Investing out of my area as a beginner?

Question

Hi all! I'm saving for my first rental property and have a question I was hoping to get some input on. Rentals are pretty expensive in my area (Washington State), so I was considering buying out of the area. I've heard of and done a little bit of research on Roofstock, and they seem to have a pretty good model, but I'm concerned with how much it might cost to have the property managed out of my area where I have no access to it to prep it for new tenants, take care of small maintenance/repair issues myself, etc. Would I be getting in over my head investing out of state or am I overthinking things? Should I just save a little more money/wait for the market to correct and buy close to home? Any input is appreciated! Thanks! Phil

Andrew Johnson · Answer

Phil T. For what it's worth, certain things in out-of-state get better with scale. I still visit my properties twice a year. Those plane tickets, hotels, rental cars, etc. aren't free. Nor were the flights out when I bought my unit. If you are like many hear you *might* be one of those "$100 per door cash-flow is my magic number." I can all but guarantee that $1200 per year will evaporate in two flights out to check up on your property. Now if you have 20+ units that cost is suddenly spread across a much greater pool (and larger cash-flow) so it doesn't sting. So keep in mind that even when it you have a great PM (I like mine, I trust mine, etc.) there are still costs to consider.

Jason G. · Answer

It all depends on what your risk tolerance is and comfort level. A property management company will charge 6-10% of your rent plus other fees associated with placing tenants, evictions, maintenance, etc.

Ali Boone · Answer

@Zach Evanish Okee dokie. But I didn't actually describe Roofstock.

Zach Evanish · Answer

@Ali Boone Wanted to correct you on your description of Roofstock. Roofstock is a curated online marketplace for tenant occupied homes that was built by some of the biggest names in the single family space. Every home on the marketplace is exclusively listed by Roofstock (these are not on the MLS) and has gone through the Roofstock Certification process where we certify the home, tenant, lease and property managers. The properties for sale on our site are owned by a wide arrange of folks ranging from some of the largest institutional landlords to individuals that own just one property. In order for a home to make it on our marketplace is has to pass through our certification process. @Phil T. Please let me know if you have any questions about Roofstock that I can answer. Happy to walk you through how we vet our property managers to ensure that Roofstock buyers are paying fees below market and working with the best of the best in each market. Unlike a turn-key company we do not own or manage any of the properties on our site. You will not find a team with more experience in the single family space.

Nolan M. · Answer

Why invest out of state? You could invest in Brandon Turner's town, its only a two hour drive! Seems like he has no trouble finding cash flowing properties! If not that town I'm sure there are other towns in the area that are good rental markets where prices aren't crazy. That's my strategy here in AZ.

Michael Hastings · Answer

@Phil T., I know this is an old thread, but I would beg to ask why you believe you must invest out of state to get started? I follow a few investors here on BP, and they are in the Washington market and seem to be able to find some pretty sweet deals (and note I live in Denver and I am from California, so I know high prices and markets which seem to be over inflated). There are so many ways for you to get started in investing, like buying your first home to start the equity clock, investing in a multi-family and living in one, using your SFH/rental as AirBnB, etc, that I would suggest exhausting your local opportunities before looking elsewhere (especially as a newbie).Find a local agent, wholesaler or investor who can answer your questions on the local market. I tried that here in Denver and was surprised at what is out there and available, when I was sold that there were no deals. Don't rely on the MLS.

Phil T. · Answer

One more thing I forgot to ask. I'd like to be able to handle small issues that come up and getting the unit ready to rent again after a tenant moves out by myself. Obviously, if I invest out of my area, I won't be able to do that. Has anyone had issues with tenants calling property managers all of the time with small issues that end up costing you a fortune to deal with? I assume it's a case by case basis, but that's one of my big concerns. Also, is there an approximate amount that property managers charge to get a unit rent ready after someone moves out?

Phil T. · Answer

Thanks for for all of the replies! It definitely gives me some things to think about and makes me a little more confident that it's doable!

Kody Fordyce · Answer

@Phil T,Thats great that you have turnkeys as a goal. As you know with our property prices in Washington and Oregon make cash flow challenging but not impossible. Out of state management is pretty much on par with West coast at 9-10%. I would highly encourage you to go with a developer that can provide you the property and management all in house. That will help minimize a lot of headaches as they are already very familiar with the properties. I would also highly suggest that you visit the prospective developer, walk through their properties, see their work and get to know them on a face to face basis. Any developer worth their salt will gladly show you around. Fill free to reach out if you have any questions. Best of luck,Kody @Phil T.undefined

Timothy Murphy III · Answer

@Phil T.Plenty of investors go out of state if their local market isn't viable for them. Your local team you hire will make or break you. Do your research on your turnkey / PM companies as well as the market you're considering. Ideally you come to town and get a feel for the areas you'll be investing and the team you'll be working with. You won't be so much managing the investment properties as you will be managing the managers.