On the fence. Local or out of state??

Question

Completely on the fence. Looking for a multi. My area, South of Seattle, seems still very high. I think I ran a calculator on several properties and they are all a pretty big "NO". Trying to gauge the market as it's slowing down, yet the properties that were "No" are now already pending. Any suggestions on areas in other states that have deals, but also enough infrastructure to find good management and renters. I was dialed in with that in both LA and Seattle, but it took a few rounds with different contractors to get there. Current plan is to get two multiplexes in the next year using a combo of Heloc and cash as down payments. So much of me wants it in my area and to manage... but the numbers. Even REO's are ridiculously out priced. I am super conservative on my numbers as I have lived in and flipped 3 properties and at first really miscalculated repairs. Figuring out a job and material/labor is a no brainer now.It's usually what's behind the wall or finding unseen problems that has me now always adding 20%. Goal is 40 doors in next 5 years and an area that can provide that. THANKS!!

Brian Ploszay · Answer

A big vote to invest in your own back yard.

1.  Efficiencies and control when investing locally

2.  Seattle area is one of the best markets.  Properties have low cash flow, but that is most likely offset by appreciation.  The market cannot build quickly enough to support demand.  I see Seattle being strong in the future.

If you leave the State, be very careful in investing in any "turn key" opportunities that you see advertised.  Get to be very knowledgeable about your outside location and set up a proper management infrastructure.  It's complicated and I tend to invest locally.  I'm from a big city, so there are enough local opportunities.

Mike D'Arrigo · Answer

Account Closed I think you have your answer if everything you are looking at is a big "NO". If you can't achieve your financial objective in your local market, then you don't have much choice but to go out of state.

Account Closed · Answer

@Mike D'Arrigo

Totally agree.

Account Closed · Answer

@Tahra Wright

Thanks Tahra. Yes that helps. Besides our own backyard (keep in mind all I am pulling with is off MLS) I have done numbers, with the BP calculator along with my wife on every property currently available. So I have been researching other areas, which of course takes longer because I'm not just running numbers but looking at true vacancy rates, unemployment, job growth, local industries, etc... I have not gotten to the point of reaching out to any real estate agents or management companies, except for our own backyard. We have found some possible alright properties in our area but they get snatched up pretty fast (even the not alright properties). We are currently finishing up the loan process and then possibly starting the a heloc process so trying to take baby steps. I think when financing is clear and I have a bit more research I'll reach out to management and realtors as you suggest. I work full time in a pretty demanding job but trying to run numbers 2-3 times a day and make sure I giving adequate CAPX/ management/ repair percentages as I know in renting properties in the past I wasn't so accurate. Thanks for the advice and I think I am on the right track. I just want options when it's time to pull the trigger!! Your post was super helpful!!

Account Closed · Answer

Hey Aristotle. I grew up in Orange County and actually live back and forth between LA and Seattle (work in the film business). We owned our own SFR and another for rent in the Long Beach area for years so I am very familiar with numbers not working in Southern California. Where are you finding good deals and are you basing that on factors like unemployment, vacancy rates, etc.. I am of course on the fence but using the calculator to on BP to find deals.

Account Closed · Answer

Thanks Brian. Yes we have been leaning towards our area for those reasons. Yet I get thrown off on how many podcasts with people being very successful out of state. Appreciation is good. And some have a minimal cashflow in areas outside Seattle. They just move fast... even the junk.

Tahra Wright · Answer

Hi there!  Yes,  I struggled with this too and for years only invested in my backyard.  After listening to BP and getting to hear about the possibilities of CF properties in other markets my husband and I decided we would consider out of state purchases.  Where we live it's more of an appreciation play and not so much CF, depending upon the circumstances. So what we did was set a goal to research three markets that we have heard are great for cash flow, where we have either family or friends in or from those areas.  We would research online on city websites, talk to friends/family, look for property managers/agents in those areas on BP and connect with them. I have one broker I connected with on BP who is a property manager, works with investors and is constantly sending me listings so I can get a feel for what properties are like and what rents you can command.  She is excellent!  We started that process with Pittsburgh and are now planning a visit.  I think connecting with property managers from those areas would be a critical step.  There was also a great podcast episode on November 29, where the guest (Monick Halm) gave a great process (indicators) to determining where to invest out of state.  hope that helps!

Aristotle Kumpis · Answer

I'm on the other side of the fence. I say invest where it makes sense for you, even if that means 1,500 miles away. These days, there's a lot of tools online to help you do the research on an area and property. Of course, it's highly recommended that you visit the area before you purchase.

I'm finding nowadays that people really want to invest for cash flow. Cash flow for retirement, kids college, etc. And if you live in a high priced market, you usually have to put down a lot more in order to get decent cash flow. I also live in a high priced market, and I would never buy a property here for cash flow. I can purchase more assests in other parts of the country that yield me better cash returns.

On the fence. Local or out of state??

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