Would Love Some Advice for Starting Out

Question

Hi everyone,

My husband and I are just starting out in the real estate investing game. We live in the greater Seattle area, WA, and just got pre-approved for a loan. Right now, we rent a 3-bed, 2-bath house for $1300/month in a park. It's a pretty good deal in our minds, and we are inclined to stay there because rent is so cheap. For a long time, we were saving for a house in Washington and would have ended up buying a duplex and house hack. However, because of this rent deal, we don't see a reason to leave. So, we've shifted gears for our real estate investing strategy to just purchasing a long-term rental.

After joining this group and learning a lot, and given the housing prices in the Greater Seattle area, the lower rent-to-price ratios, bad landlord-tenant laws, and the astronomical prices, we are seriously considering investing out of state. Given our newbie status, do you think it makes sense for us to invest out of state to begin?

When crunching the numbers, it seems to make more sense for our situation every time. However, if we did invest out of state, it would go against a lot of beginner best practices.

Thanks! Looking for some advice from seasoned investors.

Nicholas L. · Answer

@Audrey Sommer

Hi.  Welcome.  A few thoughts.

-I wouldn't give up on house hacking.  It's a great way to build wealth.  I don't know your entire situation, careers, commutes, etc., so only you can decide what fits your budget and your lifestyle best.  But house hacking with a low down payment loan is a very, very powerful way to get started.

-Should you start investing out of state?  ...maybe.  If this post gets noticed, you may get a lot of people telling you "yes, go for it!" and recommending random markets with lower median prices than Seattle, like Ohio or Alabama or Kansas.

But... the market is very, very tough right now, and what I tell everyone in your position is: if you're serious about it, you have to pick a market, go to it in person, and be willing to spend time in it in person, building a network and getting to know it.  If you just look on Zillow, pick a random property, buy it, and turn it over to people you don't know to manage it, it's extremely likely that you will: have it cost a lot more than you thought, get overcharged for things, lose money, and have a big chunk of your savings just stuck in the property not really doing anything for you.

Not to discourage you, or to say that you would do what these folks did, but here is what NOT to do OOS:

https://www.biggerpockets.com/forums/48/topics/1137397-balti...

https://www.biggerpockets.com/forums/963/topics/1195280-expe...

https://www.biggerpockets.com/forums/48/topics/1160450-run-i...

https://www.biggerpockets.com/forums/67/topics/1167190-strug...

I hope this helps - happy to dialogue further.  While it is definitely still a great time to invest in RE, it is just much more difficult than it was 5-10 years ago.

Cortney Huber · Answer

Hi Audrey! So excited for you to get started on your real estate portfolio. I agree with others that house hacking can be a really powerful way to begin. Some of the most compelling reasons for this:

1. Low down payment

2. Lower interest rate

3. Easier management--you know the property much better and can take care of issues quickly and efficiently. You see problems as they arise.

4. Your living expenses get rolled into the investment, which can offset the expense (you're paying $1300 in rent each month--including that in your calculations for either a duplex or a home with an adu may make the investment numbers work better)

I would strongly encourage you to spend a lot of time figuring out how to make a house hack work for you guys. I have so many regrets about letting daunting market factors deter me from making more investments a few years ago. Now I look back at those factors and think: that would have been easy to overcome! If you're willing to look and learn enough, you can very likely find something that will work for you guys. Paying $15,600/year in rent may seem like a good idea because it's a good deal for rent, but imagine using that money toward something that will grow and build wealth for years to come. Would you rather pay long term rent or build long term wealth? I'd be happy to brain storm ideas with you or point you to some good resources. Just DM me. You are so smart to be investment-minded; keep going! There is a way.

Colby Fryar · Answer

I think going out of state is a great idea. It will take a lot of work and perseverance, but it will be worthwhile in the long run.  You will need to research and select a market that fits your goals.   Then you will need to build a team before you hit the ground running.   There is a lot of experience on this site that can help you navigate through this.

Jonathan Greene · Answer

Investing out-of-state as a first investment is a tall ask. It surely can be done, but it's hard to learn much from it if that's your goal moving forward. There are a lot of good out-of-state markets for people who live in areas that don't support their budget, but I think there are always areas within an hour that are more investable that are overlooked. I would draw a circle around 30 minutes of you in all directions (not into the water of course) and then 60 minutes and run some data there first before packing your money up to ship off to a market you don't know.

Sam McCormack · Answer

For sure it makes sense to do that. I have quite a few investors who do that exact same thing in Greater CincinnatiBut I would say that I think househacking in Greater Seattle is still worth it. Especially considering that overtime it will appreciate, rent will go up, and you will still need a place to go. And maybe soon your rent would go up to if the owner decides to sell. Your rent can move easily, not your mortgage (unless you want it to). So definitely still worth it at some point

Nicholas L. · Answer

@Audrey Sommer

on where specifically to live, and what makes the most sense given all the factors - that's totally up to you.  i would just be willing to put some time in to look at specific properties.  again, not shopping on Zillow - but actually walking properties.  potentially lots of properties.  and how much you can afford / would be comfortable with is up to you and your lender.

on Idaho - that's exactly what I am talking about, picking a place where you have friends and connections, rather than throwing a dart at the cheapest places in the US.  seems definitely worth exploring even if you don't end up buying anything.

Audrey Sommer · Answer

Thank you Amir! yes, I will! I admit, I still have a lot of reading and numbers crunching to do. I'm taking this season to dive into that, but wanted to start a conversation with those more experienced than me. Thanks again

Audrey Sommer · Answer

Hi Nicholas,

Thanks so much for the candid advice! I don't want to give up on house hacking if I don't have to. the way I currently see it, it could add more complications to our lives in a risky way. This is what I mean. Currently, my husband and I are both busy professionals. My husband doesn't have much of a commute right now, but I have a 1.5 hr commute one way south of where we live. I can't move closer to my work, because it will affect my husband's work. So, we are stuck choosing a house in the middle of the Seattle area or the north end where it's more affordable. However, if we go north end, I'd be forced to quit my job, due to the new home being too far away. The way I look at it, buying a duplex in the north end of where we live, and being forced to quit, that would put us in a very scary position financially in my opinion. If we buy a duplex in the middle of Seattle area, we'd be paying top dollar, and we may already be priced out. I'd have to investigate the prices further tbh. What do you think? Maybe you disagree.

Alternatively, we've both been to and really like Idaho. We see ourselves moving to the court de alene area in the next few years. We've considered buying a duplex in court de alene, renting it out until we are ready to move. When we move there, we could still rent out the other unit. The only catch, is that we wouldn't be house hacking to start, we'd be required to put 20% down on purchase/sale of the property. I don't know how viable this idea is yet, I still have to crunch a lot of numbers to verify if this would be worth pursuing. If we considered this option, how would that change your advice? We have a lot of friends and connections there, and have been there before. We'd still have to find real estate connections though. But we really like it there.

Thanks again, I'll check out those resources.

Madri Koppe · Answer

Wow that is a great deal on your rent. I understand why you don’t want to move. You can definitely invest out of state. If you are serious and have the time and interest in researching different markets and building up a team so you are going in with a plan, it can make sense. I’m in CA and know people who only invest out of state.

Would Love Some Advice for Starting Out

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