Newbie from Sacramento, Interested in OOS

[Haley Dahlgard]

Hello BP! I am a new investor who recently moved to Sacramento from the Bay Area. I would like to househack in Sacramento, but want to start focusing on investing out of state.

I work as on occupational therapist, and my first goal is to be able to cashflow enough that I can be financially free in 3-5 years, and then grow from there. I currently have 80k to invest, and can save about 15-20k more per year. I am interested in no/low money down and creative investing strategies, as I don't think I can reach my goal if I have to put 20% down on each property. I'm thinking BRRR is the way to go. Perhaps do a lighter BRRR first to gain experience, then do heavier rehabs. I'm also interested in seller financing and investing with partners (who can provide more capital) once I start to build my investing resume. I would really appreciate any suggestions on how to work with the amount of capital I have to reach my cashflow goal!

I have been spending way too much time trying to choose an OOS market. I am thinking that I should avoid the super popular markets because there is probably a lot more competition, but I’m not sure if this is the right way to think. I am currently looking into San Antonio and have also considered Columbus, Cleveland, and Atlanta, as I have friends and family there.

I love real estate and am eager to get over my analysis paralysis, start making connections, and building my team!

Haley 

[DJ Dawson]

@Haley Dahlgard I am not sure of any SPECIFIC to OOS investing but I know they will have at least one meeting about it every few months. I personally attend the real estate round table hosted by Eric Bleau up at the Ramada inn off Folsom blvd. as well as the west sac BP meetup (where i live) hosted by my good buddy @Sergey Tkachev!

[Sergey Tkachev]

@DJ Dawson thanks for the mention! We have our monthly meetup in West Sacramento on the 1st Monday of the month, although the last two were via Zoom meeting. We will have a meetup focused on OOS in the future :)

@Haley Dahlgard welcome to BP and welcome to Sacramento! A lot of the advice so far is very good - I've found that the decision of what OOS market to invest in really comes down to your own research on the market fundamentals but there is also a "gut feeling" element to it. We have some investments in the Tampa Bay area in a neighborhood where home prices have not yet caught up to the rest of the market and at the same time has good potential for rent and population growth. It is also a place that we've been coming to for 20 years for vacation and now have family there so it gives us even more reasons to travel, which we love doing anyway.

I agree that you don't need to have all the cash to BRRRR as long as you can use private money for the purchase - the whole point of the BRRRR is not necessarily to use your own cash but to buy a property that needs work and won't qualify for conventional financing, thus allowing you to purchase at a much lower price, then fix it up bringing the value up and then refinancing to pull what you invest back out so you have close to infinite Cash on Cash returns.

In order to buy that type of deal you either need to have all of the cash yourself or you can have a private lender, who does not have the same property condition requirements that a bank would, lend you the money (this kind of money acts more like cash than a regular mortgage because the lender generally will not care about the condition of the property, which means you don't need to have loan contingencies in your purchase offer, which reduces the risk to the seller, who knows that a regular bank will likely scrutinize the property condition and may decide not to approve the property midway into the deal, forcing the buyer to back out and the deal to fall through, etc).

There are other details to the mechanics of how to put the deal together using private money funds but the point is that it's very doable and you don't need to use only your funds to BRRRR. The main goal of the BRRRR strategy is to buy a deal that a regular buyer can't buy with a conventional bank loan, repair it, rent it, increase value and pull the money back out with a refinance (so in the process you're either paying yourself back what you invested and/or your private lender the money they lent).

[Mike D'Arrigo]

Originally posted by @Haley Dahlgard:

@Aaron Bihl - Thanks for the honest advice! 

@Mike D'Arrigo - Do you mind elaborating on how Atlanta, San Antonio, Cleveland, and Columbus are very different markets? My understanding is that some markets are known for great cash flow/low price points (more of the midwest markets such as Cleveland and Columbus?) and others you are able to cashflow but maybe not as well, but are better for long term growth due to high job and population growth (such as San Antonio and Atlanta?). Is there something else major that I'm missing when trying to compare the markets? 

@DJ Dawson - Great meeting other investors in Sac. Do you attend meet ups here? If so, are there a lot of out of state investors at Sac meetups?

Haley, I would say that Cleveland is the outlier here. Cleveland has potential for good Coc ROI but it has weak economic and demographic fundamentals. Atlanta, San Antonio and Columbus on the other had have good economies, population growth and job growth but don't cash flow as well. Atlanta has gotten pretty expensive and TX has high property taxes and insurance rates which depresses returns. You should narrow down your criteria and define what is most important. That will guide you to the best market for your objectives.

@Anthony Morrow - OOS = out of state :) 

[Haley Dahlgard]

@DJ Dawson and @Sergey Tkachev - Thank you for the meetup info. I will definitely attend the next in person meetup! And thank you for your insights on BRRRR. I really hope to go this route in the future.

[Erin Dorsey Robinson]

@Haley Dahlgard I'm definitely biased but not alone in thinking that Cleveland is a great place to start. My husband and I own property here and help others who have similar goals. I think your strategy sounds very reasonable.  Let me know if you decide to explore Cleveland further and whether there's anything I can do to help.