Buying first multi family out of state

[Adam Lawrence]

I live in California and I am looking to buy my first buy and hold multi family. I'm thinking about a duplex or four plex. Prices here are very high. What are your thoughts about buying out of state or in another, less expensive market? I understand I don't know as much about the market, I just don't want to spend $550,000 for a four plex. Especially with rents of about $1,000 a unit.

[Joseph Hennis]

I live in California and am not afraid to invest out of state. There are tons of great places all over the country. I have 3 properties in ogden UT, 2 in fairfield/suisun. Expanding soon. One place I have my eye on right now is Joliet IL. I spend quite a bit of time researching a place before I jump in. Other good places: Texas has a bunch, fort worth and houston outskirts, florida I've seen a few good places, alabama, the Carolinas, Tennessee, Kansas City Missouri.

First I go on the web and find good deals. I try to figure out how much something will rent for. I divide rent/mo by purchase price to get the rent to price ratio. (1% is the rule of thumb but some places can be 2-3%. I've not purchased anything that great yet 1.4% is my best so far... As a comparison... The 550k deal with 1k/mo x4 in rents is 0.72%. That type of deal isn't even on my radar. It's not worth it and those are a dime a dozen.) Then, I dive a little further... city data.com has all kinds of info on a city. I pay particular interest to population growth, wages, job sector diversity, and crime. 

Then next step is the phone. I start calling property managers in the area, ask about rents, management fees, taxes, who pays water in the area, ask about other customary expenses in the area, what are vacancies like in the area, if they are also a realtor and if they have a contractor they use. I call contractors and ask about prices for various materials in the area. If I have a potential deal, I will ask property managers about that property in particular. I don't know how many times I have been steered clear of a potential pitfall by property managers. Sometimes its the property, sometimes it is the area (if your property manager wont go there, you shouldnt buy there, well, unless you are into that type of thing...). If it's an MFR with tenants already, I call the housing authority to find out what kinds of complaints there have been. Oh, also, another thing to ask property managers is if they have any pocket listings. Tell them you want to know if there are any pocket listings as soon as they have them.

You can call other realtors too, but they don't have the same vested interest that a property manager would, so just remember they are trying to sell you a property whether or not it's a good deal.

I've never even seen my properties in Utah... lol... maybe one of these days....