Purchasing Investment Property Out of State

[Nathaniel K.]

Hello everyone, 

I am looking rigorously to purchase my first investment property. I am leaning towards the direction of Section 8, due to low barrier to entry and guaranteed monthly payments. I understand the risks and things to look out for. My issue however comes at the fact that I am looking to purchase out of state. I live in Southern California and am looking to purchase in the Southeast Midwest states. What are some pointers, things to know, and tips for purchasing properties out of state? Is it a difficult process? Should I be concerned?

Your replies and insight is greatly appreciated! 

Best, Nathan

[Joe Hammel]

Metro Detroit has what 99% of REI want. Couple hundred bucks a door cash flow, double digit ROI, and yes the prices appreciate and you build equity.

Anyone who disagrees, is missing out. I cash flow $100k a year off 20 doors and have created a ton of equity. Happy to send a screen shot of the portfolio to anyone who wants to see, it just won’t allow me to attach pics to a reply.

Purchase: $80k-$130k

Rent: $1100-$1500 (no rent control in MI)

1% rule: 1%-1.4% rule deals

ROI: 10-14%

Cash flow: $250-$350/door (after all expenses and budgeting for maint, capex, vacancy)

Appreciation: 3-15% (has been double digit for a decade)

Location: C+, B-

These numbers are based on the "sweet spot" in Metro Detroit. These are largely in the suburbs and some markets in the city. You can find higher ROI (on paper) here and probably in other cities…but the probability of actually collecting rent significantly decreases. Where these numbers are found, there is a very high rate of rent actually being paid.

The bad reputation of “Detroit” comes from OOS investors wanting $20,000, D class properties. We don’t buy those lol.