21 years of age looking to buy my first property out of state how do I go about it?

Question

Hey BP fam, I'm looking at buying a rental in Ohio or Nebraska. I live in California is there a guide on how to go about this? Do I need an LLC? Can I purchase without having to step foot out of California? Is there any guides on this? Thank you all!

Travis Timmons · Answer

It is going to be more difficult than you think and it is going to yield a lower actual (spreadsheets are not real life) return than you are expecting. That does not mean that it is a bad idea, but it's not easy.

I'd encourage you to do a 3.5% or 5% down owner occupant loan in a more expensive market, local or drivable, over buying a cheap property to cash flow in Ohio or Nebraska - which will require 20% down per property. I'd rather own 5% of a $500k property (house hack) than 20% of a $125k property out of state. You'll look up in 10 years and the $500k property will be worth close to $1M while the $125k property will be worth $150-200k. Play the long game.

Marc Rice · Answer

Find a good investor friendly realtor, analyze 1-4 units, connect with a good home inspector and property manager. Close with a good lender and then have your property manager manage it.

Samuel Diouf · Answer

Hey Alex, after picking a market you like, I would suggest taking some time to fly out and get a personal feel of the area. Picking a market is a big decision and should be taken seriously.

Bjorn Ahlblad · Answer

Don't buy anything until you have mastered the numbers. How else will you know the difference between a deal and a dog? Learn and become totally self reliant. Success or failure are completely up to you.

Becca F. · Answer

That's good that you're starting out at a young age. I invest in the Bay Area and out of state (Indianapolis). You don't say how much capital you have to invest. Do you currently rent, live on your own, live at home with parents/guardians, rent with roommates, own a primary residence? If you have a high paying W2 job such as software engineer, that helps a lot with buying properties.

If you don't currently own, house hacking is a great way to invest. You live in the house and rent out rooms to roommates (have legally binding leases even if they're friends). Or buy a duplex at 5% down, live in one side rent out the other - the downside is you live next door to your tenant. You don't mention what part of California you live in.

I would caution you about buying OOS especially if you don't have lots of cash reserves - don't buy RE. Work on increasing your W2 income, saving money (don't buy new cars, expensive clothes etc), pay down credit card debt. I know California investors losing money on what was supposed to "cash flow" OOS, myself included. Cheaper prices isn't necessarily better. The disadvantage is you're not close enough to check on the properties. You have to have a trusted team to invest long distance.

Don't listen to social media RE gurus who say you can buy RE "without using any of your own money and buy in inexpensive locations"  Listen to the experienced investors on BP who have been through full estate cycles including 2008 and market crashes. What made you choose Ohio and Nebraska?

Don't worry about LLCs yet. The tenant or whoever is trying to sue you (car accident victim, for example if you're at fault in an auto accident) can track you down if an LLC isn't set up correctly. That's why having sufficient insurance for auto policies, rental properties, and primary residence are important. My investor friend who kept telling me to get an LLC, well I looked up one of his properties on the county site - his name is on there, not the LLC. If I can look this up easily so can a litigious attorney and client. If you do a search about LLCs on BPs you'll see lot of different opinions.

Feel free to DM if you have questions. Good luck!

Min Zhang · Answer

Hey Alex, I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager.

https://www.biggerpockets.com/blog/core-four-real-estate-team

I invest locally in Columbus Ohio. I can send you a list of contacts in Ohio to help you build your team, property manager. Let me know how I can help!

Ko Kashiwagi · Answer

Hi Alex,

It depends on what kind of strategy you are using. It's generally a smart idea to get an LLC (can be as easy as registering on legal zoom), but you can also get landlord insurance or umbrella policy.

If you doing creative financing (seller-finance/sub-to) you can close in your personal name, and some loans could require that it be closed in personal name (conventional). On the other hand, some loans require LLC vesting such as commercial business purpose loans.

Happy to help.

Carrie Matuga · Answer

@Alex Clark pick 3 markets (max) you are interested in, reach out to investor friendly real estate agents and learn about those markets and neighborhoods, identify your buy box, start analyzing 5 deals per day in those markets. By the end of 30 days you will have an understanding if those markets have potential. If yes, get your financial house in order with documents organized and then get pre-approved and start making offers!

21 years of age looking to buy my first property out of state how do I go about it?

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