BRRR in MA or Turn-key Out of State?

Question

Hey everyone. What would you recommend as the best strategy for someone who does not own any properties and lives in Massachusetts?

I started a business right in the beginning of 2020. Timing couldn't have been better as the business did well and has really taken of since. I save everything I make and only spend when necessary. My fiance is the same way with her W2 job; save the majority and spend on necessities. We're combining our savings to buy our first investment property. Massachusetts is pretty expensive compared to other states. Granted I'm looking at on market properties so I know there can be better deals to be found. But it seems like it can be tough to buy here in MA when you can buy nearly a turn-key property in another state for far less and still get a little bit of cash flow each month.

So my question is, should we focus more on more turn key properties out of state or should we look into some BRRR properties here in MA?

And if the recommendation is to look for rehabs in state, what is the best way to find deals? I don't need a step by step, but a resource/resources that I can use to educate myself on how to find in state deals would be great. My business is pretty hands on so I don't have all the time in the world to be driving to properties to manage a rehab but I could definitely find some time to do that. Combined, we have about $30k to work with in cash which leaves us with about $20k to keep in reserves.

Let me know what other info you need from me and I thank you all in advance for the responses.

Matt

Jason Regan · Answer

Hey Matt,

Investing in state or out of state has its ups and downs on both sides. With your down payment it would be hard to find many multis in Central or Eastern Ma that would work with that. You may have to look in the springfield market or out that way. I dont study or know that market, but I know there are investors out there. If you want value add I would BRRR in state first. Understanding a rehab and BRRRR when you are not near it can be stressful and harder to control. BRRR, of course, will add value faster to your RE portfolio. That being said this can be riskier if you dont know how to evalaute a property repair cost, holding cost, etc. Buying a turn key is safer and you know what you are getting, no surprises, but you wont create value as fast or be able to turn your money as a BRRR. You will probaby get about a 10% COC return with this strategy. This means you wont get all the money back you put into it for 10 years. I have done BRRRR here and am working on an out of state BRRR now. I think this would be the best way to scale with limited funds. Id love to talk and help anyway I can shoot me a private message.

Mike D'Arrigo · Answer

@Matt D'Arco a couple of thoughts come to mind. If you just started your business in 2020, you most likely won't be able to get conventional financing. Lenders will want to see 2 years of tax returns. Next, unless I missed something, $30K doesn't leave you with and capital for renovation.

Josue Velney · Answer

Hi @Matt D'Arco, why not have your cake and eat it too? If I was in your position I would focus on purchase closer to where you live and putting as little down as possible. After you can focus on purchasing out of state for bigger cash flow. My first purchase was in Somerville back in 2010 where I used an FHA loan 3.5 percent down. The purchase price was 450k and now the property is worth 1.1M. After that purchase I did not have enough money to buy near Boston so I purchased in Springfield. Win Win!! Good luck my friend!!

Matt D'Arco · Answer

Hi Jason! Thank you for the response. Sorry it took me so long to get back to this post, my business has been pretty busy this year and that’s where most of my attention has been.

I’ve been looking into turn key out of state properties and they do seem appealing especially for our budget. I feel we could buy at least one property per year with the turn key out of state method. I do enjoy my business and it’s been doing well so there isn’t a need to gain quick financial freedom. That being said, the past year has really made everyone reevaluate their financial positions and careers/businesses. We would like to not have to rely on the two incomes we have as our only sources of income.

I’d definitely like to connect and I’ll send a private message. Leominster is actually one of the areas I’ve been looking into for a long time. But even still, it’s tough to throw all your savings into one property especially when I don’t have experience with rehab costs. But if you feel that BRRRR is the best way to scale with limited funds then I will absolutely hear you out on that. I’ll reach out!

BRRR in MA or Turn-key Out of State?

BRRR in MA or Turn-key Out of State?

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