Where to invest best out of states?

24 Replies

Hi everyone! This is Alicia from Los Angeles. I am a new real estate investor. I would love to invest out of states. Where are the Best place to buy right now? ( July 2021) And why?

The very worst thing you can do as a new real estate investor is to invest out-of-state. While prices are lower in other states there is a good reason they are low. The rental income is lower and when rents are kept low your properties don't appreciate in value as fast. Investors make their big money from appreciation and rental income barely pays the bills and does not keep up with appreciation. When you are not hands-on and you hire a management company you automatically inherit all sorts of additional expenses that will put you out of business.

I just sold almost all of my 28 homes in Las Vegas because I had a great management company, but we can't expect that management companies will inspect the homes the same as a homeowner and the tenants destroyed almost every property I owned where it cost me $6,000 to $12,000 to clean and repair and that was by doing the work myself with two of my employees.

Another problem with out-of-state investing for you is you can't trust anybody you deal with. Every broker will tell you that every property on the market is great for you. Nobody represents you. Not even your own broker.

When it comes to repairs out-of-state you will get burned. I had a home in Idaho where my management company called me at 8 pm, told me the furnace was broke and the temperature outside was 5 degrees. The management company told me the house needed a new furnace for $6500. I told the management company I was a HVAC contractor and I would drive the 850 miles from Los Angeles and be in Boise in the morning to repair the furnace. Five minutes later, I received a phone call saying the furnace was repaired and working fine for $350.

Even though prices in California are high you will still find that the most money can still be earned in California. Even if you don't make as much as you would like in California you will still be better off by reducing the losses you inherit from not being hands-on and by not having to trust others to make your decisions. 

Never ever trust someone else with your money. Stay away from Turnkey properties and stay away from syndicated properties. Never invest based on a broker's or friend's advice. Don't invest until you can do all the math and projections by yourself.

Originally posted by @Alicia Shen :

Hi everyone! This is Alicia from Los Angeles. I am a new real estate investor. I would love to invest out of states. Where are the Best place to buy right now? ( July 2021) And why?

 Invest to do what?

Rent out, flip what?

For me in central FL I am finding more deals than I have the resources to buy 

@Alicia Shen If you know who Neal Bawa is, he has said on multiple occasions lately that Idaho Falls, ID is his #1 market right now. You can find any of his youtube videos or webinars stating why. I can even send you a link for some of them. I'm working on a huge new development here and in the info we send to investors it also highlights some of the reasons why. It has ranked high on many lists for tech, growth, jobs, relatively low crime, etc. If anyone wants to consider anywhere in the Eastern Idaho area, we're happy to help.

@Alicia Shen I don't want to be a dream killer but I agree with @Jack Orthman out of state as a newbie is not the wisest decision. My answer for the best place to invest would be WHERE YOU HAVE THE BEST TEAM. You need a good property manager, agent, and contractor/handyman. You can have a "great" market/deal and have the deal completely killed because you don't have a good team/boots on the ground. I would work on building up capital, networking and doing research on places close to you first personally.

@Alicia Shen i have some out of state rental properties and am actively looking to grow my portfolio. i'm actually in the process of building a team in a 2nd market to diversify. Some people here have identified some challenges to investing out of state, but i truly believe if you buy right and have a great property manager you can be successful. Don't get discouraged -  do your own research, get educated, set some goals, and network with like minded people. 

If, If, If, If If...I see a lot of IFS!

If you find a good property manager!

If you find a good contractor!

If you buy in the right place! 

If you buy at the right price!

If your tenant doesn't destroy your property!

If your property appreciates as you project!

If everyone you deal with is honest, intelligent, educated, trustworthy, experienced, watches your back....

If we live in an ideal world we would all be billionaires.

Do you want to invest your money, or do you want to speculate. Speculating is like going to Idaho with a tent, picks and shovels and searching ten thousand squares miles of baron land for gold. Investing is like purchasing a business that is already a gold mine like a liquor store, gas station, plumbing company, or a multi-unit property where you pay someone your money to take over their business. Speculating is when you go to Idaho Falls where there are thousands of square miles of raw land where construction is booming and you hope and pray to god that there will be some sort of imbalance between the construction and demand where the prices of homes will appreciate in value so you the properties you purchase appreciate.

