Out of State Investing

[Account Closed]

Hi all, I'm new to BP and to real estate investing. I'm about to graduate from college with a BS in Business Administration with an emphasis in Finance. I'm very interested in real estate investing and have been since I was young. This past summer I bought two rentals, one was a turnkey the other needed a ton of work. The work has been completed and there is now equity in the home. Mortgage is 550 rent is 1000.

I live in San Diego and can't afford to buy anything in this area. Is it better to look in nearby cities, maybe an hour away and try to self manage or to find further or possibly even out of state properties and get them professionally managed?

Also, since I am 22, I'm having trouble getting loans and don't have much cash do to college expenses. What is the best way to expand my portfolio? Take out an equity loan or cash out refinance? I'm worried that if I do this I wont be able to get another mortgage since I can't prove a high enough income. Any thoughts or advice are greatly appreciated, thanks in advance.

[William Hall]

Markets can be wildly different, and I like the idea of being able to get right to your property within a day's drive when starting out. For example, after 6 years of investing in LA, then I was able to manage Vegas. Then I jumped too soon trying to manage properties in Atlanta, like someone said earlier, I didn't have enough network in place there for the properties to be so distant. I ended up having to move there myself and be my own contractor. I learned a lot about the hands-on repair work, but I lost so much time learning lessons I didn't really need to know.

At 22, there's no need to rush (unless you have some dire crisis at hand). This is the time to make your mistakes; if your thinking like this you're probably at least 10 years ahead of your friends mentally.

Yes, getting loans in your early 20's is tough; maybe you can find a credit partner to back you and give them some sort of indemnity bond as security. I would avoid self-management; if your cash flow allows it, I've always believed tenants shold have NO access to the owner; they ask for too much leniency. I've had to lie to tenants and tell them I was the manager, and the owner was some nameless, faceless person they'll never meet - not to defraud them, but they would attempt to take advantage of my youth when I was honest!

One more piece of advice: I was exactly in your shoes when I started, and by 29, I was sitting pretty, but just be warned people may not take you seriously, so be extra organized, extra sharp. Many times older people would talk to me like I was just window shopping when it was my full-time livelihood.

When you can spare the time, watch what the contractors do, even offer to help. My dad used to say, you don't have to know how to do their job, but you need to know enough about what they do and WHY to know if/when they're doing it wrong!