Out of state investing
Saint Peters, MO · Member since 2013 · 6 posts · 2 votes
Hello, I am new to the group and just starting my road to real estate investment education. My question is,
Does anyone know the Danville, IL market. It is where my husband was from originally but now we are in the STL area. We know the area is depressed and there are alot of cheap houses to be bought, we are just now sure if this is the right move for us. Our goal is to buy and hold for passive income. we would like to have around 20 properties total by 2018. any thoughts on buying out of state distressed SFH's for the first time out?
OK, I don't think most of this chain is answering Jennifer's question. Even the arguments for or against out-of-state investing aren't helping her (in my opinion).
Jennifer, you are asking about two things: buy locally or don't, and buy distressed or don't. Whether you should buy locally or not depends on your personal preferences. I agree that Missouri should have quite a bit of properties not too far from you that you could hit up, but if you want to buy out-of-state or out of your local area, there are plenty of ways to do that safely and with minimal risk. Those ways can be explained and/or taught outside of this post. Then, for buying distressed or not, again it depends on how much risk you want to take. To be honest, taking on a distressed property in further away from you is extremely risky. With everything else, there are ways to be smart about it, but that combo of investing (distressed and far away) is going to be the hardest combo you can do, and if you are new, it's a huge risk.
I'm an advanced investor and I won't buy distressed properties simply because I don't want that risk or workload. But if I were to buy one out of my local area, I would only do so assuming I had a no-joke insanely awesome team in place to deal with it. Huuuuge risk.
For a first-time investment, I would say try to go for the least distressed property you can, but if you are going to have to work on a property, keep it closer by. Or buy a property out of your local area that doesn't need work.
Hope that helps!
Welcome to BP. I have purchased out of market. It sucks, even with experience. For your first few, you'd be best staying in the STL market - there are deals out there. If you still had to go out of market on your first deal, I'd work with a turn key operation, along the lines of Memphis Invest or that type of model.
In my experience and opinion, any savings or upside of buying in a market aways away is offset by the headaches that go along with it.
Hi Jennifer Severado,
Welcome to BiggerPockets!
There is no questions that there are great deal in out-of-state markets, particularly if you're in a depressed or economically challenged home market. The key is to begin by selecting a stable, growth, or emerging market. Then you can select the right neighborhoods and properties within that market to get the best deal in terms of location and cash-flow.
Working with the right turn key provider will help you select the right market, select the right properties within those markets, as well as provide you with a quality team of people to help you from financing to inspections to property management.
I do not suggest trying to find distressed ("fixer-upper") properties out-of-state and attempt to rehab them. Although it's possible to do, in my opinion it's not worth the time, risk, and headache that goes along with it to try and squeeze some potential extra equity.
Continued success!
Thank you Ed and Marco. Truely appreciate your feedback and will probably stick with the STL market for now. BTW, It's pretty exciting to wake up and check the forum and see that someone has responded. I am new to participating in forums and still in awe of the information sharing ability!
We buy out of state where we have a support network. We buy "destressed" property when describing the financing more often than home condition. We find that the best way for long distance. We also buy more expensive houses but less issue/turnover to make it easier. This has lower "profit" margin than other but has allowed us to be successful. We have a buy and hold plan. Are goal is cash flow for retirement in 15Annapolis years.
Hi Everyone! My first post. I'm looking at a property that is a 3 hour flight away. Have friends who live 5 minutes from the house and feel good about neighborhood. What are your thoughts on letting the tenant know who I am and that I live out of state? I like transparency and honesty and feel that this could be give and take for both the tenant and myself.
I invest in an area that is 2 hour flight away. My best advice is to find a great property manager. Interview a bunch and find one that would treat your money like their own.
@Chris Kirby - I think its a good idea to let them know you are out of state and you can say that your friend 5 minutes away will be doing drive by's from time to time.
Hi @Chris Kirby
First of all welcome to BiggerPockets!
I don't think you should be telling your tenants who you are or where you live. The anonymity that comes with using a property manager is a good thing because you leave them guessing as to how strict you are. You want your tenants to stick to your lease contract and your manager to enforce it. Let you manager deal with the tenants and you can stay out of site. [My 2.5 cents.]
