Is investing out of Market smart for a new investor?

Question

I am interested in some markets outside of mine. I live in the Northeast and deals are certainly tough to come by right now. Naturally, that has led me into looking at some different markets. The Philadelphia, Savannah GA, Ohio to name the few.

I have been recommended to find the best team in market- REA, Contractor, etc. What would be some recommendations for this process?

Also with that I am looking to go the HELOC route on my primary residence. Whats the general thoughts?

Evan Hopple · Answer

@Matt OwensI have been recommended to find the best team in market- REA, Contractor, etc. What would be some recommendations for this process? - BP is great place to start. Facebook groups and any other platforms that connect you with local investors is a good option.  Also with that I am looking to go the HELOC route on my primary residence. Whats the general thoughts? - HELOCs are best utilized when they cover the entire purchase. When it only covers the down payment you'll have to keep in mind that your numbers will be tighter than other investors that are making a full down payment.

Jay Hinrichs · Answer

not to be a debbie downer but I would not use my primary residence for a heloc

and then invest out of state.. especially a C or D class property..

too much risk in my mind  also keep in mind Heloc's can be called or frozen thereby putting you in default and you wont know it until after the fact they are not fully amortized loans. Read the small print.

Travis Biziorek · Answer

Matt, any strategy can be smart or a good idea as long as you understand and are ok with the risks.

Going out of state is higher risk than staying in your local market. That said, local markets don't always "make sense" for people and their goals.

I work almost exclusively with out of state investors and the number one thing I'll talk about is the risks. It can't be stressed enough.

Yes, your team will make or break you. So take your time, talk to different folks, and do a bunch of research.

HELOCs can be great but have a plan to pay it down. That typically means doing value-add projects that you can refi out of afterward and/or using normal monthly savings to pay it down.

Using a HELOC to 100% finance something is not a winning strategy.

Min Zhang · Answer

Hey Matt! As an investor, I focus on Columbus, Ohio, which has been booming, especially with tech giants like Intel, Meta, Amazon, and Google expanding there. This has driven up property prices and job opportunities.

I can send you a list of contacts in Ohio to help you build your team, including property managers. Let me know how I can help!

Remington Lyman · Answer

I believe many real estate investors share this plan. Success depends on execution. I'd be happy to discuss my experience with out-of-state investors here in Ohio.

Benjamin Aaker · Answer

To answer your question, no, don't invest out of market until you have some experience. There are good deals to be found in any market and you want to have a deal that you can physically visit regularly. Over an hour drive is too far.

Yes to the HELOC route, but only if the new property cash flows to pay back the HELOC and its own loan. You might be thinking that you can pay it out of your normal job's income. Don't do this. It's not expandable, and it risks too much personally. This rule will make it more difficult to find a subject property, but you need to follow it when using the HELOC.

Andrew Freed · Answer

@Matt Owens - I've used the HELOC route to expand my portfolio and it has been extremely effective. I HELOC'd my 1 bedroom condo in Boston MA, took out $200K and used that as a warchest to expand my portfolio. I utilized it for 3 househacks and 3 joint venture amounting to 20+ units. The key with the HELOC strategy is understanding the concept of arbitrage. Whatever you utilize this HELOC for, it is imperitive that you transition these funds into opportunities that provide a much higher return than what you are borrowing at.

Additionally, I personally like the Northeast market, much less competition since people interpret the tenant friendly aspect as more challenging, but with that comes less competition. Additionally, it is way more insulated than the sun belt due to the regulatory requirements when it comes to building. It is much more challenging to create supply in the Northeast further increasing demand. I invest in MA, RI and plan on investing in NH. All good markets if you target the right tertiary area.

Alecia Loveless · Answer

@Matt Owens I’m in the northeast and personally like investing locally. I know the markets and the appreciation has been tremendous with people continuing to move to more rural markets to get out of the cities.

HELOCS can be helpful if done correctly but personally I like having less debt on my primary residence.

While I’m making solid cash flow from my investments it would significantly cut into my cash flow if I had a $1500/month HELOC payment.

John Morgan · Answer

@Matt Owens

I did a HELOC on my primary to buy a couple out of state rentals when I first started. I recommend it. And I bought 10 houses in Arkansas in the last year without knowing anyone in that town. You find local handymen and vendors to fix them quickly. They’re easy to self manage from far away for me.

Bob Stevens · Answer

I have been investing OOS for many years. Yes, having a team in place is the key. I currently have 3 renos going, and we are closing on another property this week.

Good luck

Is investing out of Market smart for a new investor?

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