BRRR method for out of state investment for Newbie. Should I?

8 Replies

Hello,

So I am interested in using the BRRR method to start investing in real estate but I live in LA, CA and I just don't have the money to do so around where I live. Also, I am not sure if I should go into it new with such a big loan since multiplex can average from 1.5 to 2mil.

I want to invest out of state (Texas, New Mexico and Arizona are some of the states I'm looking into) but not sure if that's a good idea since I don't have the freedom to travel and I don't plan on quitting my day job. 

Any advise for someone like me? Is starting off using the BRRR method ok? and do I need to hire a lawyer to review contracts when purchasing? I am afraid of getting scammed.

Any advises or even your personal stories on how you started are appreciated. 

FYI: I just started looking into real estate investment and plan on using VA loans.


Thank you! 



Hi Saemi! 

You can certainly do a BRRR out of state and manage remotely. What you'll need to do is build your team wherever you decide to invest. I would recommend starting with a realtor as they will usually have good contacts for lenders, Property Managers and contractors. A good lender will be able to review your VA loan options as well.

Once you build your team, it will be much easier to analyze and make offers on deals. I've done this investing out of state and it has worked wonders and made my life easier. Hopefully this helps! 

All of my investing has been long distance, but I started out with two properties that I bought with a conventional loan first. That definitely taught me a few things before I moved into the BRRRR strategy.

It's 100% doable for you to start with long distance BRRRR's but it would really make everything go smoother if you had either a) experience with real estate, or b) experience managing people. If you don't have either of those you might want to consider buying a property that's in good condition first - it'll give you some experience and you can start building your team that way (real estate agent, and property manager).

I have never hired a lawyer - but it can't hurt, if that makes you feel comfortable you should do it.

Living on the West Coast is super helpful - I call all my contractors first thing in the morning before I start my normal job - it's 7am for me, but 9am for them.  

Read David Greene's book, "Long Distance Real Estate Investing". From there do research on areas. Interview key team members. Then take the plunge. Turn key or rent ready property for the first one would be good to start then grow from there. 

Definitely can be done. I work with 20-30% out of state investors. I advise hiring ficuriaries, instead of say a real estate agent who only gets paid if you close the deal.

Fellow Veteran here, and licensed agent in CA (San Diego). I feel your pain as far as trying to invest in an expensive market! I also recommend reading David Greene's book for out of state Real Estate Investing, great read! 

As far as using the VA loan, you can't use that for out of state properties as they require you to live in the property as a primary residence. You have to live in it for a year, only then can you rent it out. Good news though! You can purchase up to a four unit multiplex, live in one unit and rent out the rest. As long as your DTI is adjusted with your lender to account for 75% of the potential income that the property would bring in you can get qualified for a hefty loan, all while using the benefit we earned to use zero down! I've seen people approved for 1.25 million dollars loans on a quadruplex here in San Diego. It's truly an awesome tool to get started.

Lots of great info on this thread. I am an investor who have invested out of state investing strategy to build my portfolio. I live in Twin Cities, MN but this area is very much saturated by investors where the numbers didn't make sense for a while so I went in the Kansas market. Below are the steps I took in order to successfully complete out of state investing-

-Building a team: Start with 2-3 investor friendly agents (become part of the Facebook investors group in the town you are interested in to invest). You will get the same MLS properties as they will send you like they do everyone crosses their path but be sure to tell them you are investor & numbers are what that matters for you. Be very specific (do your research which zip codes you are interested) on your criteria. You may come across some off market properties through agents connection in the area.

-Financing: Call around as many banks as you can in the area to find out the interest rate, down payment percentage, amortization etc. (it is different for every bank and investor). Lot of banks will not lend to you for being out of state resident. In most cases it will be 20%-25% down payment as it will not be your primary home (5% down) & they want some skin in the game. Once you & the bank is set you can start sending them properties you are interested in after you ran your numbers. To be able to pull BRRRR in another state you will need a great team & you will also need experience in managing folks.

I hope this helps & sorry for the long explanation. 

Thanks

Toby

Personally, if I were to invest in an "out of sight" area (I'll call it 50 miles+ from where I am) I'm going to need to be on the ground. To me, this an investment, and information and connections are important.

Someone earlier recommended getting involved with the local real estate groups in the areas you're looking, and I agree. Some are doing Zoom calls right now, which you can take from where you are. Get a sense of their markets, their numbers, the areas they like/don't like. If you have the funds you may want to consider taking a trip out to whatever locale you want to invest in. Having your eyes on the property and the neighborhood are important, in my opinion.

OOS is a bit too risky for my extremely small, dull portfolio. But obviously some people have done well with it -- having someone you trust in the area to be your day-to-day manager is important.