First time investor needing some confidence!

Member since 2020 · 23 posts · 15 votes

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

Quote from @Travis Timmons:

@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.

The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.

“And a pro forma vs. end of year actuals are very, very different.”

45 years investing in real estate. I have NEVER seen a pro forma statement put together by a seller or broker that

1. Had any basis in reality

2. Was in any way reflective of past experience

3. That had even a passing resemblance to tax returns or financial statements

4. That could be achieved without spending an inordinate additional amount in cap ex;

In fact all I have seen had these items in common

1. Were based on dubious and unproven speculation, assumptions and best case scenarios

2. Were obviously “reverse engineered” to find a way to “back into” an attractive or at least acceptable cap rate

3. Often contained mathematical mistakes

4. Tended to leave off some categories of expenses completely

5. Assumed nothing could possibly go wrong in the next 5 years

what you want when you look at an investment property is to know the current rental amounts, specific expense items, and conditions of the building, grounds, and mechanical systems. The rest of the numbers the investor needs to “fill in” themselves based on a thorough due diligence. If you’re not willing to do this, then you may be best off investing in some kind of real estate fund concept. Prices in relation to rent are too high to have the cushion that was available before.

Private Mortgage Financing Partners, LLC

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
1y
Can anyone post an example of a deal that's "cash flow positive from day 1?" What about closing costs, rent ready costs, lease-up costs?
1 Reply
Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
1y
Quote from @Benjamin Ying:

Quote from @Jimmy Lieu:

Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

Hi Benjamin! Welcome to BP and I'd love to help answer some of your questions.

1. No, you do not need to sacrifice cash flow for good macros. You can get both in a real estate market. For example, here in Columbus Ohio, you have amazing macros (population growth, job growth, and companies moving and developing here like Intel headquarters, Amazon, FB, Google, Nationwide, and recently Anduril AND you can still find positive cash flow and the 1% rule here PLUS there's AMAZING appreciation potential.

2. You would definitely have an advantage investing in a market if you already know people there but there's tons of investors who invest in markets they have never visited or seen before. So don't be confined to just areas/markets that you know people in! If you have a great investor agent, he'll be able to help with finding you personalized deals, helping you learn good/bad neighborhoods, estimating renovations/scope of work, setting you up with his team, etc.

3. Definitely go with a PM as an OOS investor. You do not want to be taking 2AM calls at night about a clogged toilet from across the US. You can still get positive cash flow even accounting for a PM - tons of my clients do as well!

4. No, it's not. If it's a deal that is in a very very desirable location and has tons of built in equity and appreciation, I would be totally good with negative cash flow for Y1 and Y2. It is really situational and depends on your resources.

Happy to connect and answer any questions you have! :)

Thank you for the clear and concise answers Jimmy! Columbus has been coming up a lot and would love to learn more. Do you have any more materials to share with me about the market? The metrics I'm primarily focused on are: rent appreciation rate, property appreciation rate, economic growth rate, unemployment rate on the macro level.
Yup, I'll connect with you! :)
[email protected]614-300-7535
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Min ZhangBusiness Member
Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
1y
Hi Benjamin,
1. The 1% Rule is a great starting point to gauge cash flow. I recommend checking market with great macros.

2. If the market aligns with your goals, it makes sense to take advantage of the connections. I’d suggest chatting with your friend about what’s been working for him, and maybe ask for some recommendations on building a solid local team

3. It's personal choice. Direct flights are a huge convenience, but what matters most is if the market fits your overall goal and strategy.

4. Yes, I always recommend out of state buyers to have PM in place.

5. It's not uncommon to have lower cash especially in markets where properties are appreciating. In some markets, it’s rare to hit the positive cash flow in B class or better, but cash flow can still be decent in the C+ areas.
[email protected]614-412-2912
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Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
1y
@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.
The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.

4 Reply
V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
1y
Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

1. Off-set is not the word I would use. It adds to the characteristics you're looking for. The 1% rule is antiquated. Don't get caught in terms, get caught in trends.

2. Doveryai, no Proveryai. Remember, nobody is looking to work with you unless it's to their benefit. Now, if you can benefit too then you analyze if that's worth it but if it's just the former, then stick to the original point.

