In my market the average 3 family home sells for around $300k. This is pretty high for a newbie to jump on.
I have money in a IRA and am interested in investing in a small town 2 hrs away. The average 3 family sells for $50K in that neck of the woods. Here are the problems with the area.
It is not easy to get to
There are not many jobs in the area, but a new federal prison is being built in the town which is scheduled to be done in 2010
there are a lot of run down buildings in the area.
I know that there is a lot more due diligence that could be done, but as a noob I was interested in your initial opinions
My rentals are 2 hours away, and it’s a pain in the ass. It probably wouldn’t be so bad if you add in the cost of a management company in your planning, but the small town I’m in doesn’t have any realiable management companies.
NHinvestor - I am just starting out. I would not invest 2 hours away from where I live. In my case I have a full time job and I couldn’t afford to do a mid of the week trip to the property. I would end up going there only during the weekends… Not a good idea if you are starting of (at least this is my opinion). My suggestion is to find something closer to home.
You may not be able to cash flow in your area unless you find really distressed properties. Another option is to try to do some wholesaling deals to raise cash and then be able to get into those 300k properties.
Since the purchase will be with IRA funds, you can’t materially participate in the operation of the rental anyway. You would need a property manager even if the property was next door to you.