Out of State Investors: Which Market do You Invest in and Why?

Question

Hey, everyone. I'd like to learn from all you and how you went about picking an out-of-state market to invest in. I believe that in this digital age, I can cherry pick the best markets in the nation and invest there, and I've read that many people are doing this successfully.

I don't have many connections in other markets, so it would be especially nice to hear how people picked an area and made it happen. How has it turned out? Will you being doing more of it? What are you goals and how does that market help you meet those goals? Is there are particular market (aside from the one you're already in) you would recommend now?

I really want to hear what worked for you and learn from your experience.

Jason Tinder · Answer

Hey, Marco Santarelli, great stuff here. I'll be checking out your market report soon. Cash flow and appreciation are both great, but if I had to pick one that means more to me, it's cash flow. Multi-families are preferable. I've heard great things about Texas, Indiana, and a few other markets. I'll see what your report has to say as well. Thanks for posting that, by the way.

I took a look at your site. Looks like you're in all the right markets. I'll reach out as I narrow down a bit.

Marco Santarelli · Answer

Hi Jason Tinder,

Welcome to BiggerPockets!

I've been an out-of-state since 2003.  I ended up building my turnkey business around what I've learned over the years in terms of selecting markets, analyzing properties, management, etc.  The bottom line is there is a "right way" to invest successfully in other markets as a buy-and-hold investor.

Selecting your market comes down to fundamentals like employment, job growth, and other economic factors.  From there you want to select desirable neighborhoods, and last but not least, select the right property that makes sense (condition and cash-flow).

As I like to say, "Live where you want.  Invest where it makes sense!"

In terms of specific markets to consider, there are many.  Certainly several Texas markets make a lot of sense today.  There are other markets around the country that are great, but you should ask yourself what you're looking for from your investments before selecting your markets.  That is one of the first questions we ask our clients. Some markets are better for cash-flow while others deliver lower cap rates in lieu of better appreciation potential.  (Download my free report, "2013 Housing Market Forecast" to help you get started doing your due diligence.)

Feel free to post any other questions you have.

Continued success!

Elizabeth Colegrove · Answer

@jason tinder

Please excuse any spelling mistakes I am on my phone

1) We buy our investments in two folds. We leverage our personal property (therefore little to nothing down ) and we do investment loans. We bought two houses using the va loan. Because we bought cheaper we were able to get 2a for the 1 va loan. Since it was va loan we put limited down. Alll of out priperties have been distressed. Our first was a foreclosure. We gutted it ourselves with help from my oarents. We redid the house for 10k but were able to buy it for 50kish less.

After the foreclosure I got to know real estate better. I found if I had time (which we didnt the first time) that short sales were a better option. People were turned off because of the headaches. Well by dealing with those headaches I have been able to buy great houses with less work. Honestly our last 3move houses have need about $500 inorder to either move in or install a tenant. Most of that was cleaning the place.

2) we manage them ourselves. In both of our distance locations we have friendz that will look at something or help us show the house if needed. Even if i needed to fly out every now and than it wouls still be cheaper. I calculated that having a management agency would cost me over $3700 a year for one house alone in management fees. That is alot of plane tickets!!! Note: We rent to professionals. We are at .75 to 1.2 depending on the market but these people need less hand holding. They will meet any repair people if needed. Most od the houses are newer. I do have a friend who I pay to be my eyes if needed but honestly I found that trust/respect goes along way. Fyi my husband is gone alot so even if we were close I would usually have to hire someone. So its no different if the company was called 2the miles away or 2,000 miles.

I currently do not work so I have time to handle the calls. Yes there are "issues" or bumps along the way but doing it this way saves me 8,000k year.

Oh second note: i know there was a discussion on another thread about military. They are our bread and butter. We are able to do this long distance because of them as our market. Military usually rents from Military so we are use to handling repair/meeting people. They are usually amazing 3 years. Personally "I"personally have never had an issue nor do I know of anyone else who had an issue. Most service members have a security clearance. If they dont pay I will go to their command. Not only will their command not be happy but they could lose their job. Our tenants have been high enough due to the level of house that they have alot to lose.

Elizabeth Colegrove · Answer

@David Ramos

Thank you for your kind words. Please be very careful with the VA. We do not buy "flip" houses. We buy permanent residents that we rent out once we move due to orders. We often times renovate them while we live in them but this is long term. VA requires at least 1 years unless you have a great reason to leave. My husband's career just happens to be one that is moves a lot and suddenly PLEASE PLEASE make sure you follow all government regulations to the fullest extent of the rules. Not the following the rules can have large long term repercussions, banning of using .

