A Couple of newbie questions

[Max McNally]

I'm a new REI looking to buy a multifamily property for rental income. I've read the Ultimate Beginners guide, as well as Investing in Real Estate by Gary Eldred and I have a couple questions.

1. What are the pitfalls of investing in out of your area (or state) real estate markets? I live in the Bay Area of California, and I can't make the numbers work on anything near me. I could afford a place like Atlanta or Ohio. Does it make sense to buy there and get a property manager? How do I find agents/financing/contractors? How often would I need to travel? 

2. The 2% rule seems really unrealistic to me. Maybe it comes from living in an expensive area, but I've never seen a property that is worth $100k rent for $2k a month. Does this actually happen ever? 

3. I've been using this spreadsheet to analyze property listings. Does this seem accurate? I've been able to find some craigslist with great returns using this tool, I just want to make sure the model is accurate before I jump into anything. (Let me know if you are able to see the formulas in the link)

I know these questions are probably pretty basic, so thanks in advance for reading and any advice you can give me

Max

[David Faulkner]

Oh boy, here we go ... this topic has been asked and debated over and over and over again on BP ... I'd suggest doing some searches or just watching the boards and you'll see some. I'm with @Account Closed in that local is best. I've done both actually, and have come to this conclusion by way of experience. The main reasons are:

1)Most people, my self included, underestimate just how difficult it is for a small to find a good team on the ground in the location you want to invest. This team, especially the property management, will make or break your investment ... it doesn't matter how good the numbers look on paper, without a good team in place, you will never see those numbers. This business will make you very synical in one respect, you will be amazed at just how many theives, con artists, BSers, and incompetents there are in this business that prey on new investors ... and without any experience in investing under your belt, or way to validate out of state that you are getting what you paid for, you will surely come across more than a few, and each time it will cost you money (but at least you'll learn something). Just because they are on BP, doesn't mean their one of the good guys either.

2)There is absolutely no reason to. There are literally millions to be made in your own backyard. You just need to learn how to operate in your unique REI environment ... the strategies that the Mid-West and Deep South folks employ and preach on BP, just won't work in your market. Likewise, the things I do in SoCal would not be appropriate for them. Different markets, different strategies. And no it is not just pure speculation to invest in CA real estate ... there is a science to it and done properly it is highly repeatable. Cash flow is an important thing, but it is not the only thing. There are different flavors of appreciation, and not all of them are speculative. Buy and hold is possible, and even highly profitable in your market if you know how to operate. You are surrounded by many great investors up there ... find one, figure out how you can add value to what they are doing, learn, and thrive!