3. Expand, but don't throw the entire country out there. Screen by what you're looking for; housing scarcity, tax implications, barrier of entry, coastal, climate risk off or on, etc. Tons of things, once you get an idea of your angle. Start screening cities that fit that.

4. Definitely no. But highly recommended, save yourself the time but more importantly the liability.I consider it a necessity, but in reality it's not.

5. In today's era, that's normal. Cash flow is a function of LTV, so this is where it gets murky.

2 Reply
Tanner PileBusiness Member
Real Estate Broker · Colorado Springs, CO · Member since 2019 · 389 posts · 326 votes
1y
@Benjamin Ying
Every one has given some great advice!
As far as Colorado Springs you can definitely manage a rental from a far. Long term rentals are the easiest since you won't have to deal with cleaners and maintenance issues are relatively easy to deal with by calling someone.
In Colorado it is mainly an appreciation market. $450k-$500k Purchase price you will have a chance to cash flow a few hundred bucks in Colorado Springs but it won't be much.
The 1% rule is more like a .5% rule here.
For your first investment I would aim to get some amounts of cash flow and not be in the negative. You can be negative for a few years and be okay but That is a better strategy once you have more experience with real estate.
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Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Patrick Albright:

Happy to discuss one on one. We go coast to coast with the properties we manage.

Thank you for the offer! let me connect with you and we can figure out a good time. I'm still doing some research on everything so pretty green!
0 Reply
Marc RiceBusiness Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
1y
Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

If you're investing long term, then population growth, rental and appreciation growth, and good jobs is not to be overlooked. You basically have "Growing but no cash flow" or "Stagnant growth but good cash flow". Even the stagnant growth cities still tend to appreciate at par with inflation and see rent growth, so I wouldn't count those out. You can always invest in the A/B class areas in these "stagnant" markets where those mico areas are still rapidly growing and in demand.
Overall Ohio has a lot of options to choose from such as Columbus and Dayton/Cleveland.
[email protected]614-363-2787
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1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @Travis Timmons:

@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.
The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.

I could post a couple real-word turnkeys I have right now that are 1% day1. I have posted other real-world ones in past.
They are very real and, very C-D class.

And that's the reality of it if want cash-flow day 1. It will NOT be an A/B class property.
Have I done it in A-class, yes I have.
BUT, and it's a very BIG but, that was literally a chain of things going not just "right" but awesomely better than "right".
And even yet, it was ever so barely over that line, were talking like $20/$50 mnthly net.. It was a fantastic surprise because it's not what projected was, it was perfect case scenarios.

And in the C-D, your sacrificing property appreciation for that cash-flow. They simple do not appreciate like the A/B class, that's just reality.

And with them all comes inherent risk. A C-D can experience market decline. because there not the greatest areas, people are not exactly clamoring to live there, they live there out of budget necessities. Or, they could gentrify and prices rocket.

Point is, risk exists with ALL of it and there is no sure fire "guaranteed" anything. Even if it comes with cash-flow day 1, that's history, what it's been, it does not guarantee what it will be next month, year, decade.
And that's the very WORNG thought path too many have coming into such, they think it assures future returns.

Future returns are never, N-E-V-E-R guaranteed. There is no way around that. There is only risk/profit exposure calculous.
2 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1y
Quote from @Travis Timmons:

@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.
The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.

“And a pro forma vs. end of year actuals are very, very different.”

45 years investing in real estate. I have NEVER seen a pro forma statement put together by a seller or broker that
1. Had any basis in reality
2. Was in any way reflective of past experience
3. That had even a passing resemblance to tax returns or financial statements
4. That could be achieved without spending an inordinate additional amount in cap ex;

In fact all I have seen had these items in common
1. Were based on dubious and unproven speculation, assumptions and best case scenarios
2. Were obviously “reverse engineered” to find a way to “back into” an attractive or at least acceptable cap rate
3. Often contained mathematical mistakes
4. Tended to leave off some categories of expenses completely
5. Assumed nothing could possibly go wrong in the next 5 years

what you want when you look at an investment property is to know the current rental amounts, specific expense items, and conditions of the building, grounds, and mechanical systems. The rest of the numbers the investor needs to “fill in” themselves based on a thorough due diligence. If you’re not willing to do this, then you may be best off investing in some kind of real estate fund concept. Prices in relation to rent are too high to have the cushion that was available before.
Private Mortgage Financing Partners, LLC
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5 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
1y
Quote from @Don Konipol:

Quote from @Travis Timmons:

@Nicholas L. You already know the answer to that. Bunch of realtors come on a spout off that their clients cash flow from day 1 all the time. It's always crickets when you ask for an example. And a pro forma vs. end of year actuals are very, very different.

