How to get started investing out-of-state
I am going to tell you how you can get started investing out of state in 2021.
I have been investing out-of-state for over four years. I own properties in five different states and six different markets.
If you’ve had the desire to build and scale your own rental portfolio, now is the best time to get started.
To maximize your chances of success, I’ve invited four investors that we’ve helped invest out of state to share their stories and experiences. You’ll have the opportunity to learn from them.
In the Q&A session, we asked them if they recommend buying out-of-state on your first investment. Is it better to find a fixer-upper or an already updated property for your first deal? How much capital is required to get going? How to get funding when starting out? And many other important questions about how to get started with out-of-state investing!
Are you ready to build and scale your own rental portfolio? The best way to get started is to and build your skillset of analyzing deals.
Watch the video below:
In the transcription below, you will learn more about Cecilia, Sean, Alex, and Pete and their journey.
Join us for our next event HERE.
Introduction
Jennifer
All right, so before we get into our panelists, for those that know me if we’ve never met, online or in-person, my name is Jennifer Beadles. I’ve been investing in real estate for 13 years, and I’ve been a licensed real estate agent specializing in investment property sales for 11 years. In addition to helping investors build their rental portfolio, my husband and I have built, we’ve done spec homes develop land, use the build to rent strategy acquired multiple value add multifamily. And ultimately, we’ve built up a six-figure a year passive income portfolio, allowing us to achieve financial freedom through real estate investing.
In 2016, I chose to pivot, and instead of just serving investors in Western Washington, we wanted to help more people and on a national level. So that’s when we founded the agents invest brokerage model. As agents invest in a licensed real estate brokerage, where we research different markets across the US, we put investment teams together. Then we connect our investor community with viable on and off-market deals from those agent partners. So we’ve helped hundreds of investors go from 3 to 30, 0 to 5, 26 to 80. And tonight, you’re going to hear from four of them.
Meet Cecilia
Jennifer
So first, let me introduce you to Cecilia. Cecilia has a really fun story she went from. I think Cecilia, you started with one house hack. And now you have properties in Atlanta and Spokane, and some of those agents that you’ve met through our agents invest teams, and then also you were on our went to our Spokane trip, our Nashville trip and or Oklahoma. So you’ve been on three group investing trips with us.
Cecilia
Yeah, sure. Hi, everyone. I’m Cecilia. I love real estate, cats, and travel, as you can see here. A little bit more about me, my husband and I bought our first investment property in 2015, a duplex in the Seattle area that we house hacked. But we didn’t start growing our portfolio until 2018, when we started going to local meetup groups to network and learn from other investors. We got connected to investor-friendly agents and out-of-state markets through this group, which helped us start growing.
The first out of state property we bought was pretty much turnkey, then the next property we bought after that was a full renovation. And since then, we’ve continued to focus on bird type deals with small multifamily properties. So now we’re at 15 units. Last year, we sold the first duplex we had ever bought the one that we had house hacked, so our portfolio is currently split. Between the Atlanta and Spokane markets, we have three duplexes in the Atlanta area, and in Spokane, we have a triplex and a six-unit. And kind of a crazy thing for us is that my husband actually quit his job last year, which wasn’t exactly planned.
We had been thinking that he would work for a couple more years, and I would work for a few more years while we built our cash flow up. But he had been working on a really terrible corporate job for about four years, and he just couldn’t do it anymore. So he put in his two weeks notice, and on his last day of work, he went straight from his office and drove to Spokane, and he was gone for the next two weeks, finishing the triplex project we had been working on there. So since last year, he’s been a full-time investor, spending a lot of time managing our rehabs and is pretty hands-on with those. So he spends a lot of time out in these markets that we’re investing in. I’m still at a regular W-2 job to help us continue to qualify for loans and continue saving. So we can invest in more real estate. And I’m also still pretty heavily involved in our investing business, especially with deal analysis, bookkeeping, and loan stuff.
