Backyard investing or out of state?

Question

I have 70k cash ready on hand. I live in SoCal where homes are a 4cap at max. Househacking seems very desirable with an FHA loan or would out of state investing make more sense. I feel more comfortable investing in my own backyard.

Dan Nelson · Answer

It sounds like you have your answer.  If you want to househack, you have to do it where you are living.  There are other areas where you can make much more cashflow, but your house might appreciate faster than other markets.  If you can put 70K down and get a house you can afford with tenants, it makes a lot of sense.  The worst-case scenario is you hate being a landlord and you sell your house.  If you do it out of state, it is far more complicated.  But either is a great idea.  As long as you do the math and know the property fits your goals, the only mistake you can make is waiting.  My biggest regret is that I spent years trying to learn everything before starting.  You really don't learn anything until you start.

Andrew Postell · Answer

@Dillan Mamou I used to live in NYC....investing there was way out of my league at the time.  So I invested out of state.  Now, I mainly invested out of state because I had a network already formed in Florida.  I could have just gone 2-3 hours upstate (or in Jersey) and found similar priced areas as Florida.  But the important element here is WHERE ARE YOUR TRUSTED PEOPLE.  Because if you invest out of state or 3 hours away - you may NEVER see your property.  You need an immense amount of trust in the people who work for you in a scenario like that.  I hope that makes sense how I am describing it.

Robert Williams · Answer

Hey Dillan, I would start analyzing where you live. You know the good, not so good, bad, and horrible parts of town. Figure out what makes a property a deal, then expand from there. Monthly cashflow of $100? $200? $250?; Cash con Cash Return of 10%? 5%? 12%? Once you have criteria, it really does not matter where you invest, you just start analyzing deals and making offers. The only other factor to location is If a problem arises with an out of market property, will you be able to rectify it quickly?

If you need help analyzing properties, create a spreadsheet that will help you. I have attached the one I created and use. Property Analyzer

Patrick Drury · Answer

@Dillan MamouGet a house hack under your belt if you can afford your local market, then look at investing for cash flow elsewhere.

Backyard investing or out of state?

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