Invest in out of state turnkey or local multi-family?

Question

I am incredibly new to investing and still in the research phase.

Scenario 1: Out of state turn key for 100k, after rehab should be about 150k, rent about 1300. Bank will want 25% + closing costs + reserves. How do I get the 25% (please don't say friends and family)

Scenario 2: 300K-360K duplex (hardly any quadplexes in my area of California) funded by VA loan. No money down but 3x the loan amount.

Any tips or suggestions would be greatly appreciated. Like I said I am very new to this and am researching a lot of the QnA's from the forums here and other podcasts.

Account Closed · Answer

You will get better returns with less headache if you stay out of California, Oregon, Washington or any state that has a focus of keeping tenants in a rental even if they are not paying rent (to your loss).  I favor both Arizona & Texas because they are landlord friendly and affordable. But, you may want to also check out Nevada, Ohio, Tennessee, etc. I don't invest in those areas but there are plenty of people who do.

Whatever you decide, visit the area before you buy and meet the people you are going to be buying from. When we sell Turnkeys we expect to service those accounts for years to come and therefore we won't sell to someone we haven't met. It needs to be a comfortable fit both directions. Others do things differently and they may not have that requirement. Ask for a list of expenses so you know what you are getting into and how much your ongoing expenses will be. Some places put a lot of "add on" fees after the sale which can be an unpleasant surprise.

Ryan Riches · Answer

I will echo what has already been said here. You want to make sure that you are in a healthy personal finance position before venturing into REI. If that is the case already, then I would recommend finding a primary residence (single family or multi) and house hacking. As mentioned before, you can rent out each room individually to help cover expenses. The route I took when getting started was to Airbnb my spare bedroom. This covered about 80% of my living expenses and propelled me into the next step, which was purchasing a multi-unit to house hack.

James Wise · Answer

If you do go out of state there are a lot of markets in the Midwest where you can get $1,300+ in rent for a lot less than $150,000. That is pretty rough. What market are you looking at?

Cassi Justiz · Answer

If you don't have the money for a down payment, then your best option would probably be to get a primary residence with your VA loan. At that price point, it will really depend on your comfort level. At 300k you will need quite a bit of money in reserves to pay holding costs plus any maintenance while you are working on saving up reserves and getting it leased out.

I don't know how much cash you have available now, but it sounds like less than 25k. I would start your investing adventure by saving up money. If you can use your VA loan to get into a house that will cut your current living expenses then I would do that. If not, then I would stay where you are and find a way to cut expenses/increase income so that you can save up more money. It doesn't have to be a multifamily to house hack. You could buy a relatively inexpensive 2 or 3 bedroom house with a couple of roommates that will cashflow as a rental property when you move out.  You can decrease your living expenses while you live there with roommates and then have a rental (and cash) when you are ready to move on.

Ali Boone · Answer

Well, three things....

• A turnkey doesn't need a rehab.
• If it's an SFR, you'll only need 20% down.
• Answer your question by running the numbers on both scenarios. Which one leaves you with more cash in your pocket?

Out of curiosity...where would the profit on the duplex come from? That's a heck of a loan. What part of CA can you get a duplex for 300-360K?

Taylor L. · Answer

What are your goals? Would the duplex cash flow? Would you be living in one of the units?

As a rule of thumb I don't invest in California due to unfavorable landlord tenant law conditions.

Invest in out of state turnkey or local multi-family?

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