@Jonathan Greene
One size does not fit all.
1. Don't invest your entire nest egg first time out of the gate whether local or out of state.
Allocate a percentage of your nest egg for your first real estate investment.
Real estate investment is not for everyone.
So before pushing all your chips in, test the waters.
2. It's a long term investment. Slow and steady wins the race!
If you expect a couple houses or a 2 to 4 unit building to generate of appreciable amount of actual spendable cash, you will be disappointed. I have been investing in RE for over 40 years - primarily SFRs. During my working career as a broker, I focused more on capital appreciation than cash flow. Now that I am "retired" age 65, my focus is moving more towards cash flow but I still want long term capital growth.
3. My approach was/is as follows:
Buy solid properties in good areas.
I would put as much cash down as needed to ensure a positive cash flow.
I wanted to buy the property and then have it pay for itself no matter what.
That means having a healthy cash flow "on paper" so that when Murphy shows up, I don't have to panic and come out of pocket for expenses.
If some cases, this meant 30% down in others it was 50% down.
I know that's not sexy, it is not some slick house hack.
But it is solid, time tested and proven.
In doing so, I never had to worry about the property.
I made the investment put enough cash down to provide a solid excess to pay for the unexpected.
And then I let the market, time, mortgage paydown, and inflation do its thing.
The only way people get hurt in RE is to buy more than they can afford or buy properties speculatively with high leverage.
4. Trust the 50% rule!
When running the numbers, take gross rent, take 50% off for expenses, the remaining 50% will pay your mortgage.
You may very well do better than 50% expenses. If so, great.
But by using 50%, you will rarely be blindsided.
5. Out of state investing
If you live in a major metropolitan area, it will be hard to find affordable smaller investments - the kind people can buy with $50,000 cash.
My counsel for investing out of state is:
1. Personally visit the prospective area.
2. Research the local market and economy online before you go.
3. Subscribe online to the local newspapers.
4. Schedule meetings with 2 or 3 brokers and 2 or 3 property managers.
Sit down face to face and talk to them.
See what they say.
Determine if what they say makes sense.
Is the advice consistent or all over the map?
Use your judgment and life skills to determine who you trust.
5. Drive the neighborhoods - you can tell a lot by just looking around.
6. Talk to local non-real estate people about the location, the neighborhoods and the market. They have no axe to grind and are likely to tell you the truth. This means talk to waiters, to the bartender, to the staff at the hotel, to people you see in the park. Walk a neighborhood, talk to folks out front. I can't tell you how much great information I get this way.
7. Reach out to BP folks in that location.
I recently went to Huntsville Alabama looking for multifamily.
@caleb was a big help, working with his partner to find something.
Spent 3 days there doing all of the above.
We have a good sense of the location and are activity making offers.
Haven't got anything yet as that market is red HOT.
Good luck!
