3rd out of state property - closed!

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3rd out of state property - closed!

Rachel Luoto
Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $34,900
Cash invested: $50,000

3rd property in Memphis closed today! Bought $34,900 cash, have contractor quote $10-15k to renovate, comps/ARV $70-80k, $900/mo rent

This last month was our first time actually visiting the state (from WA), as we were under contract for a larger deal that fell out on due diligence. Honestly, I think buying out of state is way easier because you're forced to outsource! (this is our 5th property/8th door total)

What made you interested in investing in this type of deal?

Returns, low price point

How did you find this deal and how did you negotiate it?

MLS listing day-of, came in low and was accepted - it was clear from what the too low prior, selling for less than they paid, and poor property condition that this other out-of-state investor just wanted out!

How did you finance this deal?

Our own cash

Lessons learned? Challenges?

The unit is listed as 3/2 but had at one time been a mirrored duplex. There's opportunity to leave the layout 3/2, move some walls to make a 4/2, or re-convert to duplex. All houses on this street are nice except the direct neighbor - we will try to tactfully market to them to get them to sell to us now or in the future

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Aaron Bloodworth is our agent, he works mostly with investors and he's awesome :)

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Michael WallimannPro Member
Rental Property Investor · Western Washington · Member since 2018 · 151 posts · 60 votes
7y

@Rachel Luoto Congratulations that's awesome! I just had my third long distance multi family deal fall through at the last moment because of what I found during my due diligence contingency but I'm still hunting for that next one. As a fellow Western Washington investor your (very well structured) story hits home. Stoked for you :)  Keep kicking backside!

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  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    7y

    @Rachel Luoto awesome, congrats! Would love to chat sometime and hear about your experience. We are actively working on our strategy. It's so expensive in So-Cal, but I can't complain about the weather ;) 

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Rachel Luoto. That’s awesome. Where in Memphis is it?

    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Caleb Heimsoth:

    @Rachel Luoto. That’s awesome. Where in Memphis is it?

     Just a couple blocks north of Rhodes College, in the Vollantine district but the southern side of Vollantine itself! Do you invest in Memphis?

    1Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y
    Originally posted by @Rachel Luoto:
    Originally posted by @Caleb Heimsoth:

    @Rachel Luoto. That’s awesome. Where in Memphis is it?

     Just a couple blocks north of Rhodes College, in the Vollantine district but the southern side of Vollantine itself! Do you invest in Memphis?

    I’m not super familiar with that area but I haven’t looked into memphis specifically in a couple month.  Yeah I own a couple rentals in memphis.  Really cool city. 

    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Brian G.:

    @Rachel Luoto awesome, congrats! Would love to chat sometime and hear about your experience. We are actively working on our strategy. It's so expensive in So-Cal, but I can't complain about the weather ;) 

     @Brian Burke I know what you mean about expensive! Send me a PM and I'm happy to answer your questions!

    0Reply
  • Michael WallimannPro Member
    Rental Property Investor · Western Washington · Member since 2018 · 151 posts · 60 votes
    7y

    @Rachel Luoto Congratulations that's awesome! I just had my third long distance multi family deal fall through at the last moment because of what I found during my due diligence contingency but I'm still hunting for that next one. As a fellow Western Washington investor your (very well structured) story hits home. Stoked for you :)  Keep kicking backside!

    3Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Caleb Heimsoth:
    Originally posted by @Rachel Luoto:
    Originally posted by @Caleb Heimsoth:

    @Rachel Luoto. That’s awesome. Where in Memphis is it?

     Just a couple blocks north of Rhodes College, in the Vollantine district but the southern side of Vollantine itself! Do you invest in Memphis?

    I’m not super familiar with that area but I haven’t looked into memphis specifically in a couple month.  Yeah I own a couple rentals in memphis.  Really cool city. 

    I really liked it! If it was by the ocean I'd move there, but I've gotten spoiled :) I hadn't heard of the area either but our air bnb host was a former landlord and recommended it!

    0Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Michael Wallimann:

    @Rachel Luoto Congratulations that's awesome! I just had my third long distance multi family deal fall through at the last moment because of what I found during my due diligence contingency but I'm still hunting for that next one. As a fellow Western Washington investor your (very well structured) story hits home. Stoked for you :)  Keep kicking backside!

    Literally same story with a multi - that's the only reason I was out there in person! But oh well got a nice little deal out of the trip :)

    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    7y

    Congrats Rachel! Just make sure to be real careful with those out-of-state properties.

    Podcast Guest on Show #121
    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Andrew Syrios:

    Congrats Rachel! Just make sure to be real careful with those out-of-state properties.

