In state vs Out of state cashflowing

[Bill B.]

Hello
I've seen posts and profiles of people who own RE in multiple states. I've also seen posts and comments stating that anyone who rents out a property farther than easy driving distance from their own home should be in a rubber room and watched very carefully. I already understand the facts of being too far away to easily, and personally, address issues at the property. But, there are management companies who (for a fee) will take care of the property for you. Or, am I missing something about those services?

I'm seeking this information because I live in Southern California AND I am a newbie. Everything is being bid up within a half hour from where I live. Even in the areas where I do not want to buy. I'm contemplating cash flowing in WI, where I was born and where I have relatives (some basic support structure) Also, the market there seems to be where SoCal was in 2010-2011. i.e. a LOT of price cutting and REOs coming on market.

All that fails to mention that I can tie up several properties for a fraction of what I'd need to invest in one property in SoCal. (diversification should spread risk, shouldn't it?)

Please enlighten me. I'd like hear whys and war stories.

Thanks.

Bill

[Marco Santarelli]

Hi Bill Burke,

I know we've had some forum exchange in another thread of yours, but this question is rather simple when you stop and think about it logically.

1) Investing in other areas around the country that are better off economically that you backyard, and that produce better returns, makes complete financial sense.

2) Investing in other areas allows you to diversify your real estate portfolio. I suggest my clients own 3 to 5 properties per market, then buy more in the next solid market.

3) Your investment capital goes further allowing you to control more properties with higher total returns.

4) Unless you're highly proficient doing all the functions of a professional property manager, you should never manage your own properties. The 8% to 10% fee is well worth the cost over the long term to have better tenants placed by your manager, and free up your time to do other things (like find more deals), than to be managing your own properties.

Anyone that tells you that you should be in a "rubber room" if you invest further out than easy driving distance clearly doesn't understand the benefits above, or may have been trained by someone who doesn't understand them. Even 'control freaks' eventually get it once they realize their better off letting go!

As I say, "Live where you want. Invest where it makes sense!"

Please let me know if you have any questions.

Continued success!