Hi Traver,
My experience - The median price home in my neighborhood is $700k. In 2009, a couple of real estate clubs sprang up touting out of state investing (cheaper homes, high rents, fully rehabbed). One of the clubs has since folded and the other is doing well (President of club has been featured on CNBC, etc.). My wife and I attended some of the club's seminars and met the owners. We both felt comfortable with them at the time.
2009-2010 - We purchased 3 out of state properties. First one was in Dallas for $95,000 (30k down). The second was in Indianapolis for $43,000 (13k down). The third was in Memphis for $65,000 (zero down, appraised for $90k). We flew to Memphis and saw the house and bought the other two sight unseen. I highly recommend that you fly out and research the area and homes before buying. Homes were marketed at fully rehabbed but only the Dallas property was. We had put trust into the RE Club which is not smart.
At one point, our rents received turned into $19,000 in savings (on $43k down) so of course I was thinking this was easy money and once this savings grew I would buy another and keep adding and adding to the portfolio.
The Dallas property was rented for 5 straight years and we never heard from the property managers. It cash flowed $400 a month. This was the dream scenario. Just sit back and watch the bank account grow. The Memphis property would cash flow a max of $260 per month if there were no issues. Every few months there would be an issue (broken tile, fuse replacement, etc.) so we cash flowed about $100 per month. The Indianapolis property always seemed to have issues (per the property managers). This became our money pit. The PM's always came up with something (even replacing a bathroom door handle at $34.
The Dallas tenant moved in 2014 and left 5k worth of damage. This was a section 8 tenant who paid well over market rent but destroyed the property on the way out. The Indianapolis property flooded and was condemned. The insurance company said the flood damage was $60k which is more than the house was worth and they wouldn't cover the repairs because the house was vacant more than 60 days (ugh). My wife became very stressed and decided to pay off the mortgage (26k) and sell to a local investor (7k). So we lost quite a bit on the Indianapolis home. #StressRelief
Based on this experience I would highly recommend that if you decide to purchase out of state that you 1) Fly to the area that you are interested in and meet the people that are selling the homes, drive the areas and look at the home(s) you may purchase. The home should be fully rehabbed. 2) Have sufficient reserves. 3) Vet the property managers. Our new Dallas managers are really good. We still haven't been able to find a quality manager in Memphis but are still looking.
Hope this helps and if you have questions you can PM me.
