Investing outside of hometown
Stamford, CT · Member since 2014 · 21 posts · 9 votes
I'm just starting out and exploring small multi-families in my hometown and adjacent towns as I'd like to stay close for my first property. Unfortunately, I'm having difficulty finding anything that would actually cash flow. There are some towns 30+ minutes away that look more promising but, I'm concerned I might be biting off more than I can chew to start. I work a full-time job in NYC but would like to gain some experience landlording initially.
Thoughts?
@Tom Suvansri I work for a Property Management company in Indianapolis. We deal with a lot of out of state and even out of country investors. I think that the most important thing to consider is having professional boots-on-the-ground people to help you make decisions. With that being said, don't just hand over your money without asking questions and understanding your options. I will give 2 Scenarios.
The point of the matter is this... use professionals who value your investment. Do as much due diligence as you can (Crime maps, school research, tour the streets w/ Google Earth, etc.) Don't be afraid to validate everything with licensed professionals (RE Brokers, Inspectors, Appraisers, GC's, etc.) As an established Property Manager, our office has the pulse of the local market. I can comp most rents in the city with just an address, bed/bath, sq ft, and year of the home and be no more than 5% off of the mark. I can also generally tell you how long it will sit vacant and what kind of tenants will be interested in the home. We get homes from other PM Companies all of the time. Many of them we turn down because the home is not one that is worth the hassle of managing (nobody likes having tenants break their lease because the house keeps getting broken in to.) Not every Property Manager is going to be as efficient as we try to be, but they are out there.
Hope this helps
I recognize that home and yes I bought that one.. and when I sold out of my 350 homes last year it went bye bye.... Sorry I misspoke about you working for Aaron.. It was an assumption on my part although I know your wife did and as you know your wife and I have conversed for many years through all my different iterations in Indy at least 10 years in fact .. From when I started there with Vertucci and Aaron doing HML for their buyers... That model of course is dead and put to bed. to doing 50% LTV non recourse loans for Aarons buyers a year or so ago.
With regards to buying turn key out of state.. I defiantly have my opinions and there is a right way to do it and a wrong way.. and of course in my personal experience owning all these houses and lending on a couple thousand more I have seen my share of ups and downs. and I believe it is not for everyone... As much as I think there are good and poor turn key companies I think there are just as many poor investors and landlords.. Who really should never even own rentals anywhere much less out of state.. They don't have the experience to do it.. They don't know what to expect.. they do not assist the PM and in fact hinder the PM many times by being slow on communications being under funded and not able to keep the home in tip top shape etc etc.. So yes I believe many out of state landlords fail because of their own inability to manage the managers and their assets. and I think ,,, well I know that many fail because they choose poorly in the beginning.
My comments you quoted above were simply to let the readers know there was a new group on the block and one that has some pretty deep experience in the space. As I know your wife worked for Aaron for years was the comptroller put the systems together on the back end and ran a company that had 500 to 1000 rentals.. so I think that is a pretty accurate assessment.
And my posts as I said are based on my personal experience's owning hundreds of these and lending on thousands...
No worries, and thanks for the response! I appreciate that!
First of all, I want to note what @Jay Hinrichs stated - SELL WHEN YOU HAVE A PROFIT. What a great concept to remember, especially for new investors.
Over theyears I have done a ton of SF investing and lending out of state, in fact much more than I have done in KC where I am located, and this is a great investment market. Just a couple words of advice:
1: Make sure that you have the personality and make up to invest out of state. If you are the type that cant sleep at night because you cant drive by your property everyday, then don't do it.
2. Property Management is critical. Once you have a property manager, and lets assume its a good property manager (big assumption), it does not become a passive investment, especially out of state. Now you need to manage your property manager. If you don't, another investor is. Sqeaky wheel gets the grease.
3. There are many tools available today that help you quickly analyze out of state property. Personally, I will not provide any capital or recommmend any of my investors provide capital for an out of state SF property without using a tool called RentFax. Much like CarFax, it provides critical location information on the specific property - school systems, crime, unemployment, etc - the same items you would consider if you were going to move into a specific area. It summarizes it into a simple index score, and also provides detailed information should you choose that option. It's cheap - $5 to $10 depending on the the level of detail you want. I have no economic interest in this tool, nor do I recieve anything for referring anyone to it. But I promote it by having a link on my website - www.TheCapitalMan.com, and then click on "RentFax" in the upper right hand corner. You will benefit greatly.
Good luck and good investing out of state!
Dan