Buying outside your state?????

Question

Hello, I currently live in Arizona and my brother and I have been looking to invest in some properties outside of Arizona. We currently have a few here in Arizona we bought when market was low and they cash flow really well, but now it seems like there are not as many good deals to be found that will cash flow. We sale insurance to clients who have rentals all across the nation and they will invest in areas not in their state because markets like Ohio and Indiana have greater cash flow opportunities. We have never purchased outside our state but are wondering if any of you have? If you do how do you make sure you are not buying a dump? How did you find a good property management company to run your properties? Just nervous not being able to see it and know exactly what we are getting but we have clients who do it all the time. Thoughts???

Darrin Carey · Answer

@Joseph Whiting When I first started investing, I lived in California, and invested in Michigan, near my hometown. I learned quite few lessons from that experience. Of course, technology has improved a lot since then too. Now l live in Dayton, Ohio smack dab in the middle of cashflow central. Below are the three things I tell everyone who asks me about investing in Dayton from out of state and country (Mostly BP members) There is no substitute for being there. Not all the time, maybe not every time, but you need to visit the area you are considering before buying your first property. Google Streetview is an excellent way to get a feel for the neighborhood when you are not there, but does not eliminate the need for that visit.A reputable property manager. I had a couple bad ones, and they destroyed my properties and business the first time around. Ideally, they should be investors too. As @Jared Korman said, their goals should align with you. The right boots on the ground are the key to your success. Nowadays, online reviews can help you avoid the obvious bad eggs.Know your goals and objectives, and communicate them clearly to your team. @Kevin Yoo identified current cashflow is very important to him. That tells him exactly what type of properties to focus on. Your goals and targets could be very different. Everyone wants a high ROI, but you need to balance that with the drama level and risk you can tolerate.That should give you a great headstart when you're looking out of your local area.Here's to profitable Investing!

Kevin Yoo · Answer

@Jonna WeberJonna, a voice from the past. It is good to hear from you. When will you be ever ready to be our Partner in the Boise market? My COO loves that town. We would love to buy properties with you there.

Jonna Weber · Answer

I highly recommend that you get on the ground of the area you are thinking of investing in. There is no substitution for meeting potential property managers and other team members in person, as well as seeing the areas for yourself. @Kevin Yoo -great to see you on here! That is some very solid advice!

Michael Thompson · Answer

@Joseph Whiting - Biggerpockets is definitely the first step. This site is wonderful at building a team, communicating with them, and getting and idea if they fit your needs. Skype tends to work as well. I have used it multiple times doing home tours with my out of state investors so they know what they are buying. Also, it's great for interviewing potential team members. I think in the file place there is a list of questions to ask your potential property manager. Hope this helps!

Ali Boone · Answer

Hey Joseph! Great questions. I live in LA, so same issue with prices and returns here. I've always bought out-of-state and it's totally doable. It's all about the team you work with. There's really nothing you can't verify if you just know the process. If you have any specific questions, reach out anytime!

Gary Swank · Answer

Hi Joseph, First thing you may want to consider is getting together with a local Realtor who works with not only Residential but Commercial Investors. These professionals know the market, can check out the properties for you and advise on whether "it's a dump and you should pass" or possibly consider the investment. Since they live and breathe real estate they often have great insight into factors that can contribute to an investor's decision. I serve the Pittsburgh area, and work with local and remote Investors. I rely, in part, on technology to assist my remote clients. I have also lived here my whole life and enjoy hearing from those interested in investing in real estate.Thanks, Gary

Josh Caldwell · Answer

Cash flow is king. I live in Pittsburgh PA and we get a lot of out of town investors because we have really good cash flow. I have seen both the good and the bad of out or town investing. the bad is that sometimes the out of town guy gets suckered into buying a property in a neighborhood that is falling into the 9th level of Hell. It is ok to buy a war zone as long as you realize that it is a war zone and you do your due diligence on the numbers that the seller gives you. The good end is that out of town guys can get better returns in my market than they can in their home market. The key element here is due diligence. You either need to travel to your investing area or find someone who is local to help you out. Bigger Pockets is a great place to find a local contact. Now only can you see how active someone is, but you can also test the general and local real estate knowledge by following their posts. You can even check on their local reputation to an extent through BP (do other local investors connect with them?) I hope this helpsJosh

Tom Ott · Answer

Hello Joseph,Welcome to REI! It seems like you are off to a great start in Arizona. Investing outside of your state can be rewarding and a challenge. The key is to look for a market where cash flow can be great. It seems like you have already done your research into Ohio. I can confirm with you that the market is going strong and it is a great time to invest.Another option is either turnkeys or property management. Since you will unable to go to the property as often you want, you will want to make sure you are taken care of.Always make sure to do your research into whatever company you think about using. Make sure they are as they seem.Please send me a message if you have any questions.

Kevin Yoo · Answer

@Joseph WhitingWe own over 150 units all around the country, but we live in California. We are also very much into cash flow. We try very hard to live by the 2% for rent to purchase price. And it is not that difficult to buy at CoC a-ROI of 15 to 20%. Investing in out of state is very rewarding but is also very difficult and dangerous.BP is no doubt a great resource and virtually all of our success had something to do with BP. Our greatest failures, however, were also a direct result of working with BP members. It is like anything else where you have to take the good with the bad and just be careful.The common thread you should be recognizing in all the responses so far is that you have to have a good team on the ground. In our opinion, having an operator(s) that can find, rehab, rent, and manage the properties is a must. We go into a market only after we have established such a team and do not look at any properties until the team is in place. In other words, we do not invest in properties or markets. We invest in people.Lastly, we also realized that the members of the team must be treated equally and with incentives in place. So, we try very hard to make the operators all partners and equally accountable and responsible for the success and failures of our properties. Typically, we give half of the deal to the people on the ground which is a lot but it ensures that we can build a solid portfolio and we make up in volume what we give up in each property. All this takes years to develop and we are still perfecting it. Owning a property or two in a far away state is very difficult without a good team in place. Turkey operators seem to fill this void, but not all turnkey operators are the same. Some are just terrible. Good luck and be careful.

Kerry Baird · Answer

You can also look at turnkey properties, and cross check the providers with reviews. Google turnkey reviews. While we were posted overseas, we bought a couple of new-build properties from a partner we met here at BP. He also negotiated the rated paid to the property manager, and had a lender in place. These units have been cash-flowing since 2012. I still have not seen the inside of them. There are also people on BP who rehab properties and sell them once they've placed tenants, so while not new, they have a system for improving the major systems in those properties. It removes some of the risk, when you know that there is a new roof, new water heater, new electrical panel, or whatever.