@Benjamin Ying The only way to cash flow in the current market is to employ a higher effort strategy like STR, MTR, rent by the room, etc.
The "cash flow on paper" properties in stagnant markets or C-D class neighborhoods are probably not the type of places that you want to own long term. My advice would be to find a great asset and match that with a strategy that is a bit more work to break even or eek out a little cash flow. Leverage + appreciation is what makes real estate outperform other asset classes. If you don't see real appreciation upside (both price and rent), it's just not worth the hassle. We overthink real estate...Just find a place that people with options want to live.

“And a pro forma vs. end of year actuals are very, very different.”

45 years investing in real estate. I have NEVER seen a pro forma statement put together by a seller or broker that
1. Had any basis in reality
2. Was in any way reflective of past experience
3. That had even a passing resemblance to tax returns or financial statements
4. That could be achieved without spending an inordinate additional amount in cap ex;

In fact all I have seen had these items in common
1. Were based on dubious and unproven speculation, assumptions and best case scenarios
2. Were obviously “reverse engineered” to find a way to “back into” an attractive or at least acceptable cap rate
3. Often contained mathematical mistakes
4. Tended to leave off some categories of expenses completely
5. Assumed nothing could possibly go wrong in the next 5 years

what you want when you look at an investment property is to know the current rental amounts, specific expense items, and conditions of the building, grounds, and mechanical systems. The rest of the numbers the investor needs to “fill in” themselves based on a thorough due diligence. If you’re not willing to do this, then you may be best off investing in some kind of real estate fund concept. Prices in relation to rent are too high to have the cushion that was available before.

Hence the important of an MAI Appraisal
0 Reply
Robert Pickett
Rental Property Investor · Los Angeles · Member since 2024 · 8 posts · 7 votes
1y
Lots of good advice here already. I will just say there is great vlaue in starting out in an area where you have contacts and resources (Provo) as long as you can find a cash flow deal. I think OOS investing without a property mgr is going to be challenging even though it is a cost. In addition, I have never seen Provo show up on any booming investment cities list but of course that is just one resource and not the end all be all.
0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
1y
@Benjamin Ying

Did you take the time to actually read our response to your Q #1?

Or, has your analysis-paralysis already taken over?
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Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Marc Rice:

Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

If you're investing long term, then population growth, rental and appreciation growth, and good jobs is not to be overlooked. You basically have "Growing but no cash flow" or "Stagnant growth but good cash flow". Even the stagnant growth cities still tend to appreciate at par with inflation and see rent growth, so I wouldn't count those out. You can always invest in the A/B class areas in these "stagnant" markets where those mico areas are still rapidly growing and in demand.
Overall Ohio has a lot of options to choose from such as Columbus and Dayton/Cleveland.

Got it. Thanks for your insights! That's kind of my understanding now. I'm leaning more towards markets that may not cash flow immediately but have longer term prospects
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Min Zhang:

Hi Benjamin,
1. The 1% Rule is a great starting point to gauge cash flow. I recommend checking market with great macros.

2. If the market aligns with your goals, it makes sense to take advantage of the connections. I’d suggest chatting with your friend about what’s been working for him, and maybe ask for some recommendations on building a solid local team

3. It's personal choice. Direct flights are a huge convenience, but what matters most is if the market fits your overall goal and strategy.

4. Yes, I always recommend out of state buyers to have PM in place.

5. It's not uncommon to have lower cash especially in markets where properties are appreciating. In some markets, it’s rare to hit the positive cash flow in B class or better, but cash flow can still be decent in the C+ areas.

