Out of state investing.

I live in Los Angeles and just like everyone, cant afford the real estate prices out here. But when i look in for example, San Antonio the prices there are more affordable. I was just wondering if there would be any certain taxes or fees i would have to pay for being a California resident and investing out of state.

I can’t think of any special fees you would have to pay there, but TX has some pretty high property taxes compared to other places I’ve seen.

To be honest, the taxes are the easy part. Its the property mangement you need to worry about. Being from LA myself, I am well aware of the high cost of real estate their. Back in 2006, I purchased a 16 unit apartment complex for $350,000. Needed tons of work, but the cash flow has been awesome. Ended up relocating to nashville and finding a day job as well. Out of state investing sounds great in theory, but the reality is that you have to watch your money like a hawk due to shaddy property managers and contractors. If you can’t see it, you can’t hold anyone accountable until after the simple problems become a nightmare.

Not all property managers are shoddy. Some are really motivated and use a managing program and/or the internet to keep up to date records and data of expenses, income, tenants, etc.

As an owner, I have complete access to all the records and invoices and can request pictures or video of repairs. Tenants can even leave feedback and comments. Pay rent online, with credit cards, autopay, etc.

I find the best way to find reputable property managers is referrals.

Mine charges 7% of the GOI and anything over $200 requires my written approval.

I’m in LA too and I’ll agree with Brian. I have 2 investment properties out of state and the management companies are working very well for us. Get referrals, make sure they are properly licensed (VERY IMPORTANT—this is required to protect you and helps to keep them from co-mingling your money). Don’t expect to pay bottom dollar since this is a big investment. Build the cost of PM into your purchase. Managing properties is not an easy job – a good management company is worth the cost. I would recommend getting info on their contractors. It’s true that they think you have money and will try to slide big labor costs your way. I would suggest working contractor labor costs into your contract if you can.

I’m not a tax expert but I think you only have to pay income tax to the state you are investing in if they have income tax. I know Hawaii has an excise tax you’d have to pay. Once you pick the state you can go onto their tax web-site and find out.

Oh yes…Texas has a tax rate higher than L.A. so crunch those numbers.

Good Luck!