So it’s been exciting for us to have real estate investing go from kind of a side thing to a full business for us. And we’re both just really excited about our future and continuing to grow. We’ve learned a ton along the way so far and have met so many amazing people that have been really helpful and supportive. We also love to travel, so it’s been really fun to go on the investor trips through this group. As Jennifer mentioned, we’ve been to Spokane, Oklahoma City, and Nashville. And it’s just been really incredible to be a part of this community. So yeah, I love learning and sharing. And I’m really grateful and happy to be here with everyone today. So thank you guys so much.
Jennifer
I love your story. And so excited to hear that Joe quit his job when you reached 15-units. That’s amazing.
Meet Sean
Jennifer
All right, so next up, we have Sean. Sean, you too joined our Addicted to ROI community started coming to the meetups. I think it was in 2018. And at that time, you had a few single-family houses in Florida. And then you purchase some properties in Spokane or purchase your property in Spokane. You were on the trip of the spur first Spokane trip. And then you were also with us in Nashville purchased in Tennessee, and then most recently, Texas. So you’re up to 28 units now, is that right?
Sean
Correct. I think I joined about two years ago. And I only had two single families.
Jennifer
Okay, amazing. So you went from two single-family homes to 28 units in two years. So welcome, Sean; thanks for being here. Tell us a little bit more about your story.
Sean
Sure. So I’m Sean Newton. And as you can see, my wife and daughter like to keep active. I really enjoy volunteering with the ski patrol and search and rescue. My wife and I have done extensive international travel. Our goal with passive income is to share those experiences with our daughter.
To date, we have flipped six homes, wrote seven loans. And now we’re now 28 units. So the rentals are two single-family in Florida, one duplex in Washington, one eight-plex in Tennessee, and four four-plexes in Texas.
I joined addicted to ROI about two years ago. I was personally feeling kind of bearish in the Seattle market for flipping, and I wanted to be surrounded by investors who are successful with buy and hold. So I purchased the duplex, which is my first multifamily, about four months after the ROI, Spokane field trip. And because of my flipping background, I like a heavy value add. So the duplex had an unfinished basement, which we added four bedrooms, two baths, and a shared laundry room, essentially doubling the square footage.
Next, I attended the ROI Tennessee field trip and went pending on the eight-plex about three weeks later. Then a week after that, I saw the 16 units in Texas. All of these were on the deal blast. And we got the Texas one under contract. We ended up closing on both of these properties in December of 2019, which I would not recommend because commercial financing can be challenging. And trying to close two properties at the same time added some extra stress. And the last quick tip I’ve got is we are only able to manage our properties because we’re strong believers in excellent property management.
Jennifer
Awesome! Well, thank you so much for being here, Sean. You’re going to hear more from these panelists as we get to the Q&A section.
Meet Alex
Jennifer
Next up, we have Alex. Alex joined our meetup in early 2019, and he immediately plugged in. Alex is definitely an action taker. He’s attended every one of our meetups, attended our Spokane Group Investor Trip, and our buy and hold workshop. So welcome, Alex. Thanks for being here and sharing your story. Tell us a little bit more about you.
Alex
Thanks, Jen. Yeah, so I like to travel a little bit. About 15 months ago, I kind of decided I need to do more than just my W-2 IT job. So I just started. I had a friend that had done some real estate back in 2012. He had some rental properties from back when prices were cheap. I was watching YouTube videos. And one of them said, go to a local meetup.
Three days later, there was the addicted ROI meetup. And I was like, hey, look at that. It’s really close to me. I might as well go. I went, and I probably asked, like 60 questions. And the number of questions increased every time I showed up. Then I went to the Spokane trip and the Tennessee trip.
I’ve never owned any rental property before, I had rented a room to a friend, that kind of thing. I ended up purchasing five properties in 10 months. They’re all BRRR deals in Oklahoma City. Thank you, Jen. And the four of them are all done.
They have tenants in them and are all stabilized, one just recently purchased in March. I have renters in there.