Never jump on the bandwagon and run for the gold hills with thousands of insane speculators. Invest in 'sure things'. I purchased 10 properties in Boise and Meridian Idaho more than 10 years ago. If I take my appreciation and profit from all 10 houses for the more than 10 years I made more money on one single family house in Torrance California during the 10 year period than I did for all 10 houses in Idaho.

You can make more money every year on 1 house in Manhattan Beach California than you can on 20 houses in Compton California, or maybe you can make more money on 1 house in Torrance California than you can make on 10 houses in Compton California.

Regardless, of whether or not my numbers are true or accurate, it is insane to invest your money based on advice from any person on the planet of this earth whether or not the person giving advice earned a trillion dollars from the real estate business. I can tell you more sob stories told by people who invested out-of-state that I can tell success stories. 

Don't listen to me. Don't listen to anyone else. Don't invest your money until you have looked at so many properties that when you find the right property you will be so positive you will not ask anyone else questions and you will be able to tell the experts what is right and what is wrong. You have to be able to crunch the numbers and forecast your projections 5, 10, 20 and 30 years out. If you can't do that then put your money into something that pays a few percent because making a few percent more than that is not worth the risk, time, mental stress nor the aggravation. Learn to hold onto the money you have and be patient even if it takes several years.

In 2001, I met a real estate broker at a stock and options trading seminar. The broker invited me to his multi-million dollar home and we started talking about real estate. This broker had won an award from President Bush for making some significant number of people millionaires through real estate. He did not want one penny from me and he never charged for his services. He was only a real estate broker.

This same broker is also the same broker I always talk about when I tell people they should never listen to the advice from brokers because when I found a 28-unit building for sale for $2,150,000 and asked him to put in an offer for $1,900,000 he said, 'no' and said we would be laughed at. He told me the 28 units was too large for me. So, I told him I would go to another broker and then he put in the offer. The seller came back with $1,950,000 and I saved $300,000 by not listening to him.

Here is a little advice from broker I learned that is super simple and powerful. This is something that every fool should know, but nobody stops to think about this. This tiny bit of advice changed my entire life in regards to how I searched for properties and how much more money I earned.

For the first 51 years of my life I had earned several millions dollars, lost exactly $1 million 2 times and in 2001 at the age of 51 my net worth was probably a little under $1.5 million.

This is what my broker friend taught me. When you invest in real estate you want to invest in properties where you will double your investment capital every 1 to 2 years. That means, you want to earn 50% to 100% on your money every two years. While this sounds crazy, at first, it is 100% doable when you understand how to do the math and when you become the patient enough to search for the right properties.

Suppose, you have $30,000 to invest in real estate. To make 50% to 100% on your money in one year is super simple. Find a property that is worth $30,000 more than you pay for the property and on the day you close escrow you just earned 100% on your money. Or, find a property where you pay $30,000 down, you do a few minor improvements and now the property's value after deducting all your expenses and sales costs will net you a $30,000 profit. Or, find a multi-unit property (4 units or more) where you only need to do a little cleaning and painting, raise the rents and then see how the property's value appreciates almost exponentially when you factor in the Gross Multiplier.

Keep your money in your purse before you end up inside a beehive and wait like an alligator for the sure thing. I purchased 5 apartment buildings between 2001 and 2005. I love to be in the game like a bunch of gambling junkies at a crap table, but I learned to wait for the sure thing like an alligator lays still for several days waiting for a catch. When the market crashed in 2008 I had the cash to purchase 28 homes in Las Vegas for 30 cents on the dollar. Maybe, you will never live to see those deals come again, but it you hold onto your money long enough you will eventually run into something super hot and since you already looked at so many properties you will know what a goldmine is when YOU see one and you will not have to ask for advice.

Never trust someone else with your money. Always have control of your money. Never get into any type of investment where someone else manages real estate for you and they control your money.

@Alicia Shen I started out investing in my local area 22 years ago and had some bad experiences but learned a lot.