Continued success!
Thank you Marco! Thank you Johnson!
@Jennifer Severadoelcome to biggerpockets.
Keyword alert examples : Illinois, Saint Peters, Missouri,
Danville, Vermilion County, Cook County, buy-hold,
marketing, zip, duplex, and etc
Good luck -> " around 20 properties total by 2018 "
Honestly you have a lot of options in STL to be looking out of market for your first deal. I know it can be rough there but focus your search to the revitalizing areas.
Good luck out there
My preference would be to stick to your own backyard & find a niche that will be profitable.
The romance of buying out of state can turn into a nasty break up.
It would not be my first choice.
Out-of-state investing should not have a "romance" factor to it. That could get you into trouble. Investing anywhere should be based on sound fundamentals and solid analysis. If the market, economics, or financial performance of the investment doesn't make sense, then look elsewhere. There are many good deals around the U.S. (not usually in your backyard), so logic and analysis should prevail.
Refer to my 10 Rules of Successful Real Estate Investing.
Continued success!
Hi folks! This is my first post. I am very new to REI and do not yet have any investment properties, so I have a ton of questions. This forum has a lot of good info for me. Thank you for the discussion.
@Marco Santarelli - I would like to begin out of my home state of CA due to the price of real estate in CA. Can you suggest how to begin researching which are the best markets to invest in at this time? In your 10 Rules of Successful Real Estate Investing, you state to
Are there specific websites you can suggest for me to review? Other suggestions? I would appreciate any suggestions you - or anyone else may have!
@Ellis San Jose - Hi! I notice you are from CA also. With the RE prices in CA, why do you still promote investing in your own backyard? Does this hold true for multifamily properties in CA?
Thank you!!!
I prefer to buy & manage in my own backyard. I only invested out of state as a defensive move to escape the real estate bloodbath. Now that CA is in recovery, I am focusing in state only. I don't pay retail prices when I invest.
As far as RE prices, I like to quote Warren Buffet " Price is what you pay, Value is what you get".
Smart Multi-family investors do very well in CA. in turn around properties & focusing on niches. But since many buyers are simply cap rate chasers, they will continue to go out of state.
Thank you for your comments and insight. Gives me some more to think about.
OK, I don't think most of this chain is answering Jennifer's question. Even the arguments for or against out-of-state investing aren't helping her (in my opinion).
Jennifer, you are asking about two things: buy locally or don't, and buy distressed or don't. Whether you should buy locally or not depends on your personal preferences. I agree that Missouri should have quite a bit of properties not too far from you that you could hit up, but if you want to buy out-of-state or out of your local area, there are plenty of ways to do that safely and with minimal risk. Those ways can be explained and/or taught outside of this post. Then, for buying distressed or not, again it depends on how much risk you want to take. To be honest, taking on a distressed property in further away from you is extremely risky. With everything else, there are ways to be smart about it, but that combo of investing (distressed and far away) is going to be the hardest combo you can do, and if you are new, it's a huge risk.
I'm an advanced investor and I won't buy distressed properties simply because I don't want that risk or workload. But if I were to buy one out of my local area, I would only do so assuming I had a no-joke insanely awesome team in place to deal with it. Huuuuge risk.
For a first-time investment, I would say try to go for the least distressed property you can, but if you are going to have to work on a property, keep it closer by. Or buy a property out of your local area that doesn't need work.
Hope that helps!
So many ways to invest! I love it. Try reading the Begginers Guide. Its such a useful tool.
Best of luck to you,
Eddie M
I feel your pain. I have been investing in the Ventura County market for years & the deals never come easy. The good ones aren't on Loopnet or on the MLS typically. The focus is mostly on circumstance rather than area. The hardest part is having the patience & consistency. It's tempting to just hop on a plane & have 10+% cap properties biting you on the butt in other states.
