Concidering my first investment property. (and it is out of state)

[Angela Holm]

Hello! This is my first post. I'm currently reading Chad Carson’s book "The Small and Mighty". His real estate strategy really resonated with me. I’m currently visiting my family in Zenda, WI, a tiny town just south of Lake Geneva and on the border of Illinois. I noticed a house for sale that caught my attention. 


I am wondering if this could be a good first time investment property concidering the following pieces of information?

A bit about me:

• I live in Portland, OR (which is quite expensive)
• I’m a first-time homebuyer
• I’m interested in the "small and mighty" approach to real estate investing
• I'm actively contributing to my 401(k), maxing out my Roth IRA, and have $30K in savings. I only have student loan debt
• I have a full-time remote job
• I have no prior experience in real estate investing
• My credit score is high 700's

Here are the details about the property in Zenda,WI:

• Asking price: $235K
• It’s being sold by out-of-state heirs
• It needs at least $50K in repairs and updates
• The neighboring house recently sold for $235K (though I don’t have details on its condition before the sale)

A family friend who owns a construction company assessed the property and noted the following:

• Replacement Needed: Furnace, Water Heater, Water Softener, Floor (concrete replacement needed due to unevenness), Roof, Gutters
• Updates Needed: 1.5 Bathrooms
• Concerns: Black mold and water leak marks upstairs
• Remodel Suggestion: The staircase is very steep and narrow; recommended to relocate and extend it into the living space
• Additional Work: The property slopes downward, allowing rain to flow into the house. Recommendations include moving the patio away from the house and adding a retaining wall.

Other considerations:

• I already have a team in place locally to manage the property and handle repairs
• I visit the area biannually
• There’s another couple interested in the property and supposedly making an offer.
  
• I haven’t secured preapproval for a loan yet
• My credit union only services Oregon/Washington, so I can’t use them for a loan
• I’m unsure about the process of buying an investment property from out of state, as a first time home buyer, especially since I don’t plan to live in the property myself

What I’d like to know:

1. Does this seem like a solid investment opportunity?
2. If I proceed, what’s the best approach for financing, including downpayment and loans? How should I handle the necessary repairs?
3. Is this area considered desirable, given its location between Milwaukee and Chicago, and proximity to Lake Geneva?
4. With my current savings, is this property a reasonable first investment?
5. Any other advice or insights you might have?

Thank you so much for taking the time to read this and share your thoughts!

[John Clark]

I am not a fan of novice investors starting out with out-of-state investments. Too many things WILL go wrong. Stay very local, or if you can trust someone local, you do the financing and they do the work.

[Angela Holm]

Thank you for your insight, John. I appreciate it!

[David Butler]

Hello Angela. Congratulations on your first post and evaluating deals. In order to offer solid advice, I need more information. What are your plans for this house? Flip,LTR,STR? Zenda is a very small town so I question the demand for folks wanting to live there so that effects both flips and LTR and is a far enough distance from Geneva Lake that IDK the demand for STR so all of these things must be considered. Someone else has warned about out of state investing and I would be very careful as you are quite a distance away so there is increased danger due to distance. I am assuming you will need a downpayment and your scope of work is more than 30K so where does the money come from? I don't want to pour water on your interest, but I don't think this is the deal you are looking for because: 1. problems with all of the things you can do with the property 2. a general lack of reserves 3. long distance. I am a local real estate investor with experience and a contracting network and I wouldn't take this deal on unless there are details that you are not sharing that makes the deal better than it sounds by your post. I wish you all the best in your real estate journey!

[Marcus Auerbach]

I don't think that's a good idea, you are not getting much of a discount, the property needs a lot of work and you don't have the capital (25% down plus rehab) or the experience to take it on.

Most important for your first deal is that you have a good experience and not lose money. Otherwise it will remain the only deal you ever did. So you want a low-risk type of deal with a smaller scope of work.

House hacking a duplex would be hands down your best strategy, but you would have to move. Milwaukee has the largest number of duplxes of any city in the US to my best knowledge. 5% down get's you out from paying rent and you also learn the ropes in a really-hard-to-screw-up setting. 

[Jonathan Klemm]

Hello there @Angela Holm - It is awesome to hear that you are jumping into real estate and sounds like you are starting in the right place with reading/educating from Coach Carson.

WOW!  GREAT JOB...no bad debt, 401k contributing, credit score, etc.!

1. It's hard to know if it's a good deal without understanding your investment criteria and the analysis of the property. That being said , no first deal is perfect, and you have a lot of the pieces of the puzzle, so I'd for it if the numbers are even close!

2.  You can do 15% down with the homestyle loan program as an investment property and include the rehab.

3.  I am from Chicago and used to go up to Lake Geneva all the time.  Assuming you are doing long term rental, check zillow to see what other houses are renting for.  I'd also HIGHLY recommend connecting with a local rock star real estate agent.

4.  You are in a great place to invest - Jump in!

5.  Network locally as much as you can. The best way to learn is through experience, so just know that going into things won't go perfect, but you will learn a lot and continue to grow!

[Wale Lawal]

@Angela Holm

This property in Zenda, WI, requires extensive repairs and is located between Milwaukee and Chicago. Its proximity to Lake Geneva and potential for short-term rentals make it attractive. Financing options include conventional, FHA, private, and hard money loans. However, seasonal rental demand may be a concern. To determine if this property is a reasonable first investment, consider financial position, market knowledge, and market research. Be prepared for the challenges of managing a property from a distance.

Good luck!