Thanks for your thoughtful responses. I know my strategy is to have long term investments that may not cash flow immediately but will appreciate in value. That means it'll likely be a class A or B.
1 Reply
Ed Daniels
Holliston, MA · Member since 2021 · 5 posts · 4 votes
1y
Very common to overthink this investment. Most people throw $150k at a financial planner and don't batt an eye. Real estate investing has a floor... the land+.

I personally would say your successful friend as a guide is like gold... don't look anywhere else. And I certainly don't think flying anywhere to scout is where you are at. Acre of Diamonds... right there local!

Appreciation of an asset with low down payment, tenants paying principle down, tax advantages, all reasons why real estate is an investment of DOING.
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @V.G Jason:

Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

1. Off-set is not the word I would use. It adds to the characteristics you're looking for. The 1% rule is antiquated. Don't get caught in terms, get caught in trends.

2. Doveryai, no Proveryai. Remember, nobody is looking to work with you unless it's to their benefit. Now, if you can benefit too then you analyze if that's worth it but if it's just the former, then stick to the original point.

3. Expand, but don't throw the entire country out there. Screen by what you're looking for; housing scarcity, tax implications, barrier of entry, coastal, climate risk off or on, etc. Tons of things, once you get an idea of your angle. Start screening cities that fit that.

4. Definitely no. But highly recommended, save yourself the time but more importantly the liability.I consider it a necessity, but in reality it's not.

5. In today's era, that's normal. Cash flow is a function of LTV, so this is where it gets murky.

Awesome. Thank you so much for the honest responses. I'll reassess some locations. I know that I do want to do long term investing and have the patience for a few years of rent and asset appreciation.
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Robert Pickett:

Lots of good advice here already. I will just say there is great vlaue in starting out in an area where you have contacts and resources (Provo) as long as you can find a cash flow deal. I think OOS investing without a property mgr is going to be challenging even though it is a cost. In addition, I have never seen Provo show up on any booming investment cities list but of course that is just one resource and not the end all be all.

From some of the comments here, class A or B will likely not cash flow in the first year or two. Since it's my first deal, I'm thinking about buying in a "safer" area that has more opportunity for appreciation. Does that tradeoff sound about right?
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Drew Sygit:

@Benjamin Ying

Did you take the time to actually read our response to your Q #1?

Or, has your analysis-paralysis already taken over?

Hi drew, I'm not sure I follow. The responses here have taught me a few things

1. Class A and B will likely not cashflow immediately but can appreciate. I would be okay with that tradeoff if that's the case.
2. Definitely get a PM since it will be an OOS investment
3. Expand my search to some metros even if it doesn't have a direct flight from SFO.
This is also going to be something I will act on in 6 - 12 months as I gather more information and visit some of the places I narrow my search down to
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Ed Daniels:

Very common to overthink this investment. Most people throw $150k at a financial planner and don't batt an eye. Real estate investing has a floor... the land+.

I personally would say your successful friend as a guide is like gold... don't look anywhere else. And I certainly don't think flying anywhere to scout is where you are at. Acre of Diamonds... right there local!

Appreciation of an asset with low down payment, tenants paying principle down, tax advantages, all reasons why real estate is an investment of DOING.

Thanks! I will keep moving along and research some more to reduce uncertainty on my end
0 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Tanner Pile:

@Benjamin Ying
Every one has given some great advice!
As far as Colorado Springs you can definitely manage a rental from a far. Long term rentals are the easiest since you won't have to deal with cleaners and maintenance issues are relatively easy to deal with by calling someone.
In Colorado it is mainly an appreciation market. $450k-$500k Purchase price you will have a chance to cash flow a few hundred bucks in Colorado Springs but it won't be much.
The 1% rule is more like a .5% rule here.
For your first investment I would aim to get some amounts of cash flow and not be in the negative. You can be negative for a few years and be okay but That is a better strategy once you have more experience with real estate.

Thanks for the assessment from Colorado Springs!
1 Reply
Marc RiceBusiness Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
1y
Quote from @Benjamin Ying:

Quote from @Marc Rice:

Quote from @Benjamin Ying:

Hey all! First time poster here so let me try and lay down the situation.

My wife and I are just beginning our real estate investing journey. We live in California so I think the opportunities are better when it's OOS. Some areas I've been looking at are Provo/Vineyard, Colorado Springs, Indianapolis and Raleigh/Durham. Current timeline to purchase is probably 6-12 months as I start narrowing down and visiting some of the places to get a better idea over the next few months. Our downpayment budget is probably $60-$100k.

