Remote investing, what do you think?

[Joe Henry]

I've heard the phrase "live where you like, invest where it makes sense" (or something like that). What's your opinion on investing in multiple states or investing far away from your home? Pros, cons, why it does/doesn't make sense for you (and if your a distance investor, how do you go about finding those remote properties). I'm still very much in the process of figuring out where I want to live, and where is a good place to invest (I'm basically 100% flexible on where to live).

That leads to my next question - what are some good cities/areas right now for cash flow investing (for 80k - 280k properties) and would you invest in a town that is losing population?

[Ned Carey]

I believe in investing close to home. Investing from far away increase both your costs and risk. It is a rare area that doesn't have good deals within a one to one and 1/2 hr drive.

The best investors really know their market. It is rough to get to know a distant market. Also some of the best deals come from being out in the marketplace every day.

[John Thedford]

I agree with Ned. The investors I have talked to that purchased turn key rentals paid a high price and have to pay management fees on top of that. If you invest close to home, you can handle the management and keep an eye on the properties much easier. The only exception to this would be a commercial property such as a strip center where turnover is less frequent and leases are typically 5 years or longer along with rental increases already provided for in the lease. If dealing in SFR or smaller multi-families I would stay as close to home as possible.

[Chris Field]

Invest where you live, I guarantee within a half hour drive of where your sitting their are  a few good deals kicking around. 

Investing out of your area is expensive, you have to hire everything out. I'd only buy out of my area if the property was large and could support its own staff, like an apartment building for example. For one SFR its not worth it the margins are not their.

[Mark Ainley]

@Joe HenryI think it is all about having a relationship you feel comfortable with in the beginning as you are buying and confident they will rise to occasion down the road when issues arise.  No matter what, over the years you will have issues but knowing your property manager will react swiftly and in your best interest is what sways the answer to your question one way or another.  Without that relationship( I look at it as a partnership) you must not invest far away.  

I think it was on BP the saying "average investment with a great property manager is better than a great investment with a poor or bad property manager."

[Matt R.]

Disclaimer: I am brand new at real estate investing.

I am in the east suburbs of Kansas City, Missouri.  I only plan to invest in areas that are really close to where I live (like, a 15 minute drive or less).  To help explain why, an example:

In a certain area of Kansas City, Missouri, if you look long enough, you can probably find a beat-up 1920s or 1930s house for, say, $80K or $90K, rehab it, and sell it for $150K+.  But if you drive two or three miles east of that house, on the same street, the exact same beat-up 1920s or 1930s house will sell for, say, $30K, and if you rehab it, you can sell it for... $50K max.  I grew up around here and I know which one would be $150K and which one would be $50K, just based on the location.

I have no idea how I would reliably figure that out in a city hundreds of miles away.  Sure, I can go on a real estate site and look at comparable sales, or Google the neighborhood name and see what comes up, or do some other research.  But I still feel like I wouldn't really know the area I was buying property in.

[Joe Henry]

What you guys are saying makes a lot of sense. Thanks for your input. Seems like most people stay close to home.

I'm not too familiar with any markets right now that I am very fond of investing in (having just moved to LA, coming from NYC). I'm guessing I'll have to make a decision on what market to invest in, and spend a couple years there learning the market while I make my first couple of deals.

I'd love to hear from anyone who has successfully worked remote properties and get your take.

[Jim Genis]

@Joe Henry, I bought my first 2 properties 8 years ago in Madison, AL (part of Huntsville) while I was living in San Diego. Both of those properties cash flowed and were rented out very consistently. I found 2 keys to making this work:

1. Have a killer property manager. The one I used managed about 300 houses and had a virtual lock on the rental market for SFRs. This meant they were THE source for house (not apartment) renters and they had a full pipeline of leads. Plus, they managed everything very professionally. As a result, our vacancy rate was extremely low.

2. Buy in great school districts. We found the key to getting good, consistent tenants was to buy in a top school district. It does mean that you're paying more for the property (and maybe a bit lower cash flow than you'd ideally like) but the payback is (a) higher quality tenants who take care of the property better; and (b) longer term tenants and lower vacancy. Since repairs, turnovers, and vacancy can kill your numbers, this gave us consistent performance.