[Marcus Auerbach]

Quote from @Wale Lawal:

@Angela Holm

This property in Zenda, WI, requires extensive repairs and is located between Milwaukee and Chicago. Its proximity to Lake Geneva and potential for short-term rentals make it attractive. Financing options include conventional, FHA, private, and hard money loans. However, seasonal rental demand may be a concern. To determine if this property is a reasonable first investment, consider financial position, market knowledge, and market research. Be prepared for the challenges of managing a property from a distance.

Good luck!

 Are you seriously posting ChatGPT-generated content.

[Crystal Smith]

What I’d like to know:

1. Does this seem like a solid investment opportunity?

You don't have enough information to determine if it's a sold investment opportunity. You need at least 3 recently sold similar properties within a one mile radius in the last 6 months.  One recently sold property isn't enough data.  If you only have one recently sold property for $235K & the property you are considering is asking $235K but needs $50K of work then it's not a solid investment at $235K.  

1. If I proceed, what’s the best approach for financing, including downpayment and loans?
2. You can't proceed until you get your financing in place.  Start talking to lenders?  
   
3. How should I handle the necessary repairs?
4. At the appropriate point you should fly into town and start interviewing contractors.  Maybe meet with other investors and see if you can find someone to partner with to be your eyes and ears on the project.
   
5. Is this area considered desirable, given its location between Milwaukee and Chicago, and proximity to Lake Geneva?

From a business perspective, we determine desirability by how many real estate transactions there are in a community and average days on the market.   This goes back to your first question on whether or not it's a solid investment opportunity.  You need to do your research on the market.

1. With my current savings, is this property a reasonable first investment?
2. Measuring if a property is a reasonable first, second or last investment is not a function of how much you have saved. You should be measuring the Return on Investment & is it high enough for you relative to the risk.
   
3. Any other advice or insights you might have?

1. Get your approvals in place with a lender.  You may need more than one as some lenders may have restrictions on where they lend

2. Since you are looking at investing out of state- establish some relationships with realtors, investors, contractors,..... in the market you want to invest.  Maybe even see if you can partner on a deal with someone local.

3. Budget traveling into the market until you have all your resources in place

1. 

2. I don't think you should proceed until you do some more homework on investment 

[Alecia Loveless]

@Angela Holm I first got into investing 27 years ago. I bought 2 multis with partners that went sour and the partners bought me out. With the proceeds from the sale I bought a SFH which I renovated and furnished before renting out. The tenants TRASHED this house (I had known them for years). This caused me to quit real estate investing for 22 year. Quitting was the biggest mistake I ever made. If I'd have kept going today I would have a portfolio worth over $10MM.

Please don’t choose a first property that is going to suck you dry and cause you to give up.

I’d recommend starting with a project that has less required repairs. You can work your way into this type of project once you have more experience.

As the others have said house hacking is a great first strategy. You say you work remotely, find a great, fun, affordable location and move there and house hack!

[Grant Schroeder]

Quote from @Angela Holm:

Hello! This is my first post. I'm currently reading Chad Carson’s book "The Small and Mighty". His real estate strategy really resonated with me. I’m currently visiting my family in Zenda, WI, a tiny town just south of Lake Geneva and on the border of Illinois. I noticed a house for sale that caught my attention. 


I am wondering if this could be a good first time investment property concidering the following pieces of information?

A bit about me:

• I live in Portland, OR (which is quite expensive)
• I’m a first-time homebuyer
• I’m interested in the "small and mighty" approach to real estate investing
• I'm actively contributing to my 401(k), maxing out my Roth IRA, and have $30K in savings. I only have student loan debt
• I have a full-time remote job
• I have no prior experience in real estate investing
• My credit score is high 700's

Here are the details about the property in Zenda,WI:

• Asking price: $235K
• It’s being sold by out-of-state heirs
• It needs at least $50K in repairs and updates
• The neighboring house recently sold for $235K (though I don’t have details on its condition before the sale)

A family friend who owns a construction company assessed the property and noted the following:

• Replacement Needed: Furnace, Water Heater, Water Softener, Floor (concrete replacement needed due to unevenness), Roof, Gutters
• Updates Needed: 1.5 Bathrooms
• Concerns: Black mold and water leak marks upstairs
• Remodel Suggestion: The staircase is very steep and narrow; recommended to relocate and extend it into the living space
• Additional Work: The property slopes downward, allowing rain to flow into the house. Recommendations include moving the patio away from the house and adding a retaining wall.

Other considerations:

• I already have a team in place locally to manage the property and handle repairs
• I visit the area biannually
• There’s another couple interested in the property and supposedly making an offer.
  
• I haven’t secured preapproval for a loan yet
• My credit union only services Oregon/Washington, so I can’t use them for a loan
• I’m unsure about the process of buying an investment property from out of state, as a first time home buyer, especially since I don’t plan to live in the property myself

What I’d like to know:

1. Does this seem like a solid investment opportunity?
2. If I proceed, what’s the best approach for financing, including downpayment and loans? How should I handle the necessary repairs?
3. Is this area considered desirable, given its location between Milwaukee and Chicago, and proximity to Lake Geneva?
4. With my current savings, is this property a reasonable first investment?
5. Any other advice or insights you might have?

Thank you so much for taking the time to read this and share your thoughts!

Hey @Angela Holm! What about house hacking in and around the Portland metro? We own properties in Newberg and other cities 30-45 minutes outside Portland and have found great success there. We also have lots of clients finding wins with ADUs and multi unit properties with house hacking. Deals are created in this market, not found!