Any suggestions for investing local or out of state?

Question

Good day, everyone!

I am a first-time investor with approximately $50,000 to invest. Although, I am looking to build more capital I am very eager to get started. I believe I have 2 options:

1. JV, because I do not have enough funds to invest locally on my own.

2. Invest outside of the state, as it may be more cost effective to invest independently utilizing HML.

I want to begin with Fix and Flip to build more capital for BRRRR's. I'm not sure which choice makes the most sense for me. Any advice would be greatly appreciated.

Blessings to a successful New Year!

Min Zhang · Answer

Hey Carlos, happy new year!

When it comes to investing out of state (OOS), here's a simple tip: Begin your search by looking into cities or regions that fit your investment goals and strategies. Look for areas with strong job growth, a growing population, and a stable economy. Find that perfect match for what you want to achieve, and don't rush – take your time to dive into the specifics.

If you're looking for a good place to start investing, I'd suggest checking out the Midwest. It's got a lower entry point, and the cash flow tends to be pretty sweet. Personally, I'm into Columbus, Ohio. It's been booming lately thanks to tech giants like Intel, Meta, Amazon, and Google setting up shop, which has bumped up property prices and brought in more job opportunities.

I've also got my investments in Cleveland and Dayton. So, if you need any insights let me know how I can help!

Albert Bui · Answer

Before you make a huge mistake you should assess where you're at and what skill set and personality temperament you have relative to task/goal at hand. Do you have the personality and free time to be able to fix and flip houses ? Its a lot more tedious that it seems or sounds. Perhaps you do have both or perhaps not.

It probably took awhile to save up that 50,000 capital so Id use it wisely or you can do one of the lower risk strategies like house hack 2-4 unit while you're slowly learning and going to meetups and shaking hands and kissing babies. This is what I suggest for the average person with a full time job and limited time.

Of course you have to do all of the other personal finance stuff too like living below your means, reducing your means/expenses, and increasing your income with a HIS (high income skill).

If you are going to flip just make sure you have 6-12 months reserves to live on and to carry the monthly private or hard money payment while you're in the midst of your project so you're not left out high and dry.

Best,

@Matthew Kwan@Carlos Valencia

Carlos Hernández · Answer

Thank you for sharing!

John Williams · Answer

In my opinion, it is often easier to build capital by buying and holding mid/long term. For example, rather than fix and flip, you could use that money for a down payment on a regular rental property. In my market (Clarksville, TN), you can buy properties right off the MLS for a 5-15% discount and have built-in equity. Additionally, sellers are covering closing costs in many cases. You may be able to sell that same property in 12-24 months and cash out on the equity. I think you've got a better chance of building capital this way.

Carlos Valencia · Answer

Hello Carlos,

Its really going to depend on your personality. You have to find what fits you best. I would suggest maybe find someone who is willing to mentor you and take the time to learn from them. Explore as many areas in real estate investing as you can and once you see something you might actually enjoy doing then go all in and become the expert in that field. Find out your why in order to see what is the best choice for you.

@Albert Bui @Matthew Kwan

Sophia Buesing · Answer

Hey Carlos! If you can create a solid team investing out of state could be a great option. I see you are in Dallas. We love to host real estate happy hours there. Would love to connect.

Lindsay Davis · Answer

@Carlos Hernández,

I think you’re right—investing out of state would allow you to own a property independently without bringing on a partner.

In fact, if you target affordable markets in southern U.S. states—areas like Montgomery, AL or Tuscaloosa, AL come to mind here—you may even be able to do away with the hard money loans, which come with uncomfortably high interest rates.

As an example, the median home sales price in Montgomery is about $170,000, which means that your $50,000 budget would likely be enough to cover 20% down and closing costs. This means that you can qualify for conventional financing (and won’t even have to pay mortgage insurance to boot).

Lucas Hunt · Answer

How much construction/rehab knowledge do you have? If you have a considerable amount of expertise, then by all means, do a flip for your first swing in the real estate game. If you don't have much construction/rehab knowledge, I'd recommend investing locally into something like a house hack, or a new single family home in north of Dallas (ex. Princeton). That way you can understand local pricing/demand/tenant base along with grasping the mechanics of a real estate transaction.

$50,000 would be plenty for a 3.5% down FHA loan (ie. househack a duplex/triplex), or a $200,000 single family via an investment property loan.

Axel Meierhoefer · Answer

@Carlos Hernández I believe you have to look at your goals long term.

I mentor people who want to build a portfolio and an estate but also help with referrals to the providers I use for my own investments.

The folks I support and I look for cash flow so we can build a portfolio that allows us to stop working and live off the passive income. That's a long-term strategy that can take up to 10 years and requires the right, well-performing markets to invest in.

We are a small group of people all realizing that same goal.

If your goals fall into that bucket, I am happy to help and support you. If it is a different goal, you will find the right support here on BP, as soon as you state what you aim to accomplish in the long term.

Any suggestions for investing local or out of state?

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