Where to start? Willing to invest in rentals remotely

Question

I currently live in Southern California and I've been watching BP podcasts and analyzing hundreds of properties in different cities and states for months now. I'm looking in the $150-200 range, and I've been preapproved with 20% down and a low-interest rate for an investment property.

I was unable to find any location within 5+ hours in my Orange County area to invest in. The 1% rule will never happen anywhere around my current residence.

I decided I wanted to invest remotely, so I started doing research in different states. I landed on Michigan in the Ann Arbor area. I happened to have a friend in the area that could take a look at some properties for me.

I was ready to pull the trigger on offers for a few homes, but I started looking at different websites to find the most accurate price for rentals in the area. Craigslist and social media platforms were showing significantly lower rental prices than the larger website such as Zillow or Hotpads. I've become somewhat hesitant on placing an offer. I thought I was running everything conservatively until I noticed how far off my numbers could possibly be. We're talking $250-750 difference in rent.

Bottom line, I'm still looking to invest completely remotely if I can make the numbers work. I run multiple branches for a large solar company so remote work is something I handle every day. I can't get any good information from friends/family or realtors in the states I've been dealing with.

If you were to invest anywhere in the US around 150-200k for single-family homes, where would it be? I'm planning to use the BRRRR plan once I build some equity. Also, is craigslist/facebook marketplace really a good metric for current rentals being listed?

Andrew Syrios · Answer

The best areas to invest remotely, in my opinion, are the lower priced, higher cash flow areas in the midwest and southeast (Kansas City, Indianapolis, Oklahoma City, Memphis, Raleigh, etc.). But if you are looking to invest out-of-state, be careful. I wrote a guide a while back on it that you might find helpful: https://www.biggerpockets.com/renewsblog/2014/12/23/investing-out-of-state-essential-items-to-vet/

Jeb Brilliant · Answer

@Anthony McHale I live in Long Beach and invest in Indy. I did it to be a great city and state, very owner friendly and lots of great economic reasons as well. I run a meetup in Los Alamitos if you ever want to talk in person about Indy. I am also happy to chat on the phone.

Ryan Prun · Answer

Hi Anthony,

Regardless of where you invest, I would say, make sure the property is in good physical condition as you will be an out of state owner and don't want your life consumed with lots of little bills for items out of your control.  We help clients build portfolios of rental homes and "bomb proof" is a good way to start.  As far as nationwide from what we have seen (we are Denver only) it seems to be a trade-off between appreciation and return.  The areas where the monthly return is good is where the long term appreciation potential is worst.  We find Zillow to be the best place to look at comparable rentals as Craigslist has fallen out of fashion for rental postings as of the past five years or so.  When looking at rentals for pricing of a comparable home, make sure to check how long the posting has been active for.  If it has been up for 30 days or more (at least in our market) there is likely some other issue there, close to 60 days active and over, there is likely an overpricing issue (could be several other factors as well though).

Ryan Prun

Mike D'Arrigo · Answer

@Anthony McHale I think you're far from ready to use the BRRRR strategy remotely. You need to have a better handle on the numbers beyond what you get on Craigslist, Zillow or Hotpads. If you don't have trusted boots on the ground that can help you, you have to find a way to acquire information on your own. For rents, I would start by talking to property managers who will have more expertise.

Terone Johnson · Answer

@Anthony McHale I run a wholesale company operating in Indianapolis and have a partner on ground in Indianapolis but I now live in California. I lived in Indy all my life and just moved here 3 years ago. I deal with a ton of out of state investors and have provided many of them with great BRRRR deals in the Indy market. PM me if interested in connecting. I

Indy is a great cash-flow rental market to get started in!

Wendy Carbone · Answer

Hi Anthony,

I am currently working with many OOS investors who are choosing the market here in Huntsville Alabama.  Our city is growing fast, taxes are low, rental rates have risen steadily (6% this year).  I would caution you about relying on zillow or some of these other sites for rental CMA's.  Your best bet is to talk to a property manager in the area you are wanting to invest in and get the FACTS about the comps for the property you are considering before you make the offer to purchase.  I am a property manager and licensed Realtor here so please let me know if I can help you!

Jeff Schechter · Answer

Between us and our investors, we're over 400 doors now in Indy.  It's a great place to invest. PM me if you'd like to know more.

Ross Denman · Answer

@Anthony McHale I am the business developer for a property management office in Indianapolis and we have over 100 out of state investors we work with in Indianapolis. Honestly, most of them are from California, but we have investors from Israel and Singapore to Denver and Seattle investing here.

While I think Indy is a great place to be, I have many clients in multiple markets and I think the most import thing isn't just the market, but building a team and having a network in that market to help find the deals, understand the numbers, close quickly, renovate efficiently, and manage the property effectively. If Indianapolis might interest you, you should check out the Facebook Group for Indianapolis Out of State Investors https://www.facebook.com/groups/260862967817696

You'll find good information about the market and lots of great people to network with. Partnering with the wrong groups can make your investing experience a nightmare, so it's important to find a market with great teams and providers.

Adam Montgomery · Answer

@Anthony McHale

In my market there are lots of SFH in your price range. I can share some knowledge with you on specific areas of interest within the city.

Bill S. · Answer

@Anthony McHale The only way you will know if CL or Zillow is correct is to call the owners. Sometimes CL ads are a scam (you probably knew that already). At any rate if CL is full of scammers that could throw your numbers off. I would say that CL is not dead in all areas. Another source is Facebook ads. I know some folks renting their properties using those. Around here, I would say that nicer properties go via Zillow and the not so nice are wallowing on CL.

So my question is what if you are wrong? What is the worst that could happen? You wouldn't meet your cash flow objectives. So sell and start over in another area or with another property. I don't mean to sound flippant but you are looking for the home run pitch and strike out watching. Take a swing on a good pitch, make contact and get a base hit. Next a bat you will have much more info at your disposal and can look for a double and so on.

Where to start? Willing to invest in rentals remotely

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