Where does one start with out of state REI ?

Question

Hello BP community, I currently live in Los Angeles, but I would love to purchase my first rental property. I have heard about out of state REI, and I wanted to know how does one get started.

As well as if there are any resources that people specifically utilize to find properties, as well as what type of financing options available for a first time home buyer. Any information would be greatly appreciated.

Thank you,

Xavier Wilson

James Wise · Answer

This is called turnkey. It's a really big industry. Tons of turnkey markets & companies are out there doing this stuff. Many are well represented by sellers & turnkey operators here on BiggerPockets. The most popular markets are

• Cleveland, Ohio
• Toledo, Ohio
• Memphis, Tennessee
• Birmingham, Alabama
• Kansas City, Missouri
• Indianapolis, Indiana
• Detroit, Michigan

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. 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.

KJ L. · Answer

David Greene has a book on long distance investing that details steps for OOS investing.

Tom Ott · Answer

A lot of OOS investors look to Turnkey Providers to invest in different markets. Turnkey investments are meant to be very passive. Ideally, the Turnkey company would own the property first, renovate it, then sell it to you as an investor. It should also be occupied when you buy it.

Ali Boone · Answer

For out-of-state rental properties, there are two main ways to do it-

https://www.biggerpockets.com/blog/2012/12/22/out-...

For your second section, that will depend on which of those two ways you go. For either, the cheapest financing is a traditional mortgage, and a straight investment property will require a minimum of 20% down.

I've always gone the turnkey route myself, so I can help with that (or any of the TK folks on here), or that David Greene book is apparently the go-to for the DIY route.

Jonathan Oh · Answer

@Xavier Wilson

Do you want to be hands off or on? Hands off - turnkey, Hands on - BRRRR, but you need to start networking and build a strong team in the market that you choose. Connect with agents that work with investors and get on their marketing to get up to date deals. Connect with PMs and ask them which areas are solid for rentals. For financing, you'll probably be looking at conventional financing with 20-25% down. Shop around and ask for referrals.

Alyssa Dyer · Answer

@Xavier Wilson by coming to BP you've made a good first step!

For me getting started consisted of talking to people who have had success in real estate. I essentially copied their criteria and then learned a lot on my own when I finally jumped into my first purchase!

I'd start by asking these questions:

Based on what I can afford what's a good deal look like?

Where are deals like that found?

Who can I trust where those deals are found to help me get it done?

Tim Harwick · Answer

Hi @Xavier Wilson I purchased my first investment property using a turnkey provider in Memphis. The process was very easy and passive. Of course the downside to any turnkey investment is that the returns are less than they would be if you didn't it yourself. But in many cases the risks are also potentially less than they would be if you did it yourself. I'm glad I did my first deal as a turnkey, though in the future I want to do deals myself.

I also recommend David Greene's book - it covers all the main bases. Good luck.

Where does one start with out of state REI ?

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