Concerned about buying OOS and rental staying vacant

[Kevin Chan]

Hey BP, I joined very recently, but I have been interested in purchasing some rental properties for a long time. Because of the low ROI in California, I have been looking into out of state properties.

Many of the locations I have been seeing people recommend have properties that are much more affordable than California. For the price of 1 down payment, I can buy 2 or 3 properties out of state. But my concern is that in these same areas, there are SO MANY SFR's for rent.. so how do you get your property actually rented out when there are so many options for renters already.

For example- Kansas City, Austin, NE Pennsylvania, Tampa, Detroit, many areas of Ohio, are all mentioned in many posts as being options for out of state investors.  But every one of these cities has 500+ rentals available already.  Unfortunately, I don't have any PM contacts (yet) to ask about vacancy rates, but it's very worrisome when I think about purchasing out of California.

[Travis Biziorek]

Originally posted by @Kevin Chan:

Thanks for the input everyone.  I guess I really need to try and focus on getting to know a property manager and an agent I can work with and trust.  If there's anyone out there looking for another California investor to work with.. please send me a message.  I'm very motivated to get my first investment property under my belt.

Hey Kevin, I know exactly where you're coming from. My wife and I relocated to the Detroit area from San Francisco 2.5 years ago. In the last six months we've purchased 9 rental properties in Detroit. We never have an issue renting a house, generally in <2 weeks (usually faster). I often see houses on the same street listed for rent before mine hits and still listed after I fill mine.

Here's why.

I am not a slumlord. We fix up our houses nicer than most folks. A lot of owners in Detroit won't fix anything, won't update stuff, and don't even pay their taxes. This is changing, but it's unfortunately still very common. When prospective tenants see our places, it's extremely clear that we're not those type of folks. I'm now filling properties without even listing them for rent because I have a backlog of prospective tenants that are literally begging to rent from me.

I also only buy houses in nicer areas. I don't focus on the nicest, hottest neighborhoods, but I stay far away from the dumpy war zones, too. Offering an above average rental in a solid area at a reasonable price goes a long way.

Lastly, do not fixate too much on credit score. A lot of management companies have minimum credit score levels that will eliminate plenty of strong applicants. I always tell people credit score is where we're "most flexible". I generally want to see at least a 5 in front of it. Some of my best tenants have credit scores in the low 500's.

In short, don't be intimidated by the large number of rentals on the market. There are also a large number of real estate agents, but does that stop anyone? It shouldn't! You can be a better agent than 80% of folks by simply picking up your phone. It's the simple 80/20 rule.

I don't know where you are in California, but I'll be visiting family for a month starting mid-February. I'll be in Los Angeles for most of the trip, but I'll be shooting up to San Luis Obispo also. Happy to get together and talk shop if you're in any of those areas.