Scaling Up Out-of-State

[William Richardson]

Hello All,

I have a few questions regarding scaling up in an out of state location. I currently reside in Long beach, California and in that past months have came to the realization that finding cash flowing properties is much easier in an out-of-state location. 

Although Turnkey doesn't always get the best rep around the REI world, it seems to be a perfect fit for me due to my career demanding 55-60 hour work weeks, so I can't be hands on 24/7. The downfall to this is the slow scaling process that I would have, only 1 property a year will be attainable, unless I'm completely missing something.

My question is if anyone utilizes an out-of-state BRRRR method, I've searched around for this answer and most people say OOS BRRRR isn't a great idea, but the BRRRR method allows for rapid scaling compared to Turnkey.

I appreciate all the advice, 

Will

[James Wise]

Originally posted by @William Richardson:

Hello All,

I have a few questions regarding scaling up in an out of state location. I currently reside in Long beach, California and in that past months have came to the realization that finding cash flowing properties is much easier in an out-of-state location. 

Although Turnkey doesn't always get the best rep around the REI world, it seems to be a perfect fit for me due to my career demanding 55-60 hour work weeks, so I can't be hands on 24/7. The downfall to this is the slow scaling process that I would have, only 1 property a year will be attainable, unless I'm completely missing something.

My question is if anyone utilizes an out-of-state BRRRR method, I've searched around for this answer and most people say OOS BRRRR isn't a great idea, but the BRRRR method allows for rapid scaling compared to Turnkey.

I appreciate all the advice, 

Will

 Welcome to the site Will.

Utilizing BRRRR out of state is pretty unlikely. Markets are hot right now. Gone are the days of tons of foreclosures chillin' on the MLS. Prices are high & demand is at an all time high. It is unlikely that deals that good would make it all the way out to you before the locals would snag them. On top of that locals can afford to pay more than you as they can feasibly fix the properties quicker & cheaper than you can.

Investing out of state shouldn't be looked at as a way to quick your day job or generate capital quickly. Rather it should be used as a relatively painless way to part your existing capital while utilizing leverage to essentially quadruple your cash investment with before calculating for cash flow & appreciation.

My best practices for investors who want to invest our of state are as follows.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.