Intro + Out-Of-State Investing

[Mark Grozen-Smith]

Hi! 

I'm pretty new here and just getting into the industry. After listening to dozens of hours of the podcast and reading a couple books, I think it's time for me to get to work! 

While keeping my day job, I'm aiming to get a side business going with a couple multifamily properties, ideally all in the same area. The challenge is, I live in San Francisco and, while I have a good amount saved up, it doesn't seem very feasible to get great numbers out of this area. 

At this point, I'm looking in Austin Texas because I have a friend from there who knows the area pretty well. It seems to be a rising city that's still in my price range. But I wanted to post here and ask what people's thoughts are on this plan. I'm starting research now, I intend to visit so I can get some boots on the ground experience with the neighborhoods, and then I want to start getting to know an agent or two so I can get a market ally and an inflow of deals.

What are the major challenges I'm signing up for by starting with out-of-state investing? Does anyone have strong opinions on any parts of Austin, particularly with respect to multifamilies? What would you say are my first steps to getting more ready for investing here?

Thanks! Happy Monday,

Mark

[Andrew Johnson]

@Mark Grozen-Smith So a couple of thoughts, neither good nor bad, just to consider:

1.) I invest out-of-state and believe that you have to visit your properties.  Both when you buy them and periodically just to see how things are going.  I, personally, wouldn't outsource this to anyone else.  I use a PM but I still go and visit, kind of like "trust but verify" just for real estate.

2.) You're trading one "super hot market" for another in my opinion.  Austin, Seattle, Nashville, Denver, etc. are all in the same boat.  The main caveat is that the entry cost is lower in Austin than San Francisco.  But to know which is "better" you'll probably have to further define what "get great numbers" means to you.  Is it cash-flow?  Is it potential for appreciation?

3.) Texas pseudo-trades no state income tax for high(er) property taxes.  If you're an out of state investor you don't get the benefit of not paying state income tax but you're still on the hook for the high property taxes.  And unlike California there's no Prop 13 and Texas is pretty aggressive about reassessing property taxes.