For first property have you bought in a state you don't live?

Question

Hey! I'm moving to Colorado next year from Los Angeles, CA. I'm dying to get my first rental property in Colorado and have begun scouting numerous areas to get an idea of markets out there. To those that have been in a similar situation of moving out of state to begin their real estate investing career, do you have any thoughts/experiences you can share on whether it worked for you to wait until living in the new area so you're more physically available or to long distance manage if you find a good deal?

While longterm I am not averse to long distance management, I could also see this being a red flag for first property but would love your opinions. Thanks!

Katherine Serrell · Answer

Read David Greene's book Long Distance Real Estate Investing. Best source of knowledge to get your questions answered on this topic.

I bought a property four states away and I have zero issues. Even if the property is a 10 minute drive from you, you shouldnt be doing anything different than you would if its 10 hours away. Example: if there is a clogged toilet at 10pm, you shouldnt be the one driving over there unclogging it yourself. You would call your local plumber or handyman to go fix it.

#1 factor in easy long distance management (self managing OR outsourcing management) is good tenant screening!! Additionally, I only accept tenants who agree to do virtual walkthroughs & inspections and I only accept tenants who agree to online-only rent payments. I use the PM software Buildium and I really like it.

Timothy W Hanson · Answer

I'm from Minnesota, but my first deal was in Wisconsin. I purchased a 4plex with an FHA loan. During my purchase I reviewed the current leases on each unit, it cash flowed about $500 a month at the time after all expenses (Mortgage, Insurance, Property Tax, Lawn Care). The advice I would give here is be sure to look at rental comparisons - I just use Apartments.com to do this. Zoom in on the neighborhood and find out where your property should rent by comparing it to rentals nearby. This will give you confidence that you can cashflow and make money

Ke Nan Wang · Answer

It's only red flag if you hire the wrong people for the task(including yourself). If you are confident in your ability to find and hire the right people and build the right team, and the number still works out, I'd say why not?

Eliott Elias · Answer

Be willing to spend some time and money on the front end proving that you are serious about building a team out in Colorado. No one is going to bust their butt for you looking for deals if they don't think you're serious

Zeona McIntyre · Answer

Hey Lane, if you are buying with a loan, I always recommend some form of house hacking, either rent by the room or an unofficial duplex. We don’t have a ton of multi-family out here unless you have multi-millions to start with.

You can definitely get a furnished rental for a few months while you look to buy, a few months are not going to make a huge difference in your investing career.

I also help investors assume the loan of the seller so that they don’t need to owner occupy to get low 3-4% rates. I can add you to my list to hear about deals as they come up.

Nathan Gesner · Answer

Greg is doing well managing properties in other states, but I think that's the exception, not the rule. In my experience, most people suck as Landlords even when they live next door to the rental.

You have to know the law, have good screening processes, a solid lease, and the cajones to enforce the lease. It's hard to do that no matter how close you live to the property. Managing from a distance adds some new problems like handling showings on a vacant unit, inspections, coordinating vendors, checking vendor work, etc.

It can be done, and it can be done well. Just go in with eyes wide open to the potential problems, educate yourself, and prepare.

Greg Scott · Answer

What sort of "red flag" would this be for a first property and for whom would it be a "red flag"?

Almost all of my investing has been in states other than where I live, both single family and apartments.  While this has required me to figure out how to manage it, the fact that I was out of state created no barriers from others.

Aj Parikh · Answer

Hi Lane, One of the easiest ways of scaling in real estate today is to invest in turnkey properties out of state. If you have a busy 9-5 routine but have the money to get started and don't have enough time, turnkey companies provide some of the best resources to scale your portfolio. I have used that strategy so feel free to reach out if you want to discuss.

Lane Krejcik · Answer

Great feedback, thank you Katherine! I like that method of virtual walkthroughs and inspections by the way, I would definitely look to employee this in the future.

For first property have you bought in a state you don't live?

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