Should I invest in my own state?

[Kayla Davis]

I live in Arvada, Colorado, a suburb of Denver. The housing market here is very expensive compared to other places in the United States, where even a small townhome (2 beds, turnkey, no repairs, good area) runs around 100k. Ouch. And the kind of property I want to buy, multifamily, easily runs 250k to 400k (unless you're rehabbing, then slightly less). 

I'm only 22, and I don't have any other financial resources besides myself and my hourly wages. No money in the family, no asking mommy or daddy for a down payment. I'm afraid that the amount of money I can save within a short amount of time won't be worth investing in my own area because of the over inflated prices. The same $20,000 or 3.5% investment I could make on a fourplex in my own state, FHA and therefore owner occupied, could also be 20% down on a fourplex in another area with no need to owner occupy.

That being said, should I invest in a different state with a weaker housing market? 

I would actually prefer to owner occupy in a fourplex and do my own property management for the experience and extra cash flow, but I just don't think I can purchase in my own area...

I've read the blogs and watched the videos of some other successful investors, namely @Lisa Phillips and @Joe Fairless who invest in other states with a lot of success. However, investing outside my own neighborhood feels daunting, since I don't have personal contacts anywhere but Denver.

How do I determine what is right for me? Thoughts?

[Wendell De Guzman]

Kayla, one way around not having enough funds for downpayment is creative finance. Here's a sample deal and how I would pay a lot less cash as downpayment vs conventional way:

Rent: $10,000/mo

Sales price: $1,000,000
Offer: 80% 1st mortgage/ 10% 2nd (owner carryback)/ 10% downpayment
Downpayment required: $100,000  ($200,000 less $100,000 owner carryback 2nd)
I will close this close to the time they collect the rent so I can get pro-rated rents and security deposits (assume sec deposit is the same as the monthly rent)
By doing this, the downpayment required is now $80,000  ($100K - $10K prorated rent - $10K security deposit)
Then I will have an inspector inspect the property and find deferred maintenance items that need to be fixed. Let's assume the property needs $50,000 deferred maintenance items. I will negotiate a DEFERRED MAINTENANCE CREDIT at closing...
So the downpayment becomes:
$80,000 less $50,000 deferred maintenance credit = $30,000

Think about what just happened here: your downpayment went down from $200K (if you do things the conventional way) down to $30,000 on a $1M deal - only 3%!

In addition, you can also SYNDICATE a deal. I described in my podcast how I got a 100+ unit apartment building by putting just $5,000 of my own money in the transaction. Here's the link if you have not listened to it yet:

http://www.biggerpockets.com/renewsblog/2014/04/10...