3 years ago I got back into the market and now have 10 units in 4 properties. I’ve learned a lot. But I’m ready for bigger investments and in my area the biggest deal you will find might be a 6-7 unit ancient house that’s been chopped up into one bedroom apartments.

So, I’ve gotten on board with someone and am preparing to create a team in an out of state market for a larger property. It’s going to take time and more effort than just plunking down a 25% deposit on a conventional 30 year mortgage but I’m optimistic that I can make it happen.

So don’t get discouraged. BiggerPockets has a book on out of state investing that’s great. Start there, and make your dreams happen!!

Originally posted by @Jack Orthman :

If, If, If, If If...I see a lot of IFS!

If you find a good property manager!

If you find a good contractor!

If you buy in the right place! 

If you buy at the right price!

If your tenant doesn't destroy your property!

If your property appreciates as you project!

If everyone you deal with is honest, intelligent, educated, trustworthy, experienced, watches your back....

If we live in an ideal world we would all be billionaires.

 Funny thing is all of these IFS apply to investing locally and out of state. Not everyone has 20% down to buy a $1M investment property in socal. Does that mean they should not invest in real estate? Buying a 2-4 unit locally is probably the best way to go to build wealth since you can take advantage of low down owner occupant loans, but house hacking isn't for everyone. Not everyone wants to be a landlord or deal with having others live on your property or live in a less desirable area. You have to start somewhere... if the options are to put $20K down on an out of state property OR wait 10 more years to afford a $200K down payment on a local property OR even worse never invest in real estate, I know which option I'd choose.

I would rather wait 10 years and strike a major gold find that lose on one one out-of-state investment that was lousy from the start because of all the inherent losses. 

As stated a million times these are to very serious sayings:

"The Rich Get Richer"  and

"It Takes Money To Make Money"

So what if you want to be in the game picking up peanuts from long-distance investing and in a few years you made very little, broke even, or wish you never got into the real estate business in the first place.

Someone just asked how I made all my money and I can't answer that question because it is a very long story that starts when I was 5 years old. So, I am going to skip answering, but I will tell you reason people like Warren Buffet makes millions of dollars in the stock market. This very simple thing works with real estate and this is why "It Takes Money To Make Money"
and why "The Rich Get Richer".

This is the trick to becoming a millionaire very quickly. The OP has some cash saved up and she wants to invest it in some out-of-state properties. Jack tells her she has two choices. There are too many 'IFS' if she invests out-of-state, her risks are high and she automatically inherits a tremendous number of downsides.

Two rules apply before the OP invests her money. 1) It Takes Money To Make Money and 2) The Rich Get Richer.

The OP's second option is to keep her money in her purse until a goldmine comes along. If she hold onto her money for 5 years and saves more money she will have a much larger wad of cash when the golden opportunity.

Here is Warren Buffet's little-known secret. Warren Buffet keeps more of his money out of the stock market than he has in the market.

This is the reason why and I do the exact same thing. How do I make most of my money? Back in the day, I used to day trade the stock market. I made money, lost money and after 20 years I broke even. The same thing happens when people take risks with real estate. 

So, one day, I read between the lines and realized what Warren Buffet was doing. So, I stopped day trading, put $1 million into my online stock trading account and I stopped trading cold turkey, It was difficult because I was a trading addict.

This is how to make millions in both real estate and the stock market. The stock market has what I call Crisis Days. It is very simple to see in historical charts that Crisis Days Occur approximately every two years. Here are a few examples. 

Historical charts starting from 1637 to 2020 for stock market crashes.
S & P 500 Crisis Dates
S & P 500 Crisis Dates
1. 05/01/1901 S & P 500
2. 10/25/1929 S & P 500
929 Dow fell 90% in less than four years
3. 06/15/1948 Dow dropped 16%
4. 01/02/1953 Dow fell 10.1%
5. 11/02/1957 Dow dropped 14.1%
6. 12/31/1959 Dow fell 13.9%
7. 02/07/1962 Dow dropped 26.5%
8. 05/278/1962 S & P 500
9. 12/03/1968 Dow dropped 30%
10. 05/26/1070 Dow dropped 985.21 to 631.16
11. 12/04/1974 Dow dropped 45%
12. 2/13/1980 Dow dropped 13%
13. 04/21/1980 Dow dropped 16%
14. 08/12/1982 Dow dropped 22.6%
15. 10/19/1987 S & P 500
16. 10/13/1989 S & P 500
17. 07/1990 S & P 500
18. 10/27/1997 S & P 500
19. 03/10/2000 S & P 500
20. 09/11/2001 S & P 500
21. 10/09/2002 S & P 500
22. 10/11/2007 S & P 500
23. 09/16/2008 S & P 500
24. 05/06/2010 S & P 500
25. 08/01/2011 S & P 500
26. 08/18/2015 S & P 500
27. 09/20/2018 S & P 500
28. 02/24/2020 S & P 500