The result for us was steady-eddy income and NO headaches at all. We kept forgetting we owned them!

Hope this helps. Good luck!

Jim

[Terry Kerr]

Here is the other side.  We have never invested what you really would call close to home as we live in farm country and the closest growing town was over an hour away.  We chose a town where we had relationships with people we could trust. We currently live on the income from those investments.  We also have invested in florida, and 4 1/2 hours from home.  We no longer have the florida properties, not because they were to far from home; we just couldn’t find a property manager that we could work with in that area.  The houses 4 1/2 hours from us have a property manager that is great to work with and they are working.  It’s all about the manager and if you plan to build a large portfolio you will want a manager.  We have friends with properties a great distance from their homes.  Their success is having good property managers along with finding great deals.  Just our experiences.   Another key to our success was a mentor when we started, without him we would have fallen flat.  We didn’t do everything he did but we could see what worked.

The last part of your question was about population.  I believe you must look at why the population is moving.   Jobs gone and not coming back probably not a good area to be in but many have made great money in Detroit.  What is your comfort zone?  With the internet you can learn any market and connect with people anywhere.  

Make your connections learn your market and you will do great.

Just my two cents

[James Wise]

Disclaimer: I sell investment property to out of state investors.

Some people live in an expensive market and want to devote little time to investing. Going out of state can work for those people as you can work with people who are able to provide you with everything in one convenient  package in a market that has a much lower barrier to entry then your own.

There are downsides of course. Everything will cost more when you have to pay others do work on your behalf. If you run into a problem with your management company making a change is difficult when you are hours away. If you want to look at your properties in person that will usually be time off of work and a large travel expense. You are an outsider to the new market so you either need to take the word of a team you trust or do a lot of due diligence on that area and meet teams as well as teams to backup those teams if it goes south.

If you are looking to be hands on and get the savings associated with that I agree with others that investing close to home is where you want to go. The folks that want to invest passively should understand the pro's and the con's of doing so.

[Jay Hinrichs]

@Joe Henry  that tag line is simply a marketing gimic.. LOL.. nothing more nothing less.

you can have success out of state and you can get flayed like a Grouper out of state.

really depends on asset class.. PM and character of the folks you deal with in the first place.

For me personally I am all about finding something close to were you live .. helps you with the learning curve and over all education of being a landlord..or property owner etc.

But I have clients here in ORegon that own many units in town and still hire PM  they just have no interest at all in dealing with tenants.. so it really depends.

If you don't own a home in LA yet I personally think the first order of business is to buy a 2 or 4 unit live in one unit and use the FHA program to get in with 3.5 % down and great rates. This is a very good way to get started in CA real estate

[Maggie L.]

Disclosure: I'm a Realtor that helps out of state investors find investments.

I'd echo a lot of what has been said here: it's cheaper to invest locally because you can manage yourself (that's what I do), and regardless of where you invest the people you hire will be crucial.  Also, if you think you will invest somewhere and are geographically flexible it can be a great deal to live in a multi-family and fix it up.

One thing I would add is to talk to real estate agents anywhere you are considering.  Look for someone who is investor friendly, ask them to explain the local market and what their strategy would be.  Do this multiple times, and you should get some good insights into the market, and potentially find an agent or two that you like.  This should be in addition to all of the research you are doing on that market. I'm in Missouri, and use a non-exclusive agency agreement when appropriate - that means I only get a commission when I find the deal. For repeat clients who are looking at many ways to find deals (e.g. wholesalers, Realtors, direct mailing), I consider non-exclusive agreements the most fair way to do business.  

[Alexander A.]

If you live in an area where you can afford to invest and make money then there is no reason to ever go elsewhere.  If not however, it is a viable option.

I personally would never invest in a city with a declining population.  There is just no need to do that when you can invest in a growing city with an increasing population.  One will be much better off in the future.

