Investing in outside markets, advice please!

[Tim Ehlers]

Hello, I just moved to the North San Diego area from Boulder, CO. In colorado I did a couple of flips and a couple of rentals so I have a little bit of experience, enough to get me into trouble!. I have a few questions I am going to get some insight on. My overall goal is to create $10K in passive income per month using rentals (SFR up to multi-family apartments). Here in the San Diego area as you can imagine there are very few cash flow opportunities. I still haven't found a way to make the 0.2% rule work out! My goal down here is to complete my real estate sales license and work with investors, flip my own houses and start a property management company. My questions are geared towards investors who have experience in investing in holds outside of their own state.

1.  What areas are you currently investing?  What types of units are you investing in with what types or returns?

2.  How did you find your team in the area?

3. How are you finding your properties?

4.  When you are ready to shift to another market how do you research the new ones?  What do you look for to determine whether a specific market is good for you?

5.  Any other advice that you think I should consider?

My goal over the next few months is to meet AS MANY people as possible and deliver my business plan in hopes to cultivate potential business partners.  these can include team members, partners or lenders.

Thanks in advance for any information, it is greatly appreciated.

[Josh Caldwell]

I am on the recieving end of requests from out of state investors all the time, many of them are from CA because you have very few opertunities to cash flow.

I live in Pittsburgh and we are the #1 cash flow market in America. We can buy stuff off the MLS that will cash flow, and those deals suck.

The questions that out of state investors should ask are many.  Usually when I get a call form an out of state investor looking to get out of the market it is becuase they screwed up somewhere.  Most of the time they buy a property in a war zone that no local wants to drive through.  In general, they overpay, and since they buy sight unseen, they buy property in bad to worse condition.   I wont even get into what contractors and property managers do to take advantage of out of town investors.

So the real question is how to avoid getting screwed by less than honest local investors?

In my opinion, there are two ways to do this  You can either travel to the area you are looking to invest in and do real due diligence, interview property managers, and contractors, etc, or you can look at your out of state purchases as joint ventures, and look for partners.  I prefer the partner approach because it gives the local person an incentive to get you a good property and to run it properly for you.

I have seen too many bad purchases from out of state investors to have any faith in on line research as a method of investing.  There is a lot of local knowledge required to invest property, and some of it is pretty complicated.  Every neighborhood has good sections and bad section, trending and falling sections.  I havent seen any meta data program that will identify all of the factors that go into choosing an investment.

I hope that helps

Josh