The last Crisis Day should be very clear in your mind. It was when COVID-19 causes the market to crash.

So this is what the people do when they don't blow their wad of cash on lame stocks, or blow their cash on lame real estate investments. The people who are the 'The Rich Get Richer' hold onto their cash for several years and wait until February 24, 2020 and when the market dives and Coca Cola drops by 500% you have to be a serious dumb fool to refrain from buying $500,000 worth of Coca Cola or Taco Bell where you know the stock has the value, will bounce back and you earn $2.5 million within a few months.  Some of my friends stick with an index like SPY and they refuse to trade stocks and I think they make 100% to 300% on their money.

My point: Take on all the inherited risks I explained for out-of-state investing, or don't take any risks at all and wait until a goldmine falls in your lap.

Do goldmines fall in your lap? They do for me very frequently. In 2001, I had already been looking for real estate to purchase and I ran into a real estate broker at a stock and options trading seminar. He suggested that I stop investing in the stock market and he showed me the numbers regarding how apartment units appreciate almost exponentially. The following week, I went to about 10 real estate broker offices and accidentally say a listing on a broker's desk for a 28-unit building. When I told the broker I had $900,000 to invest he got really weird and kept insulting me by telling me that everybody is full of sh..t and he walked into another room. I grabbed (stole) the listing from his desk and walked out. The asking price for the property was $2,250,000. I offered $1.9 million. The seller came back with $1,950,000 and I saved $300,000. After I had the building in escrow I got a $50,000 credit for repairs plus $18,000 for security deposits. Today, the building is worth $9 million.

If I has blown my wad of cash on the stock market, or had bought crappy houses I would not have had the down payment for the building.

Here is another goldmine that fell in my lap. A broker called and asked how much I thought a 14-unit apartment building was worth. I knew exactly what building he was talking about before he told me because there was only 1 14-unit building within several miles of the street he mentioned. I knew, for a fact, that apartments were selling for $100,000 per door, but I told him the building was worth $800,000. The next day he called and said the seller would take $825,000. I said, "SOLD", but if I did not have the cash I would haves missed that golden opportunity. The building is currently worth $300k per unit, or $4,200,000.

Today, someone asked how I made all my millions of dollars. Patience! Patience! Patience! Don't invest in junk. Keep your money in your pocket until the stock market has a Crisis Day. The real estate business has Crisis Days. That is why I kept my cash in my pocket and was able to pay 30 cents on the dollar for 28 homes in Las Vegas between 2008 and 2010.

Maybe, at this time, you can't save enough money to buy 28 homes, but you never will when you invest in low-price out-of-state properties where the rents are low and where you have too many hands in the soup and where the cost to clean and paint a house in Memphis is exactly the same as California. In fact, I went to Idaho to paint my own homes because painters want $5500 to $6500 just to paint inside a 3-bedroom home.

@Alicia Shen

Metro Detroit still has great ROI and Cash flow.

The “ring cities” seem to be a great spot for our out of state clients because it’s pretty straight forward.

- Buy a house for $70-$115k

- Rent for $1000-$1400 (1-1.5% rule deals)

- ROI 10-15%

- solid location

- use a decent PM

- Go buy another…

Warren, Taylor, Lincoln Park, Redford, Southfield, Harper Woods, Hazel Park, etc.

@Jack Orthman wow man just made me second guess my strategy... After more than a month of research into turnkey providers!!!! Boom you crushed my plan lol and your suggestion instead? For someone living in NY!