[Ali Boone]

Where in LA are you? I'm in Venice, and I also only buy out-of-state. Pros- monthly cash flow can be positive, entry prices much easier, and for me I prefer the 'out of sight, out of mind' idea (I know a lot don't though). Cons- property managers (blech!)

Right now Kansas City and Philly are my favorites. 

I absolutely do *not* invest in markets with declining populations. For a gazillion reasons.

[Alicia Horton]

Hello Ali,

My name is Alicia - I'm a realtor in the Kansas City Metro area. I'm looking forward to networking with more investors. If I can be of any services to you please feel free to connect with me.

Have a blessed day! :)

[Cliff Harrison]

Originally posted by @Joe Henry:

I've heard the phrase "live where you like, invest where it makes sense" (or something like that). What's your opinion on investing in multiple states or investing far away from your home? Pros, cons, why it does/doesn't make sense for you (and if your a distance investor, how do you go about finding those remote properties). I'm still very much in the process of figuring out where I want to live, and where is a good place to invest (I'm basically 100% flexible on where to live).

That leads to my next question - what are some good cities/areas right now for cash flow investing (for 80k - 280k properties) and would you invest in a town that is losing population?

Start local.  It's challenging to be in this business even when you are local.  When you go out-of-state you increase the number of challenges and opportunities to be taken advantage of.  

[Joe Henry]

Thank you everyone for the plentiful responses. Its great to hear both sides of things.

Sounds like there are pros and cons to investing remotely, but it is doable, so it just has to fit your goals and you have to be prepared for the extra risk and expense.

@Ali Boone, I'm in Hollywood right now, renting month-to-month. How do you go about finding your properties in other states? Do you just travel a lot, or have people there your trust?

[Ali Boone]

I work with pros who specialize in out-of-state stuff. They find the crews with the properties and vet them and the markets and all that...and then I go off of that. 

Feel free to message anytime and I can provide more details, and contacts, if you're interested.

[David Faulkner]

https://www.biggerpockets.com/forums/311/topics/22...

Any questions?

[Karen Barber]

Disclaimer:  I work for a rehab company in KC

Buying out of state, while it may seem scary can be a good choice.  Sure you have to find a Property Management firm to handle the rental portfolio for you.  If you have a strong one they will do their best to make sure that it is tenanted at all times.  However, before purchasing a house, ask if it is tenanted, look at only tenanted houses if you are concerned about cash flow.

You also have to think of this on a emotional level.  If you purchased a house close to home, you would probably manage the house, know the tenant.  While knowing tenants is good, it also can put an emotional connection there.  I think everyone wants their tenants to do well & succeed in life, but you also want your tenant to pay your rent on a certain day in full.  If you know them you might get taken in by a sob story about how they didn't have the money to pay all their rent.  If you allow them to get by once, then they might continue to try to get away twice or three times.  If you hire a PM Firm, it's there job to collect the rent to you the owner.  They can tell the tenant, the Owner demands his rent so they PM team won't get involved, it's there job to do this & when it is our job, sometimes, we leave emotions at the door.

When it comes to buying a property in a city not close to you. Do your research.  Go online, check the school district, ask questions to the company selling the house, what school district is this in.  Go to the county records, check taxes, go to trulia & check the crime areas.  Tell the company you are buying specifics on what you want as an investment property.  Ask questions.  If they are interested in helping, if they are truthful & honest, they will take their time & answer all questions, you should be able to reach them by phone, email & even texts.  Do your homework, figure out what your yield will be, figure out you appreciation, your cash flow just like you would with any property.  If you can, visit that city for a day or two, meet the company you are buying from, the property management firm.  Do your own homework, do demographic studies on the social anchors, on the job industry in the area, on schools, even churches in the area...

[Brady Hanna]

@Joe Henry- I definitely agree with others who have said it is more difficult than you think investing away from your local area.  What I would recommend is get your feet wet buying a property within 45 miles of you and dealing with that for a year or two before you jump in with 2 feet all the way across the country.  

There is a reason that most wholesalers will have their target list be non-owner occupied owners who live out of state.  It is because they thought it was easy and now are desperate to dump their property.  Just my 2 cents.  :)