Buy and Hold Out of State Real Estate

Lakeville, MN · Member since 2018 · 30 posts · 17 votes

Looking to chat with individuals who have experience with owning rental properties out of state for the purpose of increasing passive income. I just flat out am not sure where to even begin, from locating the right house, to picking the best rental property management company, to the BRRRR method, etc.

Thanks!

-Patrick Olownia

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George Pauley

Chandler, AZ · Member since 2017 · 174 posts · 269 votes

I live in Arizona and have 3 properties in Phoenix, 3 in Memphis, 2 in Davenport Iowa. All out of state properties are turnkey. I LOVE my turnkey properties, they cash flow well, were easy to buy, and easy to maintain.

One thing I did for the out of state properties was to fly out and spend a day with each provider exploring their operation, seeing their renovation process, talking to their property managers, etc. I learned a lot, made face-to-face contacts so I know who I'm dealing with from AZ, and gained confidence that the providers were legitimate and competent. (And had nice little mini-vacations expensed against my investment company as a bonus!)

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Patrick Olownia well from my experience I can tell you there will likely be some growing pains. If you can stomach that, then it can be very profitable and good experience. What you want to do is look at different markets listed here on BP. Then start to network in those markets. From there you’ll want to visit and meet people. These people become the basis of your team. They handle the day to day things. I’ve done this in Memphis and Cleveland. Send me a PM if you want to chat more
4 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
8y
Hey Patrick! I've owned rentals out-of-state for passive income for 7 years now. Any burning questions to start?
If you're in MN....do you need to go out-of-state for cash flow?
2 Reply
Casey S.
Seattle, WA · Member since 2018 · 3 posts · 1 vote
8y
Patrick, Thanks for asking this question. I live in Seattle and am a new aspiring investor as well. Our market here is at a high point and I’m looking for opportunities in markets that better suite a beginners budget. -Casey S.
1 Reply
Jennifer WardPro Member
Investor · Denver, CO · Member since 2017 · 94 posts · 42 votes
8y
Hi @Patrick Olownia. I too am diving into research for out of state long term buy and hold properties by means of the BRRRR strategy. I have come across a few companies in Memphis that facilitate the BRRRR process for you, they call themselves the turnkey alternative. I will definitely take this route at least in the beginning until I eventually develop a solid team of my own and feel more comfortable with the market.
I second @Ali Boone's comment, if you are in MN do you need to look out of state. I talk to a lot of investors here in Denver that are investing in MN.
2 Reply
Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
I wrote articles both on BRRRR and on buying out of state that I would recommend checking out:
BRRRR: https://www.biggerpockets.com/renewsblog/brrrr-buyrehabrentrefinancerepeatprimer/
Buying out of state: https://www.biggerpockets.com/renewsblog/2014/12/23/investing-out-of-state-essential-items-to-vet/
I hope they help!
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John Woodrich
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
8y
There are properties in MN that cash flow, it is just a different game. The cities and suburbs where everyone is looking are tight but there are many in out state MN that work well.
1 Reply
George Pauley
Chandler, AZ · Member since 2017 · 174 posts · 269 votes
8y
I live in Arizona and have 3 properties in Phoenix, 3 in Memphis, 2 in Davenport Iowa. All out of state properties are turnkey. I LOVE my turnkey properties, they cash flow well, were easy to buy, and easy to maintain.

One thing I did for the out of state properties was to fly out and spend a day with each provider exploring their operation, seeing their renovation process, talking to their property managers, etc. I learned a lot, made face-to-face contacts so I know who I'm dealing with from AZ, and gained confidence that the providers were legitimate and competent. (And had nice little mini-vacations expensed against my investment company as a bonus!)
6 Reply
Alpesh Parmar
Investor · Dublin, CA · Member since 2016 · 344 posts · 228 votes
8y
Patrick Olownia I have only owned OOS for last 4 years. Investing in California is speculative and doesn’t have positive cash flow so I didn’t have choice but invest OOS. Feel free to ask me questions on the forum or PM me and would try to help out. Good Luck!
1 Reply
Patrick Olownia
OP
Lakeville, MN · Member since 2018 · 30 posts · 17 votes
8y
Thanks for all the awesome responses and tips everyone! Great to hear about what everyone is up to and how they are succeeding.
I've decided to refocus my real estate goals and start out by House Hacking a MFH here in MN.
-Patrick Olownia
2 Reply
Aziz Raji
Real Estate Agent · Chicago, IL · Member since 2017 · 715 posts · 138 votes
8y
Patrick Olownia Welcome to BiggerPockets! It is great to have you and please feel free to jump in the community - there are certainly great people around here.
0 Reply
Lane Kawaoka
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
8y
Patrick Olownia I started with turnkeys out of state. It’s a good way to start but try to move on to bigger deals with more equity. Let me know if I can help.
1 Reply
Rita Medeiros
Rental Property Investor · Pompano beach, FL · Member since 2017 · 478 posts · 194 votes
8y
@Patrick Olownia Welcome to OOS investing. David Greene's book, Long distance Investing is an excellent guide & has been of great benefit to me in my business. I wish I had it when I started.
0 Reply
Ernesto Hernandez
Realtor · San Francisco, CA · Member since 2017 · 408 posts · 361 votes
8y
I have used the Data section of Zillow recently to narrow down what I'm looking for.
Requires basic Excel abilities.
An approach I take is filtering out the top 50-75 most populated cities (250k pop minimum) then I just compare average 3 bedroom home sales price versus average 3 home rent rate. This helps me narrow down which cities are as close to the 1% rules as possible.
From there you can eliminate cities where the average 3 bedroom home (or whatever you want to use as a denominator) are just flat out too expensive for you and you'll end up with a list of 5-10 solid cities based off your own criteria that you gravitate towards.
When I compare this strategy against an index that someone I'm learning from uses and we end up with a lot of similarities.
Hope this helps.
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Patrick Olownia:

Thanks for all the awesome responses and tips everyone! Great to hear about what everyone is up to and how they are succeeding.
I've decided to refocus my real estate goals and start out by House Hacking a MFH here in MN.
-Patrick Olownia
this is the best move for someone beginning buy a 4 plex were you live if you can use an fha loan.. get owner occ rates move in.. then in a few years move out.. and move up to other things and now you have 4 doors already..
i would always buy local FIRST
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
8y
Originally posted by @Patrick Olownia:

Looking to chat with individuals who have experience with owning rental properties out of state for the purpose of increasing passive income. I just flat out am not sure where to even begin, from locating the right house, to picking the best rental property management company, to the BRRRR method, etc.
Thanks!
-Patrick Olownia
It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- 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.
5 Reply
Lane Kawaoka
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
8y
Patrick Olownia check out my profile and let me know if you have any questions.
0 Reply

Jennifer WardPro Member

Investor · Denver, CO · Member since 2017 · 94 posts · 42 votes

@Eric Fernwood recently posted a very thorough reply to the discussion about best markets to invest in. Another great resource to research stats on cities is http://www.city-data.com/city/Atlanta-Georgia.html and https://www.neighborhoodscout.com/ga/atlanta/real-estate

Median household income:

Median house or condo value:

Median contract rent:

Unemployment:

Residents below the poverty level:

Median resident age:

Median property taxes:

Crime: ?/US Avg: 280

avg annual appreciation:

I personally think finding the property manager first in the area you want to invest should be your first team member. A good property manager will have a wealth of resources and contacts at their fingertips. Most importantly they will have a list of investors they work with that you can reach out to to learn more about the area.

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Jennifer WardPro Member

Investor · Denver, CO · Member since 2017 · 94 posts · 42 votes

I am using this discussion to request for your input in which city I should primarily focus in for out of state investing. I have been doing extensive research and I came up with the below table of various factors I believe are important to compare. I converted the data to percentages. Of course this data is not perfect but based on the numbers below which city would you invest in first?

City	rent to value (higher is better)	rent to income (lower is better)	taxes to value (lower is better)	insurance to value (lower is better)	Avg Annual Appreciation (higher is better)	unemployment (lower is better)	Crime/US Avg: 280 (lower is better)	population growth (higher is better)
Atlanta	0.41	2	1.1	0.41	2.29%	6.1	591	1.98
Cleveland	1	2.42	2.2	1.19	-1%	6.3	847	-0.52
Memphis	0.88	2.2	1.84	1.17	0.82	7.3	802	-0.27
Kansas City	0.58	1.67	1.36	0.81	1.85	5.2	707	0.22
Indianapolis	0.65	1.87	1.08	0.73	1%	4.4	649	0.33
Minneapolis	0.39	1.65	1.28	0.51	2.82	5.8	559	0.86

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Originally posted by @Jennifer Ward:

City	rent to value (higher is better)	rent to income (lower is better)	taxes to value (lower is better)	insurance to value (lower is better)	Avg Annual Appreciation (higher is better)	unemployment (lower is better)	Crime/US Avg: 280 (lower is better)	population growth (higher is better)
Atlanta	0.41	2	1.1	0.41	2.29%	6.1	591	1.98
Cleveland	1	2.42	2.2	1.19	-1%	6.3	847	-0.52
Memphis	0.88	2.2	1.84	1.17	0.82	7.3	802	-0.27
Kansas City	0.58	1.67	1.36	0.81	1.85	5.2	707	0.22
Indianapolis	0.65	1.87	1.08	0.73	1%	4.4	649	0.33
Minneapolis	0.39	1.65	1.28	0.51	2.82	5.8	559	0.86

thats kind of a random sampling if your going to do this why don't you do this for every major MSA in the US and then compare..

you missed many good markets and others were apprciation is much more prevelant.

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Jennifer WardPro Member
Investor · Denver, CO · Member since 2017 · 94 posts · 42 votes
8y
@Jay Hinrichs thanks for your input. I realize it is random, I started with these cities because I have developed contacts in several of them and the others I saw listed many times in the out of state posts where people invest. I will certainly tackle the MSAs, but for now I am curious how people would choose from the list to help me define a preferred market.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Jennifer Ward:

@Jay Hinrichs thanks for your input. I realize it is random, I started with these cities because I have developed contacts in several of them and the others I saw listed many times in the out of state posts where people invest. I will certainly tackle the MSAs, but for now I am curious how people would choose from the list to help me define a preferred market.
I think most will choose a provider they trust as you can see the numbers are so close .. and reality of a given rental is just the roll of the dice you have one bad tenant like Jim Wise post pictures about and you can throw all those numbers out the window..
reality is there is a certain amount of risk in Quote in Quote cash flow homes.. price points and renter profiles create some risk
if your looking at A class 3 to 5 caps you can count on the numbers much better kind of like syndicators do with quality multi projects but like even here in Portland some areas are seeing rent compression on the higher end and its blowing the numbers up.. to the point were there is even stress to the owners.. IE not making DCR coverage as per their loan covenants
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Account Closed
Investor · Leander, TX · Member since 2016 · 299 posts · 402 votes
8y
I own 4 soon to be 5 properties
1 Texas (Home)
1 Ohio
2 Georgia
1 Alabama
Love it, have a great company that works with me and we find great properties with solid cash flow. No way I could do this in Texas with the taxes.
PMs collect the rent and take care of the tenants.
I'm on my way to retirement within 5 years.
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