As for other markets especially Texas and Arizona. Please be very careful. We have done well because we have examined the areas that we have been in for sometime for some reason. We have always had contacts and know the area. As a service member you do not have the ability to just "pop" overstate lines if it is out your "bubble" if there is an issues.

In our situation it works because "I" take care of the real estate/business/non-military execute side. His profession requires long hours, last minute trips and24/7 available. He is rarely available when issues happen. This is not saying that you won't be able to handle the rentals. Just realize they are alot of work. Depending on your career and spousal choice. You might want to evaluate your plans and make sure that your goals and military commitments line up.

David Ramos · Answer

Elizabeth  Colegrove:

Thanks for all the wealth of information that you have provided. I am also a service member and to be honest, the security clearance deal and having the connections to look up somebody's command or unit is the best collateral that you can get when dealing with military members. ONe thing that really impressed me was how you guys got a double whammy with the VA loan, which I originally though it could lend if and only if you live in such property. My doubts have been eliminated but I will surely research more about the VA to get my Flip strategy going. It also seems that you have a good system set up to manage all your properties, especially being out of state. In my particular case I am assigned to Dover AFB, DE and the market around Kent COunty is somewhat slow; I have also considered to broaden my target market more towards nearby Pennsylvania and MD areas. Fortunately for me, and same as you too, I do have some fellow service members assigned to those areas that could keep an eye to any possible investment properties. I've learned a lot on this thread. Also, I'm also intending to look up Texas and Arizona as Rebecca Chapa mentioned previously. They both seem to be two booming markets out there. I will, however, kindly ask everybody here if they have any further input regarding those two target markets. Best of luck to everybody!

Jason Tinder · Answer

Hmm... living in Venice Beach and investing remotely in different markets. Sounds a whole lot like the American dream. Glad to hear that someone is having a positive experience with turnkeys. I've been leaning toward going that route. My own market just doesn't quite pencil out, and even with slightly lower returns, I'm thinking going that route is still a better return than I'd get in my backyard and being hands on. It just might pay to do less!

Interesting site, by the way. I'll check it out more when I run across a little time.

Ali Boone · Answer

Hey Jason! I only do out-of-state investing. I buy turnkey properties, which makes the process soooo much easier. I can be mobile to all the markets, don't have to worry about establishing different teams in each spot, and it's just totally hands-off and carefree.

Don't rule out investing in Dallas though too, that is one of the hotter markets. But yeah, being able to invest anywhere is definitely the way to go in my opinion. That's all I'll do.

Jason Tinder · Answer

Elizabeth  Colegrove - That's a very interesting set up you have going. I've never considered that a property could be maintained out of state without a property manager, but then, again, I can see how it's possible in the situation. The military situation and renters sounds like it has paid off really well. The most surprising thing to me is that you've managed to gather these up in different states, but hey, if it works, it works.

Thanks for the response. Really, eye opening in a lot of ways as to what can really be done from a distance.

Elizabeth Colegrove · Answer

Third Question: I have found that depressed properties have been a great way to get deals. My favorite are short sales. I found you can get as good as a deal if not bettee than foreclosure. Short salws also need less work as they are voluntarily being given up. Honestly the only house that needed work was the foreclosure.

I forgot to mention, as we do conventional financing. Our current biggest hinderance to growth has been getting financing. We are beyond the magical "4" mortgage number. Therefore we are finding it more difficult to find financing as we have to hold all the dedt on our income/dedt ratio.

Last note: I worked for 15 months in commerial real estate/multi family background. I also have a MBA with my undergraduate in finance and accounting.  Therefore I learned from my employers and have thr finacial knowledge.

Jason Tinder · Answer

Elizabeth  Colegrove - Ha, I had to laugh at the part about never knowing which "sh**ty little town" is the place to invest. That's probably very true.

Mind if I ask a few questions?

- How do you structure your deals? Are you just doing traditional financing w/ 20% down?
- I read your profile and it says you manage them yourself. You don't use property managers at all, even out of state?
- Do you have to do a little rehab on the houses to get them into rentable condition, or do you focus on those that are already in great shape?

Just curious.

Out of State Investors: Which Market do You Invest in and Why?

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