Where to invest? Out of state investment

Question

Hi,

I live in Hawaii and obviously Hawaii is not a easy place to real estate investing.  I am looking to purchase multi unit properties to rent.  I have really good credit and also have some cash in reserve.  I am also looking for turn key investments.

Basically, I have two questions.

1.  Where is a good place to invest?
2.  Do out of state investors travel to look at properties?  I can't imagine flying all over the states for every property I am interested in.

Thanks you for your time!
Jack

Andy Chu · Answer

Back to the original question at hand. Go back to the basics for investing in real estate. CASH FLOW or APPRECIATION.

If you are going for appreciation/gambling, then open any real estate article and they will tell you the highest appreciation that happened in the previous quarters.

If you are looking at cash flows with good returns, find low key places that have historically double digit returns.

Jeremiah B. · Answer

Jack Richards - it depends on what you value.  What do you think will appreciate?  What are your goals?  Do you want a big city?  Are old houses OK?  How long will you hold?

I'm just starting a similar search, and here's my criteria:

Cash Flow
1.	10% cash-on-cash return, after additional capital expenses.
2.	Clean/decent condition of interior (note that I might be willing to invest in modest cosmetic fixes such as new appliances, paint, carpet, etc.  But no remodels or major repairs needed in year 1.)
3.	Newer construction.  2000+ is great, 1990 is OK.  1980 would take some convincing.
4.	Reasonable commute to large centers for employment
5.	3+ beds; 2+ baths.  I would say that 4/2.1 would be ideal.
6.	Modern features such as a functional 2-person master bath, social kitchen, attached 2+ car garage, central heat and/or AC, non-gold features, etc.
7.	Clean, decent, functional yard (low cost of upkeep, so no pool and probably no water feature)
8.	B neighborhood or better, and on a decent or better street.
9.	Attractive curb appeal.

Appreciation
1.	Stable-or-better outlook for the economy (this one is complicated)
2.	Low $/sqr ft (<$50 is ideal)
3.	Low cost of living in the city
4.	Larger lot in a neighborhood with larger lots
5.	Diversified economy
6.	Non-Extreme climate
7.	Property doesn’t have any significant negatives (high road noise, power lines, hills, odor, etc.)
8.	Housing market trends must make sense
9.	Decent or better city to live in.
10.	A decent sized city or larger (maybe one of the biggest 75 MSA in the US.  Note that this is due to both appreciation and feasibility)
11.	Ideally, the real estate market for the city would be in pretty poor shape for the recent/near-term.  We are not selling any time soon, so falling prices, foreclosures, vacant homes, etc. for the city-at-large are not a huge concern.

Diversification
1.	Not in the Pacific NW.
2.	Not in an economy largely driven by Nike or Intel.

Other
1.	SFR.
2.	Within the US.
3.	Not primarily a college rental or specialty rental (section 8, elderly, etc.).
4.	Non-offensive political views of the state? No joke, but I think that there are some states that we may not want to invest in due to their political stance.  I’ll ignore this point for now; if we get to the point where one of our finalists is in one of these cities – we’ll take it from there.

Christina Hoffmeier · Answer

I would focus on the up and coming areas.  I am currently working with many investors in the Pa market.  This area is a high target shale oil area.  Sale prices are low and rents are high.  [The price for] an average 4 square two story in the city of New Castle for an average of $20k and rents are yielding between $600-$2000 a month depending on amenities, condition and whether or not utilities are included.  Based on the research I have done on similar markets effected by the exploration of oil and gas and the influx in rents we have seen in the past year, market sale rates are expected to be on the steady incline for this area of the course of the next 5-15 years.

I always suggest that investors visit an area prior to investing. However when this is not possible it is important to connect with a partner and team you can trust.  Receiving the most accurate up to date information on your investment is so important.

Happy Investing!

Troy Fisher · Answer

And how's that going? 
One of the things we've talked about a lot recently with the members of the REIA around here is, if you limit yourself to one vertical and too narrow of a niche, you are going to miss out on being able to deploy capital and increase your assets.  By creating a vast list of items and some that are so qualitative and not quantitative how do you find the right property?

Qualitative:
 - Reasonable Commute?  In Seattle it's about an hour, here in Vegas it's 15minutes.  It's relative and therefore qualitative.  
 - Clean, Decent, Functional Yard?  I get that a pool and water features are expensive but so is having a nicely groomed yard of any type.  You could throw down bark every year and make it look great with no need to do upkeep.
 - Curb Appeal? I love this what the heck is curb appeal?  This might be a great topic but can you quantify this?  I always assume its relative to the quality of the neighborhood.

If you keep your list to more quantitative measures you expand your market and make it easier to find the right properties:

COC, CAP RATE, Economic Indicators, Rehab costs.

For me it's simple: 
- Cash Flow positive @ 75% Occupancy.  
- 5-10k rehab costs.  
- Purchase price that carries a debt service = 20% of market rents.

as to the OP, have you looked at housing in Hawai'i owned by military?  That might be the niche to pursue, if they get marching orders, they might need to sell quickly at a discount, or might OWC

Jack Richards · Answer

Thank you all for your advice. This information is invaluable.  I have to take some time to reread your posts to make sure I don't miss anything.

I am looking for cash flowing properties. Appreciation would be great, but I know enough not to rely on appreciation alone.

I will probably travel to the location where I am willing to invest with to get familiar with the location and to see the properties.

I would like to work with a company that can provide turnkey properties to make it a little easier for me.

Marco Santarelli · Answer

Jeremiah B.:  Great job on creating a very detailed criteria on what you're looking for in a real estate investment.  I see very few investors do this!  That should serve you well, but if you find you're coming up empty handed then you might want to look at some pre-1980s property too.

Continued success!

Marco Santarelli · Answer

Hi Jack Richards,

Welcome to BiggerPockets!

You are one of those "lucky" people that live in an expensive market where the numbers don't make a lot of sense from an investment perspective.  Fortunately, there are many other U.S. markets that do make sense and offer good opportunities for you as an investor.  In your case "turn key" investments are a great option.

To answer your two questions:

That depends to a small degree on what your invest goals are.  Generally speaking there are two types of markets: linear and cyclical.

In short, you want to focus on markets with strong economic fundamentals, particularly employment and job growth potential.  You also want a sound housing market.  Finally, you want to consider what the rates of return are in those markets and consider what the rent-to-value ratios are.

Sometimes.  Using our investor client base as an example, about 90% of them do NOT travel to the city to visit some of our properties.  The other 10% (+/-) do visit the market they're considering to meet our team, tour some properties, and learn more about the market and neighborhoods.

Those that don't travel to preview the properties conduct all their due diligence from home with the help of our guidance and using our out-of-state buying process.  Of course, you can do the same if you take a logical, cautious and systematic approach.

I would be happy to send you our checklist if you PM me.

Continued success!

Paul Timmins · Answer

Jack

Welcome we look for cash on cash 12%+, debt coverage ratio 1.6%++ and CAP 12%+

We prefer emerging markets job growth and local government support for that job growth. We use value plays like raising rent to increase the profit.

In your state Niche Housing can be good increasing rental income 2-4 times.

Paul

Geronimo Moreno · Answer

Jack this is a good post. I'm new and at groud zero with getting my business started. The questions you asked and the answers your getting is helping me out and giving me some things to think about.

Jeremiah B. · Answer

Marco Santarelli  I know that we will not find a place that meets all of those criteria, and that's probably OK.  But, I actually don't think age would be one of our first compromises.

Where to invest? Out of state investment

Most Popular Reply