Out of state buyers: What informs your decisions?

Question

I have been investigating the possibility of buying a rental property out of state.

If you are an investor who has bought out of state, what informed your decision?

Jobs? Economy? Population? Cheap deals? Unsaturated markets? Inventory?

Lets hear it, y'all.

Elizabeth Colegrove · Answer

@Joe Butcher You have some "amazing" potentials in Texas. If you are willing to go out of the Dallas area. I would research the little military towns in Texas. I have found that if you are willing a little risk regarding the military might leave (which really isn't going to happen) than you can find great tenants, high rents, cheap prices with lots of qualified tenants beating down your door. The town I am thinking of specifically is great. It's issue is it is in the middle of no where so no one wants to buy. Therefore there are not alot of rentals but high demand

Chuck Catchings · Answer

Joe, here's my 2 cents on this subject. I work directly with a buyer that is a buy to rent guy. Location is always one of the top issues we look at but 99% of the deals that I look for come from full turn key wholesalers. Homes are usually rehabbed to a point, already have tenants in place with rental history, PM is with an established company and of course the all important NOI. Every investor or buyer is going to have their own set of guidelines that they look at or consider when looking to buy a property. I've pretty much done it all in my 30 years of construction and RE business and I explained to my buyer, why reinvent the wheel when you have everything from individuals to large companies doing this for you and everything is in place. To me it's a no brianer but you will get a lot of feedback from buyers or investors that think buying out of state is crazy. I'm not sure why your even looking outside of Texas though??? Good luck, hope this helps out somewhat.    ChuckC

Joe Butcher · Answer

Elizabeth  Colegrove thats interesting. What town were you thinking of specifically?

Marco Santarelli · Answer

Hi Joe:

Having invested out-of-state since late 2003, I look at everything you've mentioned and a little more.  I firmly believe, and tell my clients, that you should take a top-down approach meaning that you find the best markets first then work your way down to the right neighborhoods and properties.

Too many investors start off by evaluating individual properties, or relying on the "right team" despite the market they're in.  A good property or a good team does NOT necessarily make the investment good.  There are good teams and good properties in depressed markets like Detroit (sorry Detroit), but that increased your long term risk and exposure in the carry costs of that property.

You need to me Market Agnostic (my 5th rule of successful real estate investing).  You can find good properties and good teams in markets both good and bad, but that does not make up for the overhang of a bad market.  Take the top-down approach, and start with a market that makes sense economically, and with a healthy housing market.  You will lower your risk and carry costs, and increase your appreciation potential.

To reduce it down to its simplest form, find healthy markets that offer good cash flow and appreciation potential, then narrow that market down to desirable neighborhoods with good tenant demand, and tie that in with quality properties that make sense (condition and cash-flow).

BTW -- you have some great markets there in Texas including Houston and San Antonio.

Continued success!

Ali Boone · Answer

Yeah, the team just depends on what you want to do. If you want to buy foreclosures and fix them up, then an agent, inspector, contractor, property manager. I've only bought turnkeys so those teams are more centralized to the turnkey providers themselves since the houses are rehabbed already and the companies provide management and such (although I still use my own inspector). Less directly, I have worked with a lot of mentors and buyers outside of the direct sales part and I consider those guys to be my team as well.

So of course the biggest thing in looking for somewhere to buy is definitely that it's a good investment that makes sense, but I tend to work backwards- once I know the awesome teams, they tend to already be in the great markets for buying, so I really just kind of piggyback off of them. Kind of the 'don't take advice from someone you wouldn't trade shoes with' theory. Reverse that to say, if all the pro investors are buying in a particular area, maybe I should be looking at that area!

Once you get a feel for out-of-state buying tho, the big markets a lot of people are buying in becomes a lot more obvious because of how many people you meet buying there.  Atlanta, Memphis, Houston, Charlotte, formerly it was Phoenix, etc.

Joe Butcher · Answer

Hi @Ali Boone ,

When you say "teams" I am assuming you mean realtor/prop mgmt/inspector etc? If so are these teams you have assembled yourself or you found through others who have invested in the same market?

Ali Boone · Answer

I have kind of a different answer, sort of. My big thing is "teams". I go where the good teams are, which usually conquers my second criteria of being a good investor-friendly market (returns, laws, etc). If I don't know of a good team somewhere, I won't buy it. My theory is if you find the good teams, you can follow them and it takes so much of the legwork out!!

Stephen Masek · Answer

Price to rent ratio, schools, commuting, and shopping.  We also look at crime data, and the neighborhoods.  Jobs availability from a variety of sources is also a factor,

Elizabeth, thanks for your very good point about the higher rank military tenants.

Joe Butcher · Answer

Excellent, Elizabeth Cosgrove. That gives me some insight.

Elizabeth Colegrove · Answer

@Joe Butcher We buy out of state. My husband is in the military so I evaluate each area we got too. I look for house prices, rent prices, # of units for rent, how quickly they are rented, whether people prefer to rent or own and why, etc...

Personally I shop on the mls with an agent and find my own tenants. My current demographic is professionals or high level blue collar (military that is E6+ or O1-O3). My current niche is areas that people will not buy because they would will not stay there long term nor do they want to voluntarily come back (small town America with university and/or military presence).

My tenants want a home not an apartment. They take care of little things or are presence when any maintenance men need to come by. I install the tenant and I move them out. Otherwise everything is done electronically and long distance.

Out of state buyers: What informs your decisions?

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