Out of State Buying!

[Harrison Jones]

I have started building my own portfolio mostly consisting of single family homes. Theses homes are pretty concentrated in Eastern NC, where I live, I have always been able to scout the homes out. I have been considering in widening the scope of search to surrounding states that have strong markets as well. What advice do you have when searching for homes out of state? What do you search for in other markets? How do you personally vet homes when they are out of state? How to you manage risk when buying out of state?

[Vicki X.]

Quote from @Harrison Jones:

I have started building my own portfolio mostly consisting of single family homes. Theses homes are pretty concentrated in Eastern NC, where I live, I have always been able to scout the homes out. I have been considering in widening the scope of search to surrounding states that have strong markets as well. What advice do you have when searching for homes out of state? What do you search for in other markets? How do you personally vet homes when they are out of state? How to you manage risk when buying out of state?

 @Harrison Jones I've invested OOS. I hope the general criteria and considerations below would be helpful for you. 

• Your budget: are you looking to buy under $200K, $200-300K, $300-500K or higher? It can help you create a short list

• Population growth, employment growth, wage growth, composition of business types are the most important factors in the health of the market. There are many analysis, charts out there. Specifically. places where the millennials are attracted to are interesting as they are becoming the biggest renter and homebuyer group

  (Note: Be careful with 'historical' data. The top growing markets in the last 2 years are unlikely the most sound choices. Good examples are Austin and Phoenix. Try to add the futuristic lenses into your analysis whenever you can. In the ideal case, there be a "new California" emerging somewhere in the next 10 years. But to be frank, CA's trajectory is impossible to replicate as working remote has become more prevalent, companies more “decentralized”, and more people think about not just professions, but also lifestyles these days).

• Are you able to find trustworthy realtors/PMs or even service providers? Do not get into a market before you know whom to work with. Many investors interview many to find the best one. In my case, I started in the Houston area as my friend had very good recommendations for me. So use your network to get more ideas!

• Run the numbers to understand the cash flow, and pay attention to the major cost such as the effective property tax rates. It typically range from 0.5%-2%+

• Rental regulations as some States are more friendly to renters while some more friendly to investors

• Distance to you. If you find a good area 2-5 hours drive from you, it’ll be easier to meet your team and check out the properties in person

• Certain hazards or costs that you want to avoid. Drought, flooding, snowstorms, tornados, just to name a few

Some other considerations:

• Form an opinion about where you'd like to live in the future, and factor that in. Even if you work with PMs, being close to your properties will still be a plus.
• Also decide whether cash flow is most important for you, or good enough cash flow with less hassle, higher quality tenants, or even appreciation potential. That will determine the type of properties and the price range you want to focus on.