Long Distance Rental Properties as a Newbie?

Question

The initial reason that lured me to real estate investing, was to look into purchasing an out of state property that I could rent and eventually use as my retirement home.  However, as my real estate education grows during these early stages  an out of state investment as my first may prove difficult and challenging.

I'm a CT resident, which in an of itself is a "downer". Very expensive to live here between the property prices and taxes, as compared to many other states.  The South East is where I was considering, states such as NC, SC, FL.

It's obviously possible to achieve, based on the stories here at BP, but my guess is that most would not suggest it to start off, unless necessary?

Perhaps a state closer to start would make some sense?

Your feedback is appreciated.

Ali Boone · Answer

@George P.

Yes, I invest out-of-state...If that's why you tagged me...?

Since I'm here, Claudio, you have totally legit concerns. Ultimately you should only do what you are most comfortable with. I can tell you that I have only invested long-distance (I live in LA so the same pricing problem here) and I've done fine with it. I was a newbie investor when I started and it was fine. I know a lot of other people on here who do it successfully as well via different means than I do (@Mehran K. is one I'd recommend talking to), but do know it's possible and can be easier than some make it out to be. It all depends on how you want to do it and meeting team members to help you along. I'd say the #1 key to doing it is who you are working with. Since you have to trust other folks with things, it's imperative those are good folks.

I'm horrible with geography, but if you are in CT, not sure how far away that is from some of these but for example, Philly is booming right now for buying rentals. Trenton has had a lot of action too. I don't know of any other northeastern markets right now, but maybe you wouldn't have to travel as far as you think?

Everyone will have their preference, but I love buying long-distance and until CA becomes more friendly for cash flow, I have no desire to stop doing it. Again, all about the team members.

Jay Hinrichs · Answer

@Claudio Golia  since your question was to buy were you might want to retire.. that seems like a pretty easy thing to determine... most folks want to retire in warmer areas from the northeast.. and that usually means the Carolinas south.

I doubt many people are going to want to retire in Philly or trenton as Ali Boone mentions.

so from my point of view if retirement is your goal you would want to buy the best property possible and if it just paid for it self that would be acceptable it does not need any big positive cash flow.. and if its a vacation rental it might do better.  Rental positive cash flow properties in the bigger metro cities are all in areas that are bascially all rental areas with little redeeming features other than a vehicle to create a few hundred bucks a month in cash flow... so unless you can go large with it.. the risk is very high ... Look for A class properties in an area you Would ACTUALLY like to live in... huge difference between rental areas and retirement areas.

Esaul Viramontes · Answer

If you have family or friends living there already that would be something to make that a little easier. I would also encourage doing research. LOTS and LOTS of research in the area and physically visit the area you have narrowed down. I think most folks that get into trouble investing somewhere else is because they went into it blindly.

Jeremy Baker · Answer

@Claudio Golia a wealth of great advice here and I think @Jay Hinrichs hit the nail on the head regarding vacation rentals in areas you would actually like to live.

One of the great aspects about rei is there are so many different ways to invest and accomplish your goals, however, for many this also makes it difficult to decide how to invest.

As for investing long distance as a newbie, it can definitely be done and exactly what we did.  For us, we decided to choose an area we were very familiar with and we decided to start with a vacation rental condo in Kihei, Maui because we visit there each year and it's definitely where we will retire.

The great thing about choosing a vacation rental in an area you visit frequently is that you get to use the property when you visit (check the tax rules on how much you can use it!).   Each trip we make to Maui, we save over $2,000 in hotel/ rental fees when we stay at our place.  Now, I guess you can count this $2,000 as cash flow, but it's definitely not $2,000 that's leaving my bank account each year!

In my opinion, I feel that vacation rentals are much easier for us long distance than a long term rental.  There are a couple of things we don't worry about with our vacation rental that we would worry about with a long term rental property.  Evictions, property damage, and late/missed rental payments are just a few items that we don't lose any sleep over making this type of investment more comfortable for us to accomplish long distance.

Mehran K. · Answer

I'd say it depends on your market. If I lived in a strong cash flow market, I would buy a local rental. This is mainly because my goal right now is to produce cash flow with my investments. With that focus, I'm not going to buy a local rental here in Los Angeles that doesn't cash flow well just because it's close by :) The saying goes "Live where you want to live. Invest where the numbers make sense." One other thing to consider is the landlord/tenant laws in the potential state/city you're looking into also. My local landlord/tenant laws suck! They are much more landlord friendly in the areas I invest.

Try starting out with a list of all the fears/challenges you see yourself facing with investing out of state. Ask around or do some research on ways investors mitigate the risks of those situations or deal with the problems all together.

As you can see, everyone's helpful here and I'm sure if you keep asking the right questions you'll eventually feel comfortable enough to move forward :)

Thanks for the mention @Ali Boone!

Account Closed · Answer

@Claudio Golia

Our company manages over 600 properties in the Central Florida area. Let me know if I can answer any questions for you.

Tyisha G. · Answer

@Claudio Golia and all others, this has been an insightful thread especially for new investors considering investing out of state. I hope you are able to find the best strategy that works for you Claudio.

Ali Boone · Answer

Hey Claudio! I just got your PM so I'll respond there (mostly with my contact info because typing it all out will be too hard)

Claudio Golia · Answer

@Jay Hinrichs

Thank you.

What brought me to BP and real estate investing was the desire to purchase a property in that my wife and I could someday use as our retirement home.  However, until then perhaps we could use it as a vacation rental for others.  Assuming of course the location was desirable to do so.

However, since being here, engaging with members, reading, and listening my mindset seems to be shifting away from solely a retirement property and more on potential buy and hold rental properties.  I love the idea of cash flow on multiple properties (as do most), but the going BIG, is something I hadn't given a lot of thought or even considered as a possibility mostly due to risk for a person in my shoes.

That said, the retirement strategy is not "out the window".  As with others just starting, I'm still trying to figure it all out and get a plan together as to what I really want my goal to be. Really trying to focus on education and networking at this point to see what options and possibilities exist.

Appreciate the feedback.

Long Distance Rental Properties as a Newbie?

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