Start building a team... But in how many locations? Then what?

Question

I'm in Los Angeles and new to OOS Real Estate rental investing.  I'm committing to investing 5 doors in 2020 and replacing my income by 2025.  Committing to reading a new real estate book every week until I run out (I have 4 in my current backlog. Suggestions?). Committing to building a trusted network.  It's going to be a good year even with this coronavirus madness.  I'm using this time to coil up with information in preparation to strike.

I have so many questions...

I keep reading build your team, build your team, build your team (Immediate paralysis). How do I do that without knowing which location I want to build my team in? I've been doing my location research perhaps googling the same thing as everyone else. How do you find a good location? How many locations should I build a team in? Which team member is most important to start with? If you're an investor and live in LA can I buy you a coffee?

I'd be grateful for any advice :)

Josh

Joseph Cacciapaglia · Answer

If you find an agent that works exclusively with investors (not a dabbler), then they should be able to recommend all of the other team members for you. Ideally, you'll have an agent with in house property management, because it keeps them accountable after the sale. I don't think it makes sense to try to build teams in multiple markets. Pick a market that is large enough for you to grow into, and one that has significant long term economic drivers.

We've had a ton of OOS investors coming to San Antonio for the past several years, and lately we've started getting a lot more from some of the other major metros in TX. The diversified economy leads many to believe in it's reputation for being recession resistant. There are plenty of great markets to choose from though. Once I had it narrowed down to 2-3 locations, I would focus on finding someone that you feel comfortable working with. This is a relationship business more than it is a numbers game. Both are important, but it's really about the people first. If you're OOS, you want someone that's going to consistently respond to your calls or emails quickly, and that will have a strong network to share with you when they don't have an answer.

Joseph Cacciapaglia · Answer

So almost every agent will tell you they are "investor friendly" or that they work with investors. You can ask what portion of their income comes from investor sales. Ask them to tell you about their last few closings. To be really sure, you can always mention that you're thinking of moving to the market, and could they help you find your own home. I actually get this question a lot, and I always let them know I have a great agent I can refer them to.

You shouldn't have to prove that you're a serious investor. An agent that does a lot of investor deals will be happy to train a new investor. I don't mind taking a lot of time up front, because I know the clients that develop into serious investor become amazing clients. What I will normally ask about is your resources and attitude. Do you have good credit and money (or access to capital) for your down payment? If we find a deal that fits your criteria, are you willing to buy it? If we find deals that are close, are you willing to make offers? As long as you have the ability to buy, and you're willing to actually do so, an agent should be happy to spend the time and share the resources that you need to make deals happen.

As for San Antonio, I believe we will fare much better than most larger markets in the coming recession. I worked in several different states over the last 15+ years, and I moved to San Antonio a couple years ago in large part because I believe it will perform well in the next downturn. We have a very diversified economy. The 5 military bases create a large group of employees that should not lose their income. Other major employers include a large insurance company, that appears to be transitioning to remote work quickly, and the headquarters of large regional grocery chain, which has recently increased it's hiring. These are all reasons that we should do better than average in the short run.

In the long run, San Antonio is positioned to do very well. We are the only tier 1 city with tier 2 pricing, and there is no reason to believe this will remain the case. We have strong population and employment growth. Of course, we may see this stall temporarily, but there is no reason to believe that it won't pick back up. I think this is one of the best markets to be in, if you have a 10-20 year time horizon and want to develop real mastery of a single market. We have plenty of opportunities on the low and, but are a large enough city that you can grow into larger assets over time. If you're planning to hop from one market to another, then there will definitely be better places for short term gains at any point in time. I think you can do well with either approach.

Mike D'Arrigo · Answer

@Josh Huber building a solid team in just one out of state market is not easy and takes time, especially if you don't have any experience. Don't try to build a team in more than one market when you're just starting off.

Marc Edwards · Answer

Nice conversation here, @Aaron Weiler I would be open to discussing certain areas here in Kansas city. There are areas that people shy away from and there are areas where Investors flock to. Also depends on your short term and overall goals with investing.@Ryan J Wenrich I see your from Topeka, not to far away I'm noticing more and more investors from Topeka venturing out towards Kansas city to invest. I know Topeka very well along with Kc I'd be happy to answer some questions for you guys anytime.

Marc Edwards · Answer

Anytime kind sir! Cheers to to the quarantine life my friend lol. Good luck with all your investing endeavours I'm just a text or call away.

Ryan J Wenrich · Answer

@Josh Huber I am also looking to invest, find partners and build the right team in the Kansas City area. I have fairly solid knowledge of the area, as I've owned a few businesses in the city, and I live in Lawrence, KS (40 miles from Kansas City). I also own a small property management company in a neighboring city. Even if my company isn't the right fit for what you're looking for, I could probably help find the right managment. DM me if you're interested in discussing some options to get started in the market. I'd love to throw around some ideas.

Ryan J Wenrich · Answer

@Aaron Weiler Are there any areas in particular that you're interested in?  Feel free to message me for an offline discussion.

James Wise · Answer

Welcome aboard Josh. There are several popular markets for out of state investing. The one I am most experienced in is Cleveland, Ohio. You may want to check out The Ultimate Guide to Grading Cleveland Neighborhoods for more information on that market. I also have similar guides that you may want to look over for Kansas City, Missouri.  & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides Cleveland, KC and BHam. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

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 lose 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.
• Google Clayton Morris scam and/or Morris Invest fraud for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

Dan Krupa · Answer

@Josh Huber Kansas City, MO is great. I have a bunch of clients from the East and West coast and all are impressed with the numbers and low purchase price. Happy to share some info and links if you are looking for more info about KC.

Aaron Weiler · Answer

@Marc Edwards

Absolutely sir. I will shoot you a message.

Cheers!

Start building a team... But in how many locations? Then what?

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