I have some possible good deals in another state that I’m interested in but now I’m not sure if investing out of state is possible especially when you’re not present.
Do you have to fly in everytime to meet sellers or to show your properities to buyers/tenants?
Do you have to be present to present your contract and have it signed?
Do you have to fly in/ be present at closing?
How do you protect your interest; to ensure you are not left out of a deal you put together if one is not present?
How can one become a successfuly out of state investor?
Can out of state investing be done successfully? Answer, yes.
Are most out of state investors successful? Answer, no.
Why? For starters, those questions that you’ve provided. You must have a viable way to answer those questions before even considering becoming an out of state investor.
I am investing in my current location but the other state is where I am most familiar with as that is where I am from. If there’s a way to still do it while not having to be physically there, that is what I am trying to figure out.
I understand. I was living in Virginia. I had 3 duplexes and a single family. I realized that I wanted to raise my family in Houston. I sold the properties over a 2 year period, got a job in Houston moved here and started investing here. Remember it is not about the money it is about the lifestyle. If you see yourself sitting out by the pool everyday and you find yourself living in Alaska, you need to move to a place that is warmer. The real estate is an ends to a means. The goal is to live life like you want to live, not to collect a bunch of dirt. The real estate allows you to live your lifestyle so you have to be where you want to be.
from experience if you plan to invest out of area in another state, make sure the cashflow is great. And you have several properties. perhaps getting a deal from another investor liquidating. There is no sense in owning 1 or 2 homes 1000 miles away and only making $300 a month or so. You want several, also you need top notch property mgmt as well. Get clean rentals. If your in a not so hot area, then look for the nosey tenant and cut them some slack and make them your eyes and ears if you have a good size unit with several tenants, like a 4-10plex. Mgmt co will not know it all, but tenants do…
As to why would someone invest out of area. For many, it is because it is impossible to buy cashflow rentals in your own market without putting down 30-50% and still not in a comfort cashflow spot at times.
Star,
Yes. Have a team in place. A realtor you trust who can do drivebys and view potential purchases and sell them for you. As long as you have market knowledge and some local pro help !! You win.
The only thing I like about your situation vs many of the others that are looking into the out of state thing is that you are from there and know the area. You’re not starting blind and that’s a good thing. When you don’t know the area you can get in it deep fast, as you know a difference of a few blocks in some towns is the difference between the ghetto and mansions.
I agree 100%. I have property on both coasts but I only buy where I have lived and know the market. Understanding your market is the golden rule in my book. When my agent calls about property in one of my East Coast locations, I can usually give her driving directions to the place.
Also, I agree with focus and concentrating on an area. It takes a LOT of effort to get a good team set up. One or two properties is not worth the trouble.
There are some deals out there that you don’t have to be present for to show the property. You can use a management company to take care of the rentals for you if you want. Keep in mind most of these companies will take a 10-20% fee, but it will help you with the fact that you do not have to be present and they will take care of everything from signing contracts to repairs. Where are you looking?
The problem with out of state rentals is that you’re a spectator. You have given up complete control of your asset. If you find a great property manager who works cheap and a good maintenance company that works cheap, yes, you can do it. However, that usually does not happen. What happens in the real world is that you get a management company that doesn’t care about anything but collecting their fee and that charges you a fee for every little thing they do (like placing tenants and scheduling maintenance). These EXTRA fees can easily eat up all your cash flow and place you in a losing position. Worsening the situation is that you won’t be able to supervise the maintenance and rehabs and that the manager typically doesn’t care what the maintenance costs. This can put you in big trouble, really fast.
I think you’d have just a better chance of success going to Vegas and putting all your money on RED!
You are right on the mgmt company which is why you need to find that right nosey tenant that will keep you informed for a break on the rent. Say rent is $600 a month. Give them a $50 a month discount and it goes along way on finding out whats going on with your property. I have done out of state rentals in past and they went fine. Also letting the mgmt co know your looking to increase your portofilo in the area and giving them more business as long as they do the job right is important. Giving them 1 or 2 properties and they do not care, give me 10 to 20 properties and they will love it since that is good cashflow for them as well…
Cheap underpriced markets I believe has alot of out of state investors. But being out of state, you do not want to go into a war zone neighborhood for investing.
Yes I agree, I think 1 or 2 properties might not be worth the property managers time but 5 or more and they may actually care.
I am looking into Maryland as that is where I’m from. If renting isn’t a good idea for out of state investing, what about flipping properties or fixer uppers than reselling them?
Flips you fix up and then you wash your hands. If you have a really good contractor, then it’s not too bad. Rentals are a never ending series of issues. Most of the experienced landlords on here say you need to manage them yourself to make money at it.
Great insights and recommendations. I’ll throw in my 2 cents. I’ve been fortunate to have worked with roughly 30 out of state investors in the past three years and I am currently coaching and helping investors acquire great properties in my state. Because of their out of state acquisitions, they are now in a position to buy in states with high appreciation and neg cash flow. Our goal is to create a portfolio of cash flowing properties to hedge against great properties with neg cash flows. Often the investor buys the neg cash flowing property first. I take a different approach.
Before you make your first purchase consider this:
-have your property manager in place
-if the PM doesn’t do repairs, have a general contractor in place
-if you’re borrowing, make sure the lender is ok with the state and can close using specific power of attorney.
-employ a Realtor experienced in buying for investment
-locate a good mapping website that covers the area the property is in
-ask for references
In my market (Indiana) most investors are using a buy and hold strategy.
My investor clients use the same property management and contractors that I use.
I live in Oregon and bought in Texas, Alabama, and South Carolina. The first two states I did well, but I’m upside down in SC. The reason has everything to do with knowing what you’re buying. Absolutely YES, fly there, look, do detailed due diligence. Have the excellent PM, which can be obtained by finding the highly successful commercial realtors and getting referrals, then checking references, MOST importantly the tenants that PM manages. That’s where you get the truth. The longer the PM has managed that tenant the better the information. The excellent PM AND looking FIRST and doing excellent due diligence is the key to success. Those who only invest in their own backyard are amateur investors who are unlikely to do really well over the long term. If you’re lucky enough to live in the right place to buy, great. Then your market changes. If you don’t have the skill to analyze markets across the country, learn it. It’s how you get rich. I rec Dave Lindahl Apartment House Riches for this. He will also teach you the multiplex market, which is where the big money is for a buy and hold investor. If you don’t go look and do the above, buyer beware; you will likely get screwed as I did.