higher-appreciating (cyclical) markets like coastal CA and the North-East want or expect the same price appreciation from other markets. That's just not normal, nor is it sustainable.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Marco Santarelli:

Originally posted by @Account Closed:

@Marco Campos Be sure to be aware of the lack of appreciation and rent growth. A lot of CA people assume rents and values will go up like in CA.
https://www.rentjungle.com/average-rent-in-indiana...
Good point Bob!
Many investors from the higher-appreciating (cyclical) markets like coastal CA and the North-East want or expect the same price appreciation from other markets. That's just not normal, nor is it sustainable.
Are you saying the rent growth rate and appreciation rate over the last 50+ years is not normal or sustainable?
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Marco Santarelli
Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
10y
Originally posted by @Account Closed:

Originally posted by @Marco Santarelli:
Good point Bob!

Many investors from the higher-appreciating (cyclical) markets like coastal CA and the North-East want or expect the same price appreciation from other markets. That's just not normal, nor is it sustainable.
Are you saying the rent growth rate and appreciation rate over the last 50+ years is not normal or sustainable?
LOL.
No. We've seen abnormal (and often crazy) rates of appreciation and rent growth for many years now. Ideally, in a normal market, and without outside manipulations or the government's subsidizing of housing, we should see real estate keep up with the rate of inflation. Depending on who's numbers you look at, that has averaged between 4% to 7% per year over the long term.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Marco Santarelli:

Originally posted by @Account Closed:

Originally posted by @Marco Santarelli:
Good point Bob!

Many investors from the higher-appreciating (cyclical) markets like coastal CA and the North-East want or expect the same price appreciation from other markets. That's just not normal, nor is it sustainable.
Are you saying the rent growth rate and appreciation rate over the last 50+ years is not normal or sustainable?
LOL.
No. We've seen abnormal (and often crazy) rates of appreciation and rent growth for many years now. Ideally, in a normal market, and without outside manipulations or the government's subsidizing of housing, we should see real estate keep up with the rate of inflation. Depending on who's numbers you look at, that has averaged between 4% to 7% per year over the long term.
Prices and rent growth are determined my supply and demand. That is why you have $50,000 houses in Kansas City and Indianapolis that would sell for over $1,000,000 in CA.
Even at the lower 4% inflation rate that would mean you could buy those KC and Indy $50,000 properties for $11,000 in 1978! So they don't even KEEP UP with your lower rate of inflation.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
10y
@Marco Campos I used to rent from a New Yorker. They always seem to own a lot of good ones in LA. She lived on Park Ave in NYC. Perhaps take a gander at these new LA duplexes with no rent control. Looks like good cash flow is possible still. This company has a few hundred under management oceandevelopment.com. They call them passive investments vs turnkey but same concept. Good luck with your expansion!
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Alex CraigBusiness Member
Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
10y
My advice when going out of state, don't assume all turnkey providers are the same. If the numbers look to good, they probably are. Leave the sub $70,000 properties to the locals. Buy well rehabbed properties where capital expenses will not be incurred during the first several years and pay attention to the little things as those are the items that kills your cash flow. Such items as: does the turnkey provider use carpet in high traffic areas? That carpet will likely last 3 years max. Are there new supplies lines installed at your angle stop valves? Plumbing problems can nickel and dime you to death. What does the fence look like and external buildings? Are there tree branches hanging over the house? Those items are often times overlooked and will certainly cost you at some point in time.
901-848-9028
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Patrick Zanders
Phoenix, AZ · Member since 2015 · 43 posts · 14 votes
10y
I just connected with an investor in South Bend Indiana that has some really great rent ready deals. They rehab and do the property management as well. I also have a source in Ohio. Let me know if interested
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Michael DiFranco
Commercial Real Estate Broker/Investor · Willoughby, OH · Member since 2013 · 7 posts · 1 vote
10y
@Marco CamposThere are definitely still deals in Cleveland, OH depending on your acquisition criteria! Are you looking at SFR's or multifamily, or retail? Also, i may have some personally coming available that i could keep management on.
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