Should you buy a rental property out of state for your first?

Question

I’m born and raised and living in El Paso, TX and have been looking at properties in Cape Coral, FL. I’m not familiar with the area but after doing my research, it’s looking like it’d be a great area to invest in for cash flow. The rent to price ratios there are around 2% for many properties on sale, while in El Paso they are around 0.5%. I’m considering it more and more but I feel I should stick with the area I’m familiar with and play it safe for my first rental. I would most likely be using a turnkey for help if I bought property in FL and of course have no experience with those either. Any advice would be greatly appreciated!

Matthew Tregoning · Answer

Hey Jose! Here are some key considerations to aid your decision-making process:Diversification: While the allure of Cape Coral's potential cash flow is undeniable, diversification can be a prudent strategy. Consider starting with a smaller investment in the new market while maintaining your El Paso holdings. This allows you to test the waters without committing entirely to unfamiliar territory.Local Expertise: Leveraging the knowledge of local experts is invaluable. Connect with experienced real estate professionals in Cape Coral, such as realtors and property managers. They can offer insights into the market's intricacies, help you find suitable properties, and navigate the turnkey process.Visit & Familiarize: If possible, plan a visit to Cape Coral to familiarize yourself with the area. Walking its streets, exploring neighborhoods, and soaking up the local vibe can provide a deeper understanding of the market dynamics.Due Diligence: Prioritize comprehensive due diligence on any property you consider. This includes thorough property inspections, evaluating neighborhood trends, and understanding the local rental market. Even with a turnkey provider, a vigilant eye is essential.Risk Management: While potential rewards are enticing, manage risks carefully. Have contingency plans in place, set aside reserves for unforeseen expenses, and be prepared for fluctuations in the market.Investment Strategy: Define a clear investment strategy tailored to your goals. Decide whether your primary focus is cash flow, equity appreciation, or a combination of both. Your strategy will shape the types of properties you target and your overall approach.Ultimately, your investment decisions should align with your risk tolerance, goals, and level of comfort. While stepping into unfamiliar territory can be exhilarating, remember that combining adventure with wisdom often leads to the greatest rewards.

Account Closed · Answer

My 2 bits.Invest locally, ideally within 30 minutes or somewhere you can drive to within half a day, (Las Cruces, Sierra Bianca or to Tucson or Midland) first. Until you work out the bugs in your sysyems and procedures.Or, if you invest farther away, do a personal, physical (not Zoom) walkthrough of the property before you sign off on it.Surprises and out of state investments, don't make good bed fellows.

Stetson Miller · Answer

@Jose Alejandro Hernandez I frequently work with investors in your same situation, their home markets just don't offer any great options, comparatively. Following cashflow trends in emerging markets can allow you to meet your goals much quicker, even if that means getting a bit out of your comfort zone. With the right team that has experience in this space, it's more than possible to do, potentially even easier than starting without the right team in your home marketPurchasing on your own with a team in place to help with any needs will allow you to maximize your returns, but to truly have all bases covered with someone to manage the entire process, a turnkey company would be a great place to start. For that and this area, I would highly recommend Rent To Retirement. Let me know if you would like me to make an email introduction and I would be happy to do that!

Theresa Harris · Answer

Personally I would not invest in a place that I don't know. I have out of province rentals, but they are all in a similar area and an area I know well. also remember cheaper isn't better and numbers can lie. A cheap house may look great on paper, but the reality is far from that. Generally you will have more problematic tenants and higher and more expensive turnovers.

Peter Dorinsky · Answer

Hey Jose, I would suggest starting out locally for your first deal, you'll have an advantage starting out in a market you're already familiar with. I'd also suggest looking into house-hacking for your first deal.But if/when you decide to invest out of state, building your core 4 will be fundamental to your success, https://www.biggerpockets.com/blog/core-four-real-estate-tea...

Carlos Julio · Answer

I'm based in cape coral and have majority of my portfolio here... you are right on cashflow and I will add appreciation and population trend is planned to be increased due to this city is one of the cities used as an outlet of miami, Orlando and Tampa since they are too expensive... happy to chat whenever you want. I have a team here that is growing and is able to cover all needsDepend of your risk tolerance, in your case I would start at least the first one in your area to learn little bit more and then I would think on out of state investment

Jose Alejandro Hernandez · Answer

Appreciate your valuable tips here. Thank you much!

Michael Margarella · Answer

This isn’t a direct answer to your question, but one thing I found useful when making new broker contacts was calling those who had properties listed/recently listed and try to organically build a rapport. Takes a bit more legwork but another tool for the tool belt.

Michael Haynes · Answer

Hello Jose Alejandro Hernandez. You need to always Google Search for Reviews and comments for any type of Market Investment Method. Rent to Retire has bad reviews based on inflated numbers that certainly do not make sense. I looked at REIT's many years ago and they are similar. You have to start with a large investment and trust the company for five years to maybe make ZERO at the end. The best 4 REITS in 2022 made 4%. That sucks.

Zach Lemaster · Answer

@Stetson Miller Thank you for the recommendation! Rent to Retirement is the #1 recommended turnkey company for out of state investing on bigger pockets with over 180 5 star reviews on this site for over a decade now. @Jose Alejandro Hernandez we are here to answer any questions you have at any point in time. We actively invest in TX, FL and 12 other midwest & SE markets that have excellent cash flow and appreciation. It's all a balancing act of course, but it all comes down to finding the right market that matches your goals and working with the right team. Lot's of great areas on both FL and TX! Reach out anytime with questions.https://www.biggerpockets.com/users/ZacharyCole/references https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review