Hunting for out of state SFH rental property

[John Chung]

Hi all,

I need some guidance

I am looking to buy an out of state rental property (Single family) around Tucon AZ or approximately around there.  I live in California so the housing is too expensive at this time for me here.  I chose Arizona as I am hoping to retire there some day.  

Anyhow, I was looking around the $150k - 200k SFH marker...but if i use the 1% rule, i would need anywhere between $1,500 - $2,000 monthly rent (relatively speaking)...HOWEVER, when looking at rentometer.com, it always shows about 0.5% rent of the value of the homes i am pulling up. Does this mean the property is way over valued?

Since i am out of state investor (Calif) and not a ton of time to physically be there to do research, can anyone give me some pointers on how to find property deals to get me to the 1% mark? (other than turnkey)  

I have a full time 8-5pm job (often even more hours)...so its difficult to conduct business looking for a property during working hours (nor do i think its ethical to use work time for my personal business).  

Anyhow, I'm not afraid to put in after hours work to find my deals...but i would imagine it is difficult to do business with contacts during the evening...? I'm sure there is a way...but not sure where to start.  I dont have any friends or family there so can't ask anyone there to be my "boots on the ground".  

If you had similar experience, or have knowledge about this, your strategy would be greatly appreciated!!

Thanks

[Ali Boone]

No, it doesn't mean the properties are overvalued. It just says that the price-to-rent ratios around Tuscon aren't all that conducive for cash flow these days. Which is accurate, as AZ went low to negative on cash flow years ago after the big Phoenix push. Property values and rent values don't necessarily depend on each other. There are more markets than not (CA cities included) where the rents don't allow for cash flow or even expense coverage with the property prices. That says nothing about the property values being overpriced or inaccurate. It's just- real estate reality.

So if you're looking for cash flow, you'd specifically want to find markets that have price-to-rent ratios that support the kind of cash flow ratios you want. 

Also keep in mind, those "rules" are arbitrary. Don't take them as gold, and only run real numbers to know whether something might be a deal.

Lastly, it's not likely that if you are trying to buy for cash flow that you will buy a house that you want to live in later on in life. Good rental properties tend not to be the places we really want to live. Not that they are bad areas, but just not preferred. So really make sure all your motives are in line if you choose somewhere like Tuscon. 

All of this is not to say it's un-doable or to discourage you, but you really want to have a handle on all of these factors before you go grabbing up a random property. And if you don't have a lot of time to research or be with the property, and you don't have a trustworthy team established there, you might get quickly up the creek without a paddle.