     @Andrew Syrios for sure. Anything specifically you'd be wary of? 

    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    7y
    Originally posted by @Rachel Luoto:
    Originally posted by @Andrew Syrios:

    Congrats Rachel! Just make sure to be real careful with those out-of-state properties.

     @Andrew Syrios for sure. Anything specifically you'd be wary of? 

     Mostly taking things you know about one market into another (price and area quality) as well as being very careful with managers and contractors. I wrote an article about it a while back you might find helpful: https://www.biggerpockets.com/blog/2014/12/23/investing-out-of-state-essential-items-to-vet/

    Podcast Guest on Show #121
    1Reply
  • Thuy Twee Nguyen
    Member since 2019 · 24 posts · 16 votes
    7y

    @Rachel Luoto Congratulations! I heard Memphis was a great place for the price/rent ratio.  I actually read that Tennessee as whole is really good to invest in.  Were you able to find the PM and the contractors through the RE agent?

    2Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Andrew Syrios:
    Originally posted by @Rachel Luoto:
    Originally posted by @Andrew Syrios:

    Congrats Rachel! Just make sure to be real careful with those out-of-state properties.

     @Andrew Syrios for sure. Anything specifically you'd be wary of? 

     Mostly taking things you know about one market into another (price and area quality) as well as being very careful with managers and contractors. I wrote an article about it a while back you might find helpful: https://www.biggerpockets.com/blog/2014/12/23/investing-out-of-state-essential-items-to-vet/

     @Andrew Syrios I hear you about area, neighborhoods are very different in Memphis and that's not something we could have understood without visiting. I like to meet people who have local knowledge and are not investors, and correlate what everyone has to say about the area. I've never bought "from a company", all the investors I know who got screwed either bought from a real estate investment company or with a boots-on-the-ground partner. 

    In my religion there's a story about someone who is given a bit of money to look after, they are responsible with it, and then they are given more. That's what I try to do with my team; give people a little responsibility, see what they do, and if they succeed give them more.

    0Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Thuy Twee Nguyen:

    @Rachel Luoto Congratulations! I heard Memphis was a great place for the price/rent ratio.  I actually read that Tennessee as whole is really good to invest in.  Were you able to find the PM and the contractors through the RE agent?

     Yes, my PM came recommended through my agent, and talking with other investors on BP they confirmed they liked that company. It's actually the PM branch of a turnkey provider, so they have a contracting team and pre-negotiated rates, which kept things simple for me. Other people may say to shop around more, but frankly to me it's not worth the time when I'm already getting the returns and service I want and building trust. 

    1Reply
  • Joshua Zlatkin
    Philadelphia PA · Member since 2019 · 21 posts · 8 votes
    7y

    Congratulations!

    1Reply
  • Michinori Kaneko
    Rental Property Investor · NY · Member since 2018 · 571 posts · 332 votes
    7y

    Congrats! sounds like a pretty sweet deal. what are your expected cashflow on this property? Are you looking to refinance? Looking forward to before and after pictures, if possible!

    1Reply
  • Jeremy Clark
    Contractor · Pembroke, MA · Member since 2017 · 22 posts · 2 votes
    7y

    @Rachel Luoto

    Congratulations!!

    Im definitely interested in hearing more. What is the cash flow on this property after you factor vacancy, mortgage if you’re refinancing, capex, management and maintenance. Wondering if I’m better off starting out with out of state investing as my area is so high priced.

    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Jeremy Clark:

    @Rachel Luoto

    Congratulations!!

    Im definitely interested in hearing more. What is the cash flow on this property after you factor vacancy, mortgage if you’re refinancing, capex, management and maintenance. Wondering if I’m better off starting out with out of state investing as my area is so high priced.

    Hey Jeremy! For us it looks like 200-300/month - I give a range because no matter how many times you do it on paper things are different in real life with the cost of evictions, tax increases, insurance increases, etc :) We could have higher cash on cash with leverage, but we have other high risk investments and like a simple and stable cash flow source!

    0Reply
  • Junior Soares
    Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes
    7y
    @Rachel Luoto Congratulations! Things should start to snowball now assuming you reinvest your cashflow. Best of luck!
    1Reply
  • Chris LumLee
    Investor · Honolulu, HI · Member since 2017 · 187 posts · 108 votes
    7y

    @Rachel Luoto Congrats!

    2Reply
  • Jake Coyne
    Member since 2017 · 4 posts · 1 vote
    7y

    Hey Rachel, Congrats on your third property!

    I'm intending to start applying this investment method as well for my second property, however I haven't done any renovations or fixers before. Could you share what your $15k will be going to (i.e floors, kitchen, termites, paint, etc) and the breakdown of costs for each?

