Horror or Great stories for out of state newbie investors?

[Adrian Jenkins]

Hello everyone.

As a newbie I am a little concerned about investing in a city and state I am unfamiliar with for the following reasons.

a) buying in a place I’ve never been to

b) not being able to tell what part is good or bad

c) not being able to tell if I’m being taken advantage of by a local real estate agent

d) since I work a 9-5, I’ll hardly ever go out to visit

Can anyone be kind enough to share if any of this was ever an issue or if you were able to jump though all these hurdles mentioned above?

In a perfect world I would find something on MLS, make an offer, get a referral for a property manager and then cash flow... however this seems to good to be true. Since I live in LA it's impossible here.

Thanks!

[Darius Ogloza]

My experience in Rochester NY (I live in SF Bay Area) mirrors Caleb's in many respects other than the fact that I stayed in for about 10 years and at my height owned 6 city duplexes and a few suburban SFR's.

Lessons learned from my perspective:

(1) Do not discount basic things like weather.  Northeast winters beat up real estate like nothing we experience in Cali.  I replaced three roofs on my properties over the 10 years at significant cost.

(2) Do not discount the age of the housing stock.  Much of Rochester real estate is pre-WWI.  I replaced more furnaces (including one octopus from the 1800's) and water heaters than I can remember.  Capital expenditures can bleed all profit out of your deal.   

 (3) If you are serious about taking the plunge, do your own research especially now when there are great resources available on the web (when I started in Rochester even zillow was not there yet).  You need to know the neighborhoods in which you are investing.  Being two blocks on the wrong side of a major artery (e.g., Culver Road in Rochester) can lead to very costly errors.  You simply cannot leave this step to a stranger.  If you do not have time to do the basic research, you are playing roulette pure and simple (but not getting free drinks as you would in a casino).   

(4) I mostly self-managed with the help of friends who were my boots on the ground.  I have heard that there is money to be made even when paying for "management" and I suspect this may be true in some markets but with high NY state property taxes even a great market like Rochester would not pencil out.  I would have done better leaving my money in a four star high yield muni bond fund.  

(5) I now stick to growth markets like SF/Marin County, Las Vegas and college towns where you essentially have endless demand (with parent guarantors).