Investing Out-of-State & Minimizing Risk

[Jon Q.]

Investing locally in most areas of California often requires lots of capital. Like I did, Investors can begin with as little as $5K in capital and invest out-of-state...as did a close contact of mine. He acquired over 30 SFRs in Detroit for as little as $5K a piece. He recently, sold all properties in Detroit and acquired multiple fourplexes and other small MF in East Oakland amounting to 21 units.

My strategy was/is a little different...I'll call it the "Lean Out-of-State Investing Method". Over 10 years, I developed a low-risk strategy, investing in high-quality, Class B SFRs in high growth markets. My return target is 12%+ COC and 20%+ IRR. For the return calculation, I use a 5% appreciation, which I feel is conservative for these markets...I'm buy and hold and don't often sell. That said, all investments that I have sold have surpassed the 20% IRR figure.

I began investing in SFR in Austin in 2004 and I began managing my own out-of-state properties in 2006 and continued to buy SFR in Dallas (2008-2011), San Antonio (2010), and Charlotte (2012-2013). In addition to investing on my own behalf, to a limited extent, I've helped other investors by properties out of state...for a % of cash flow and equity proceeds. They simply obtain financing and take title and I do the rest. Because I'm often able to locate properties for below market value and very efficiently manage them, after my fee, several of these investors are generating 8%+ COC.

Currently, I'm in the process of scaling my business. In addition, to continuing acquire SFR in select markets nationwide, my goal is to develop a portfolio of MF properties in the Bay Area.

REI is not easy, but if you are driven, willing to put in the work, and are focused on creating value and serving your customers (tenants), gaining financial independence by investing out of state is possible.

Thanks,

jon.