I am working on a few Seller Carry properties in LA & Ventura County that will cash flow nicely with terms that make sense. I drew a (2-3 hr max. drive) circle from my office & mail the heck out of the niches I am targeting. I don't really like multi-fams that much anymore because of the nature of the asset class, with rare exceptions, apartment dwellers tend to be higher turnover which = more expenses= more work= less profit.
I would rather drive 3-6 hrs round trip & be home for dinner than fly to the Midwest or Texas (been there) & spending a week in a hotel taking care of issues.
To be fair, this just my personal opinion based on my experiences. Just be careful "cap rate chasing" & focus on the big picture too.
@Jennifer Severado I need to echo what @Ali Boone said.
I do not think the question is in state or out of state, distressed or not distressed, I think the question is about your risk tolerance and desired return.
I have only been on this board two days and what I think I am learning is that Real Estate is just like any other investment, the more risk, the more potential upside. More risk also means that you have a greater chance to lose some or all of your investment.
Since I have a low tolerance to risk, I am saving my cash (and considering pulling some equity from my first SFR deal) to either find a fixer in my out of state market where my existing SFR is and I have an existing support system *or* go with a turn key investment property in a different out of state market.
What has been helpful for me is developing the business plan mentioned in the getting started guide. This helped me and my wife define what we wanted to do (5K per month of rental income to supplement our existing retirement plan) and how we wanted to do it (do not put the existing retirement plan at risk).
Just another point of view.
Out of area is NOT for the faint of heart or inexperienced. I've found it very beneficial and as many on here are aware, I've been able and willing to move to different areas to follow up on good deals. I've invested in many states and have lived in quite a few also. It can be done, but I've sure seen a lot of out of area investors get taken to the cleaners. Buyers beware....Rich
I just read the previous post and I readily agree.
Jennifer, we've got similar paths it seems. I went to college at Illinois Wesleyan just down the road from Danville and my first job out of college was in OFallon, MO. I lived in St Peters off of Mexico Road near the Mall. That was over 20 years ago, but I have fond memories of there (I'll throw in a Go Cards). We don't invest directly in real estate, but we do invest Nationally in 1st mortgage notes. It took us a while to build a solid network that we could trust to look into our investments. I saw St Peters and Danville and had to chime in. Good luck and let me know if I can help in any way.
Hi @Rick Bradd,
As I've said for years, "Live where you want. Invest where it makes sense!"
The biggest challenge in cyclical and "bubble" markets like coastal California is having the time and patience to find the real deals. Good cash-flow deals aren't just sitting around in plain sight.
To quote @Ellis San Jose, "The focus is mostly on circumstance rather than area. The hardest part is having the patience & consistency." That means you need to spend the time looking for distressed sellers and/or distressed properties. In my experience most investors lack the time and/or experience to find those opportunities.
You can find good quality investment properties in other markets that will help you meet your investment goals and criteria. I'm referring to good markets, neighborhoods, and properties, under professional property management. You do not need to manage your own properties - ever. You're a great example of someone owning rental property within driving distance and never managing it or even visiting it within the last two years!
If you focus on the big picture, you'll never have to "chase cap rates".
Continued success!
NO! "The more risk, the more potential upside" is what stock brokers tell you to convince you to "diversify" within the same asset class because neither one of you have any control over the investment. This is NOT true with real estate.
Real estate allows you to have full control over your investment. It allows you to minimize your risk by selecting the markets, neighborhoods, and properties that make sense. You also control who you hire and keep as your property manager.
Real estate is the best asset class to invest in because of this, and more.
Are there specific websites you can suggest for me to review? Other suggestions? I would appreciate any suggestions you - or anyone else may have!
Hi Margaret,
Welcome to BiggerPockets!
I'm glad to hear that you've recognized that the prices, and rent-to-value ratios here in most parts of California don't make financial sense. This has forced a large number of investors to leverage their investment capital in other markets where they can get more property with higher cash-flows and rates of return.
Our website blog is chock full of information that answers your questions above. I would start there. In addition, you can find a lot of great information on the BLS website, city-data.com, Zillow, Trulia, local Chamber of Commerce websites, local Department of Commerce websites, greatschools.com, etc.
Continued success!