I live in Northern Virginia. And recently, my partner and I got a call from a woman who has houses for sale in Texas, Georgia and Florida. My partner, who’s newer to this business was naturally excited and wanted to know how to figure out if it’s worth it to buy houses that are hundreds of miles away from where you live.
Well, personally, I try and keep my houses within a 60 mile radius of where I live. And quite frankly, I often have to go that far to find the best deals. But any further than that and I pretty much have to hire a property manager. However, as the saying goes, “nobody is going to manage your properties as well as you do.” Of course, that’s true, because you’re the owner and nobody cares about your properties like you do.
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Considering Being an Out of State Landlord?
So, when I’m evaluating a deal that is in another state and far away from me, it pretty much has to be a “home run” for me to want to purchase it. If it’s a deal where I’ll make $100 a month in cash flow, or where I’ll get a little bit of equity then I won’t do it. The reason being is that first, I’ll have to hire a property manager. And you have to factor in the fees of the property manager which are often 10% of the rent every month.
Not only that…
Every time a new tenant moves in, a property manager will keep the first month’s rent for finding a new tenant, or at least a portion of the first month’s rent. As you can already see, the property manager alone is going to eat up a lot of profits so it can’t be an “average deal.”
Plus, what happens when you have to fire the property manager or when there is a major problem with the house. It’s not like you can get in the car and drive a few miles and take care of a problem… Or drive a few miles and interview a new property manager to see if you want to hire them.
Therefore, you might also want to factor in the cost of a plane ticket or two.
Back to the properties my partner and I are currently evaluating, so far it looks like none of them are deals and the woman is upside down on all of the properties (no real surprise there.) Also, on some of them she has those nasty interest only loans that are set to balloon soon.
So, my advice to you is to be very careful of ever buying a house that is not within an hour drive of where you live. Over the years I’ve met plenty of investors who have owned out of state property and only a small percentage of them have had a good experience.
Most of them are like a friend of mine who recently told me about a property in Georgia he owns where he has to evict tenants and he’s having a heck of a time finding someone to do this for him and he can’t get anyone to return his calls.
Simply put, if you choose to get caught up in “investor fever” and buy houses in another state, don’t say I didn’t warn you.