Questions:

1. Does focusing on macro trends (Population growth, rental and appreciation growth, good jobs) offset the 1% rule?

2. My friend is a big investor in Provo and has connections there. Would it make sense to reduce risk and use his connections first and invest it that area? Curious what experience others have had done.

3. Should I expand my target metros? These areas are relatively easy as a direct flight from SFO and one of the BP videos mentioned how it's a good idea to be able to fly direct if you have a OOS investment. For example, Columbus or Huntsville, AL has come up a bunch of times but I’d have to transfer.

4. Do you definitely need a property manager for OOS investing, especially as a first time investor? It seems like that would eat into the returns and you can't get positive cash flow for a while

5. Is it just a bad rule of thumb for an investment if you can't get positive cash flow for the first year or two? Or is this normal?

If you're investing long term, then population growth, rental and appreciation growth, and good jobs is not to be overlooked. You basically have "Growing but no cash flow" or "Stagnant growth but good cash flow". Even the stagnant growth cities still tend to appreciate at par with inflation and see rent growth, so I wouldn't count those out. You can always invest in the A/B class areas in these "stagnant" markets where those mico areas are still rapidly growing and in demand.
Overall Ohio has a lot of options to choose from such as Columbus and Dayton/Cleveland.

Got it. Thanks for your insights! That's kind of my understanding now. I'm leaning more towards markets that may not cash flow immediately but have longer term prospects

Columbus fits that bill...or any A class areas in Dayton or Cleveland should too.
[email protected]614-363-2787
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Drago Stanimirovic
New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 478 votes
1y
Benjamin,

You're on the right track by focusing on macro trends like job growth and population increases, these can justify investments even if the 1% rule isn't met. Leveraging your friend's connections in Provo could lower risk and give you a head start, especially if the market fundamentals are strong. Your target metros make sense, and direct flights are a convenience, but if Columbus or Huntsville offer better returns, they’re worth considering despite the extra travel.

For OOS investing, a property manager is highly recommended, especially for a first-time investor. While it eats into cash flow, it prevents costly mistakes and keeps operations smooth. Minimal or negative cash flow in the first year or two isn't uncommon, especially in appreciating markets, but make sure you have a plan to improve profitability.

When you're ready to move forward, I’d be happy to help with financing options to maximize your investment potential.
Best,

Drago
0 Reply
Lauren Perry
Realtor · Indianapolis, IN · Member since 2017 · 87 posts · 48 votes
1y
Hi Benjamin,

I would be glad to connect and discuss your goals to see if I could be of assistance. I began my OOS investing journey investing in Indianapolis back in 2018 while living in Oregon. I've lived the pros an cons of remote investing and would be glad to share my experiences.

I now live in Indianapolis and work exclusively with OOS investors, particularly those investors looking to acquire cash flowing small multi-family and/or short term rentals.
Since relocating here, I've enjoyed expanding our own portfolio while also offering services to OOS investors looking to invest in Indiana. I wear a few hats as a realtor, property manager, STR host and project manager so if you'd like to chat about any or all of those services, I'd be glad to schedule a call!
1 Reply
Benjamin Ying
OP
Member since 2020 · 23 posts · 15 votes
1y
Quote from @Drago Stanimirovic:

Benjamin,

You're on the right track by focusing on macro trends like job growth and population increases, these can justify investments even if the 1% rule isn't met. Leveraging your friend's connections in Provo could lower risk and give you a head start, especially if the market fundamentals are strong. Your target metros make sense, and direct flights are a convenience, but if Columbus or Huntsville offer better returns, they’re worth considering despite the extra travel.

For OOS investing, a property manager is highly recommended, especially for a first-time investor. While it eats into cash flow, it prevents costly mistakes and keeps operations smooth. Minimal or negative cash flow in the first year or two isn't uncommon, especially in appreciating markets, but make sure you have a plan to improve profitability.

When you're ready to move forward, I’d be happy to help with financing options to maximize your investment potential.
Best,

Drago

Thank you so much Drago! would love to keep in touch!
1 Reply

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