    Just based on my imagination, I would think a $40k property would require more than $15k for habitability. Also, what red flags do you look for in a home of this price?

    Thank you!

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    7y
    Originally posted by @Rachel Luoto:

    Investment Info:

    Single-family residence buy & hold investment.

    Purchase price: $34,900

    Cash invested: $50,000

    3rd property in Memphis closed today! Bought $34,900 cash, have contractor quote $10-15k to renovate, comps/ARV $70-80k, $900/mo rent

    This last month was our first time actually visiting the state (from WA), as we were under contract for a larger deal that fell out on due diligence. Honestly, I think buying out of state is way easier because you're forced to outsource! (this is our 5th property/8th door total)

    What made you interested in investing in this type of deal?

    Returns, low price point

    How did you find this deal and how did you negotiate it?

    MLS listing day-of, came in low and was accepted - it was clear from what the too low prior, selling for less than they paid, and poor property condition that this other out-of-state investor just wanted out!

    How did you finance this deal?

    Our own cash

    Lessons learned? Challenges?

    The unit is listed as 3/2 but had at one time been a mirrored duplex. There's opportunity to leave the layout 3/2, move some walls to make a 4/2, or re-convert to duplex. All houses on this street are nice except the direct neighbor - we will try to tactfully market to them to get them to sell to us now or in the future

    Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

    Aaron Bloodworth is our agent, he works mostly with investors and he's awesome :)

     Congrats..........Keep grindin!

    1Reply
  • Ryan Naylor
    Lender · Salt Lake City, UT · Member since 2017 · 77 posts · 76 votes
    7y
    Originally posted by @Rachel Luoto:

    Investment Info:

    Single-family residence buy & hold investment.

    Purchase price: $34,900

    Cash invested: $50,000

    3rd property in Memphis closed today! Bought $34,900 cash, have contractor quote $10-15k to renovate, comps/ARV $70-80k, $900/mo rent

    This last month was our first time actually visiting the state (from WA), as we were under contract for a larger deal that fell out on due diligence. Honestly, I think buying out of state is way easier because you're forced to outsource! (this is our 5th property/8th door total)

    What made you interested in investing in this type of deal?

    Returns, low price point

    How did you find this deal and how did you negotiate it?

    MLS listing day-of, came in low and was accepted - it was clear from what the too low prior, selling for less than they paid, and poor property condition that this other out-of-state investor just wanted out!

    How did you finance this deal?

    Our own cash

    Lessons learned? Challenges?

    The unit is listed as 3/2 but had at one time been a mirrored duplex. There's opportunity to leave the layout 3/2, move some walls to make a 4/2, or re-convert to duplex. All houses on this street are nice except the direct neighbor - we will try to tactfully market to them to get them to sell to us now or in the future

    Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

    Aaron Bloodworth is our agent, he works mostly with investors and he's awesome :)

    Just curious of your intent on this property, Are you planning on a refi to pull your cash back out? or being that you paid with your own funds are you planning on just letting it cash flow without the debt?

    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Junior Soares:
    @Rachel Luoto

    Congratulations! Things should start to snowball now assuming you reinvest your cashflow. Best of luck!

     Thanks Junior! We actually reinvest with our friends company Exequor Capital to quickly grow our cash for the next deal, you should check them out!

    1Reply
  • Rachel Luoto
    OP
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    7y
    Originally posted by @Jake Coyne:

    Hey Rachel, Congrats on your third property!

    I'm intending to start applying this investment method as well for my second property, however I haven't done any renovations or fixers before. Could you share what your $15k will be going to (i.e floors, kitchen, termites, paint, etc) and the breakdown of costs for each?

    Just based on my imagination, I would think a $40k property would require more than $15k for habitability. Also, what red flags do you look for in a home of this price?

    Thank you!

    Love the question Jake! A lot of the price of a fix up is labor. For example, my friend couldn't get a quote for an 800sqft interior paint job in Seattle for less than 30k! However, our quote included fixing a large water damage leak in the kitchen floor and wall, cleaning the carpet in the bedrooms since it's not bad just dirty, new vinyl plank in the common areas, light renovations on the bathrooms, new windows, new paint throughout, new hot water heater... more I can't even remember. It's pretty thorough. It would be a lot more if the house needed the drywall/electric/plumbing gutted out, or a new roof, like a lot of fixers do, but I wouldn't go that far unless it was desperately needed or selling for flip.

    For me, a red flag will always be neighborhood, and after that, the only renovation item I've shied away from so far was foundation/structural on an apartment complex I had under contract. 

    0Reply
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