New investor and beginning with an out of state owner occupancy?

Question

Hello, I am very new to real estate and I had a general question to see if anyone has done this previously or if it is a good idea at all. Where I am located and the nearby areas single family houses are very high priced. Well at least out of my range for a beginning investment house for 80k-150k, In California near the Sacramento area this really isn't possible unless the houses are in rough shape in a bad location/neighborhood which would be a terrible investment. I have researched a few cities out of state that I believe have a great market and are exactly in the price range of houses I need to be able to purchase one and be able to gain equity with the house. The thing is it would be out of state which makes me unsure if this would be a great idea to do starting off, although I feel it would be one of the only choices I have if I want to be serious about investing and fully go for it. Is this a feasible idea to consider if planned well? Such as beginning to network with trustworthy agents and contractors in the city I choose and studying the local market etc?

Any advice is appreciated! Thanks in advance.

Steve Kontos · Answer

@Ryan McGlassonAs someone who has been investing out of state for almost a decade now, I would recommend attending local REI meetings and listening to the pod casts on here. Find someone who has invested out of state successfully and see if you can meet with them to pick their brain in regards to a strategy for yourself. Best of luck!

Ryan McGlasson · Answer

@Stephen Riggs Hello fellow Sacramento user haha! I agree calling local realtors would be a good start of course, and I would definitely want to make a note of seeing if the realtor has had previous experience with someone purchasing a property from out of state. @Liz Daigle Ah okay I see, so out of state is pretty common for a lot of investors. Maybe doing it as an owner occupant is not so common but at least I know others have done it before. I also figure I would not have a property manager cost if I am living in the property renting out multiple rooms. I have been doing a lot of research on the market I have in mind to get an idea of rent and the market value for houses in various areas, along with finding the good neighborhoods and avoiding the bad areas. But of course must keep researching. Also I would really appreciate if you could recommend me a possible agent!

Liz Daigle · Answer

@Ryan McGlasson Hi there! My first buy and hold ended up being out of state. It was a townhouse so potentially a bit easier. Out of state you will have to calculate in property management costs (probably will still work out better than Sacramento). I didn't have much of an issue with the out of state rental but I did thorough research beforehand. I would find an experienced real estate agent in the markets that you are considering and really pick their brain. The downside to out of state is it is a completely different market so you will have to do a lot of research to find out what is driving supply and demand in both housing and rental markets. I am an agent in Denver but know a lot of agents throughout the country - let me know if I can help find you an agent in a particular market. Good luck!!!

Stephen Riggs · Answer

I also live in Sacramento, and agree -- the return on investment here is not nearly as good as you will find out of state. My advise would be to call local Realtors in the markets you are considering. You should be able to find someone who has experience in helping out of state individuals with the purchase and management of investment property. It can be hard enough to manage property in your own town. If your first few deals are out of state, I would recommend working with someone who has local knowledge.

Ryan McGlasson · Answer

@Alex RodriguezHey! Thanks for the reply, I am planning to do buy hold rent single family, put some work into it to increase the value and rent it for awhile to search for another house to do the same. I have been finding houses that are decent deals in the cities I'm researching, they don't need much work if any, the ones that do are basic work such as painting and carpets etc. I have considered that with running a direct mail campaign but I truly feel California is not the best location for investing in houses in the price range I need, because realistically here they are not priced that way if they are again the same issue of it being low rent and high crime or its an area way away from any commute or jobs. Also from reading many sections of the California /Sacramento/ Stockton/ Modesto etc forums on here many people have said the same thing, those kind of houses wont be easy to come across. But in other markets of course there are a ton of possible deals but also a ton of investors throwing offers as well like you stated. Just kinda asking generally on here if anyone has done an owner occupancy out of state, I know many people have invested out of state and have had success in it. I have seen many users have someone manage their property out of state but I wanted to see is being an occupant any help in the process because you're there managing the tenants so you wouldn't need a property manager? Also how they had known the house was in good condition if they never saw it in person, did they arrange an appraisal? Trust the real estate agent? Just a ton of general questions related to it! Ha!

Alex Rodriguez · Answer

@Ryan McGlasson I am also in the Sacramento region and felt the same way when i first wanted to get into the game and was making my plan. The first step is, what type of investing do you want to do? I originally wanted to do buy and hold, try and find something on the MLS and found that anything that needed work or was priced low went within hrs. It is extremely difficult to find something on the MLS without tons of offers, leaving us as new investors nothing or overpaying. I have switched my focus and don't bother with the MLS anymore and have now focused on finding something off market. Maybe trying to do some sort of marketing and finding an off market deal is an option to find within the area?