Rental Property out of state Question. Pennsylvania?

Question

Hello all,

I'm new to this forum and new to RE Investing, but I'm looking to put a toe in the water with a couple of rental properties in the Pittsburgh area. And I have a couple of questions I'd really appreciate advice on:

1. Is it viable to own properties in another state - I'm based in CA and I can't afford to get started here.

2. What's the general opinion of Pittsburgh as a rental market. The research I've done has been encouraging, but if anyone has thoughts or opinions on the area I'd love to hear them.

Thanks!

Eddie Ziv · Answer

Thomas:
I'm from California too and I've been investing in out-of-state for about a year. I own properties in Texas and in Alabama. There are wonderful opportunities out there but YOU MUST do your homework. 
I can only speak from my own experience. I learned about Texas from friends who have investment properties (SFH) there and although I made some mistakes along the way, (Who doesn't?) I'm very happy with the results. 
Alabama is a different story. I heard about a company that sell investment property in Birmingham for 55k-75k with $500 down using a bridge loan and a tenant in place. Sound attractive, isn't it? but further digging into the areas of those properties, I found out that the actual value of these  properties in those neighbourhoods (At the time which was about 6-7 months ago) was  $15,000-$25,000. What this company and others like it do ,is buying those properties on a very cheap, rehab and sell them high - very high. So I decided to do it myself. I don't flip but rather rent out. I also try to stay from really bad neighborhoods .

Here is what you should do (That worked for me, anyway)
1. Define your goals - Do you want to flip? Do you want to rent out? If rental is your goal, do you want to rent to mid or higher-middle class and therefore buy properties with greater value (And costs)? Can you afford those properties?
Do you prefer to rent to low income i.e. section 8 etc?
2. Contact a small local management company in the area you think fits your goal and get as much info (Neighborhoods that fit your budgets, on-going monthly rent, average time it takes to rent, etc)
3. Find properties on the internet (Realtor.com is a good starting point but is not updated fast enough, local MLS, and of course this site)
4.Run those properties by that management company owner and get the feeling.
5. Fly to the Pittsburgh or any other city where you target area is located and check physically the street and the neighbourhood.
If this is a low income area, look for neglect, abandoned cars, abandoned houses, signs of decay. All those things that tells you don't touch this area, or on the flip side, buy it fast.

If flipping is on your mind, Justin Pierce has a very enlightening guideline on flipping
http://www.biggerpockets.com/forums/255/topics/32527-criteria-for-flipping-near-denver

If you need info or help you can contact me directly.

Eddie

Dee Xixi · Answer

I live in Boston but I am looking to invest eslewhere in Rental Properties.

From experience, I want to get so feedback from my BP fellow on what are the best states and cities in the mid-west or in the south to invest in Rentals and why ?

Jay P. · Answer

I agree with everything said above.  As a real estate broker for more than 30 years behind me, I cannot stress how important it is to put the plan and your partners together.

I work for a company that vendor manages property managers across the nation for larger corporate clients (particularly foreclosures) and for individual investors.  We mitigate some of the risks by managing the back office functions of the local licensed property manager by making sure our system tracks virtually everything which is available to the investor 24/7.

It is very good to network as you are doing, speaking with those folks who have done what you are trying to do.  And yet, you are facing some trial and error.  You need to buy right and that includes location, price, condition, and all of that has to bounce up against your long term objectives.  One thing is for sure, if you have time and patience, there are many opportunities in this market.  But I personally believe it is a long-term strategy.

Savannah Leigh · Answer

I strongly suggest considering Northeastern (Scranton), PA.  I don't know Pittsburgh market at all...so  I can't compare.

As for viability YES YOU CAN.  but you need local maintenance and (licensed) management.

IN PA REAL ESTATE MANAGERS MUST BE REAL ESTATE BROKERS unless they have an ownership share in the property (as I do with my out of state owners)

In my market, one of the few I've found you can get cash out each month, here's my basic formula:
Total rents
-30% for Maintenance and Vacancy
-10% for management (even if I'm doing it, it has value)
-$100/month profit PER UNIT
- all hard costs (except mortgage)
The remaining number is how much I can spend on a mortgage...and therefore gives me the value of the property

Joey Budka · Answer

Thomas,

I am in a similar position regarding investing out of state, particularly in Pittsburgh, PA. My partners and I have been investing there for the past 6 months or so- so far, so good. There's tremendous cashflow opportunities that are abundant out there in the Steel City, but nevertheless, if you are going to invest out of state, the key is to make sure your tenants are reliable. A solid management company should screen the right folks who will not trash your place and pay rent on time.

If you're still looking to get started investing out of state safely and securely, PM me and I'm sure we'll be able to accommodate your investing criteria accordingly.

To continued investment success,

Joey Budka

Eddie Ziv · Answer

Mike is right, but only in part. Being a "California type" property owner myself  , I'd say that trying to manage a property in remote control doesn't work. However, finding a good management company, although tough, is not impossible. I have a management company that handle my properties in Texas and another one in Alabama and so far so good. I don't deal with apartment building but only SFHs. either way, you have to keep your management company on a short leash.
... And by the way Mike, I never wanted to get-rich-quick. Just having comfortable retirment... :wink:

Michael Rossi · Answer

It is NOT easy and certainly not "very very" easy.  In fact, operating rental properties is not easy even if you live 10 minutes from your properties.  It is MUCH harder if you attempt to do it long-distance.  The vast majority of newbies fail and that is even more pronounced with long-distance landlords (even if you have local management).

During the boom, we had a bunch of California landlords here in my area.  One of their rental houses was right across the street from one of my houses.   I'll never forget the day that I drove by and saw the commode sitting on the front lawn along with a lot of other fixtures from the California landlord's house.   I looked up the guy's info and actually called him in California and offered to buy his property for a ridiculous price.  After all, you can't pay too much for a house that has no fixtures.  LOL!  BTW, this guy had a local manager, but like most managers he wasn't in touch with what was going on with the property.  Why should he be?  It wasn't his property!

To make a long story short, all the get-rich-quick California landlords are long gone.  They simply couldn't make it work.

Mike

Vishal D. · Answer

great advice Eddie. Certainly make it seem very very easy. Thanks!

David Bui · Answer

I couldn't agree with Eddie more! Thomas listen to Eddie he knows his stuff!!

Joshua Dorkin · Answer

I can't answer #2, but as for your first question, it is absolutely viable to own property in another state.  There are plenty of places with great deals, but the challenge you'll face is management.  I'd highly recommend doing some reading on the site and digging up some of the discussions here about investing out of state, as you'll get a lot of feedback on the ups and downs of doing so.

Good luck!

Rental Property out of state Question. Pennsylvania?

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