Out-of-State Investors: What Would You Change If You Started Over?

Question

For those who invest out of state, if you could go back to when you first started, what would you do differently? Would you choose a different market, build a better team, or take another approach? Looking to learn from those with experience in remote investing!

Michael Smythe · Answer

@Zane K. what we see investors doing wrong:

1) Not understanding Class A, B, C & D properties and HOW their ROIs are different.- Property Class will affect location, tenants, maintenance, vacancy, etc.

2) Not doing enough of their own due diligence when buying a property. - Trusting agents & PMCs too much!

3) Naively expecting paper results to be real results.

There's a lot more, DM us if you'd like to chat about them.

Becca F. · Answer

Would have bought one higher quality asset (Class A or B) in Indianapolis metro area and not two Class C homes "cash flow on paper" which in reality I'm negative most months (sold one home to cut my losses) - constant repairs called in by tenant. My Class A (nice suburb and great schools) is doing well, except for the significant property tax increases.

Don't buy sight unseen. Properties and neighborhoods look much different in person than in photos/videos.

Would have talked to property management companies first to ask about rents, tenant base, etc. And talked to contractors - I did all off this after closing on the homes.

Would have had a local investor (unbiased party) walk the properties before I made offers. Will never again buy any 1920 "renovated" homes in Indiana (or any other state).

Would have looked up property tax records before making offers. If it shows change of ownership with LLCs every 2 to 3 years, not a good sign.

Would have probably bought one SFH in Nevada if going OOS - low property taxes, good appreciation and much closer to visit (drive to Reno or short flight to Vegas).

Would have also considered buying one SFH in California (not the Bay Area) but maybe Sacramento area or elsewhere in NorCal and done a mid-term rental to lessen negative cash flow. For me it's quality over quantity now.

Travis Biziorek · Answer

I would have bought more... LOTS more.

Back in 2019-2021 I was buying up SFH's and duplexes in Detroit. I was pretty leveraged with my HELOC, 401k loans, etc. but I could have been even more aggressive.

I only have 12-doors though. Everyone thought I was nuts and, while I did my best to ignore it, I'm sure it impacted how aggressive I was in the end.

Everything I bought is up 2-3x and last year I had net rental income on my taxes of $86,000. I expect 2025 to be higher.

I did a cash out refinance recently on a duplex I bought in 2019. I paid $62,000 for it and it's generated me $1,000/mo net cash flow like clock work ever since. It appraised for $201,000 the other month and I put $103,000 in my pocket after closing costs and paying off the old note.

I wish I had about 20 more of those...

Mike Paolucci · Answer

Would have maybe taken a couple extra trips to look at the neighborhoods a little harder but I wouldn't have chosen a different market. Been pretty happy with my decision so far and even moved here after my initial 4 buys.

Having realistic expectations was something I had to accept early on.

Property managers are going to be key for your investing as well. Definitely want to talk/meet with a few different ones if possible and try to get to know them and their companies if possible on the front end so you don't have to fly in after the fact.

Austin McClain · Answer

Property management is huge when investing out of state. It needs to be a top priority to get set up with a good PM so you never have to fly in to address issues

Hayley Beckman · Answer

Great question! My biggest piece of advice is to make sure you have alternate connections for sourcing properties, property managers, and contractors. You don't want to be reliant on one company or one person in any market (especially out of state)!With contingency plans in place it will help you sleep MUCH easier at night. Hope this helps!

Barry Mathis · Answer

Just to be clear , are you looking to purchase additional properties if the numbers are right ?

Becca F. · Answer

Sure. You can DM me. I'm not an expert on the Sacramento area so I'll try to help. I just look at trends of follow where the Bay Area people are moving

Barry Mathis · Answer

Good ideas Becca - my pastor used to say that you can trust someone who walks with a limp. It shows that they have learned from experience. Shifting strategies to accommodate a changing market or changes in your lifestyle or the resources available is crucial. I am a Broker and Property Manager in Sacramento and have a list of 4 properties that I just identified as potential investments for another investor. He is only looking for one , whould you be interested in taking a look at the financials on the other 3 ?

Zane K. · Answer

That is correct

Out-of-State Investors: What Would You Change If You Started Over?

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