how many investors buy out of state vs in their back yard?

Question

I was just thinking about a chat with my property manager the other day while we were grabbing coffee. Shes been handling a few rentals for me in North Carolina and she mentioned how more investors from out of state are jumping into the market there because of the steady growth, rents and affordable entry prices. It got me wondering how many investors buy out of state vs in their back yard. For me out of state is a game changer for rental property scaling, but it can feel a bit daunting at first for sure. From my experience, it's all about key strategies that make it less scary and more rewarding. What do you think? Please share your out of state investing experiences.

Lets talk about picking the right market, like focusing on places such as North Carolina where the economy's booming with tech and education hubs pulling in renters. I feel like researching population trends, job growth, and rents to prices is crucial. Pros: You can snag higher returns than in saturated spots, and NC has got that mix of urban and suburban appeal. Cons: It takes time to analyze data, and market shifts can hit harder if youre not tuned in daily. You can use online tools and demographic reports to narrow it down.

Building a solid local network like real estate agents, property managers, trusted contractors and inspectors who know the ins and outs of neighborhoods. In my opinion, connecting with pros via referrals makes all the difference. Pros: They spot deals and issues you might miss and handle boots on the ground stuff. Cons: Trust building from afar is tricky, and bad picks can lead to costly surprises. I think starting with referrals plus virtual meetings helps ease into it.

Then there's leveraging turnkey real estate companies which to me seems like the easiest way to dive into out of state investing without the headaches. These companies often rehab properties, find tenants, and manage everything, handing you a ready to go rental. Pros: Minimal involvement for busy investors, speeding up real estate portfolio growth. Cons: Potential higher upfront costs, and you have to vet the company to avoid subpar work. From my perspective, it's perfect for scaling rental properties when you're not local or in a hyper expensive market especially if they offer creative financing opportunities with lower down payments.

Another strategy is financing smartly and vetting lenders or alternatively hunting for creative financing opportunities. Pros: Can get asset based DSCR loans. Cons: Can be strict qualifications and require a large downpayment which makes it difficult to scale as opposed to creative financing.

Lastly, due diligence on properties remotely using video tours and detailed reports for professional inspectors. From my experience, this saves trips but still gives a good feel. Pros: Efficient and cost effective for out of state investing. Cons: You might miss subtle issues like neighborhood vibes. I recommend combining it with local insights from your network.

Common mistakes to watch out forare underestimating management, repair and vacancy costs or ignoring tenant laws that differ from your home state that can turn a good deal bad quick. And don't skip multiple insurance quotes or engaging with an insurance broker.

If you're eyeing out of state investing for rental property scaling, start by researching your markets (like North Carolina), build your team, and maybe partner with a turnkey company to make it smoother. Start with underwriting potential deals and start building your network. What's worked for you and what hasn’t?

John Morgan · Answer

I started investing locally buying 18 SFR near me because I thought it would be easier to live within 30 min of my rentals in case I needed to check on them. The profits were meh, but the appreciation was decent. I started investing out of state 2 years ago for much better cashflow. I was nervous at first since I didn’t know anyone in the area I chose. But I found it was easy to find vendors and handymen for these 12 cheap rentals I got in a small town in NE Arkansas. I find it’s easier to self manage out of state than locally for some reason. Maybe because I can’t drive to the rentals and deal with the tenants? I just hire everything out which makes it easy. And I’ve had some vacancies which were actually easy to deal with. So I’m open to investing anywhere out of state that makes sense.

Greg Scott · Answer

People looking to invest out of state often over-think and over-analyze, believing that choosing the perfect market is the key to success.  In reality, there is no perfect market.  Also, there are MANY places that would work just fine.  In about 15 minutes I could develop a list of potential cities that could all make great places to invest.  With another 30 minutes I could find a long list of viable submarkets.

It is worth noting that calling North Carolina "a market" is overly-simplistic.  North Carolina is actually made up of hundreds or thousands of of markets.  Take Kinston, NC, for example.  Its population peaked in 1960 and has been in decline since.  That would not make my list of potential places to invest.

The more important part is building your team.  Some markets may make more sense because you grew up there or maybe you have family there.  Some markets may be less interesting because there are no direct flights from your city to that one. To me, the real question is where do you want to build a team and how hard is that going to be.

The team is more important than market selection.

Jay Seville · Answer

I'd say about 1/3 of investors are from out of state in the SE NC region.  Lately there have been a lot more coming from the west coast along with regular primary home buyers from there as well as an aside.  The out of staters tend to be from NE. The majority of investors are from the Raleigh Triangle and Charlotte.  About 2/3rds are on their first property.

how many investors buy out of state vs in their back yard?

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