Would you do it? Out of State Rental

Question

I currently rent in Boston and I'm looking to get started in REI. I would love to house hack locally but it's such a hot market right now and everything is way overpriced. I've wasted a year and a half now waiting for the market to change and I'm sick of waiting. I'm looking to put what I have for a down payment towards an out of state turnkey rental.

Rental Property Analysis

Looking for advice and suggestions for the following rental analysis. I'm also not familiar with the area so if anyone can comment on the neighborhood that would be great.

Thank you all in advanced!

Greg D. · Answer

My experience with my out of state rental was generally stress free and positive. Since the numbers look pretty solid in the pro forma you shared, the biggest factor is finding a property management company or individual who has a good track record and you feel comfortable with them. Do a search online for PMs around the area of the house and speak with at least 3 of them. You'll want to find out what the going management % fee is and try to find a reputable (positively reviewed) PM that is on the lower % end.Good luck!

Matt R. · Answer

Hopefully someone local can check more but from what I can tell the area is low low end. The price seems to be about double what a local investor might pay. If we add all that up as is, not a deal. Understand the home sold for 12k a couple months ago and the ones asking 50k today seem much bigger and might have better numbers. Good luck!

Grant Diggles · Answer

@Nathaniel N. , I agree with Larry. Typically, these property price ranges suggest lower income areas associated with C- and D class areas. But who knows, maybe its a good find?This is what we recommend our investors consider when looking at these types of deals:1. Who is the builder and how many properties do they develop each year?2. Since they're the PM, how many do they manage and what are you getting for 8% or $60/month? (this is a little lower than the standard 10%)3. What have they ACTUALLY done to the house and what can they provide as proof?4. Does the home come with any warranties on the work or rental income for a period of time?5. Are you willing to fly out and view the property? You should.6. Has an appraisal and inspection been done on the property?The list goes on, but you get the idea. Let me know if I can help any way.Cheers,

Nathaniel N. · Answer

@Tom Ott I'm currently looking into Kansas City MO and Dayton, OH and Orlando, FL. So far Kansas City seems to have some of the best numbers.@Greg Dresher Thanks for the input! The turnkey provider offers PM for the mentioned property at 8%. This company comes highly regarded on BP.

Account Closed · Answer

@Larry Fried Have you personally owned in this price range? I see on several posts that you have discredited certain areas and/or price range of properties. Have you considered doing a thorough tenant screening despite where someone lives or who they are? I recommend a full background check, credit check, rental and employment verification (at least 3x the rent income) as well as walk the current property that they live at. @Nathaniel N. This happens to be a property my company is offering. It did go under contract already due to our high demand.

Anthony Gayden · Answer

Yes, I would do it. I own two out of state properties right now. Keep in mind that you will need to be on top of your property manager. This is not a totally passive investment. Your job is to manage the property manager. A lot of this can be done by simply calling and sending emails.

Dan K. · Answer

Hi Nathan,Out of area investing is a completely different tactic than house hacking as you know. This is my opinion, and I know there are great turn-key providers, but out of area investing is similar to investing in the stock market -- you don't control the management and your financial results are completely reliant on the management.House hacking is very viable in the Boston area if you have the income to support the strategy. If needed your can have roommates in your unit that can help offset your mortgage (along with the other units).

Peter Hollyfield · Answer

Nice - are you prepared to drive out frequently? I've done so before, but usually at a location that I like. So whenever I can, I take the family out, do a quick drive by and grab a bite. Road trip + investment.

Larry Fried · Answer

@Nathaniel N. I am an OOS investor and avoid investing directly in this lower price range. You have to be prepared that these properties are going to be in areas and with tenants that are very difficult to manage well. The properties themselves are also going to require a lot of ongoing maintenance. In addition to your down payment and closing costs, are you setting aside reserves for the eventual vacancy, maintainence/repairs, and capex costs? What work has really been done on this house? Is it going to need some major repairs much sooner than you think?

Greg D. · Answer

@Nathaniel N That sounds like a pretty turnkey deal. Good luck and let us know what you end up doing!