I’ve looked at turnkeys, and I haven’t found any that I like. And otherwise, I just want to eventually get to the point where the cash flow can replace a little bit more than replace my income. And I can transition out of W2 to work and then grow real estate, even more, travel a bit more, that kind of thing.
Jennifer
Amazing. Love your story, Alex. And yeah, you do ask a lot of questions. But we love you for that because they’re really great questions.
Meet Pete
Jennifer
Alright, so last, but certainly not least, Pete. So Pete also joined our meetup in early 2019, as a beginner, with no rental units. And Pete went on to purchase nine single-family properties. And so he owns in Oklahoma City and Kansas City. I think, Pete, you were mentioning your latest acquisition, the duplex with an extra building lot with some rodents.
Pete
Yeah, yeah. And we haven’t had any luck getting any rent out of the dead rats.
Jennifer
But, you know, what makes it really special to us is, Pete has spent countless hours navigating the complicated world of portfolio lending on these low balance, single-family home loans out of state. So for those that don’t know, that is really hard to do. It’s hard enough to get loans out of state, let alone on these low balance loans, you know, these kinds of inexpensive houses in the Midwest. And then going the portfolio route as opposed to conventional. And Pete has done really well in finding some banks that could loan to him and kind of navigating that whole world so that he can build and scale his portfolio quickly. So welcome, Pete; tell us a little bit more about yourself and your journey without estate investing.
Pete
Yeah, thanks, Jennifer. Appreciate it and the opportunity to talk. I wouldn’t be where I am if it wasn’t for the team at Addicted to ROI. So it’s, it’s a privilege to be able to talk to everybody. And the first thing I tell everybody is don’t put me on the pedestal is I’ve got everything figured out. Right? All of us up here are figuring things out every day as new challenges come up. And that’s something I tell a lot of new investors too is you can’t hope to know everything before you get started.
You’re gonna have to trust that you can figure things out as you go. So with that said, thanks for the intro. Jennifer. As you mentioned, I have a single-family in Oklahoma City. I started buying in Oklahoma City in February of the last year, 2019. And from February to mid-April, we bought eight single-family homes down there over the course of about seven weeks, all as BRRRs. So as you can imagine, buying that many properties very quickly was interesting is one way to say it. We intended to buy even more, but again, we had to roll with the punches and figure things out as we go. And we’ve been doing pretty well.
Towards the end of the year, we started buying in Kansas City. And out there, we currently have two single families, the second of which is going to be coming online as an Airbnb towards the end of the month. And we just closed this past Friday on a cash flowing duplex, we paid $145k, and it already appraised for $180k. And we get a shell of a building that is currently occupied by dead rats right now along with it. So we’re gonna do some creative things. We did seller financing on that property. And I’m now under contract for another single-family down there too. So if anybody’s wondering if I’m hesitant in the market currently, the answer is no.
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Q&A Session
Do you recommend buying out of state on your first investment?
Sean
I started out of state because of the lower cost. It was actually with turnkey and turnkey worked out great for the first two units because it proved the concept was very passive. And so what I started to look at is the return on my time was excellent. So we talked about, you know, return on your dollar, but the amount of time I had invested with the turnkey out of state was very low compared to the dollars coming in.
Is it better to find a fixer-upper or something that’s already updated when it’s your first deal?
Pete
I think it really depends on your goal and your strategies, and your available resources. So if you aren’t experienced in real estate, and you’re just kind of looking for a quick and easy return, then maybe turnkey is a better solution for you plus it to Alex’s point, it’s an easier way to get your feet wet without some of the risks. But you should also expect that the returns won’t be as great as we think.
How to get started with investing?
Cecilia
I think definitely networking and going to local meetups have been a big thing. And it definitely helped us get started, tried to do out of state investing before we started networking, and just kind of for a variety of reasons, weren’t able to get anywhere. And one of the reasons was just on our own, we weren’t, we didn’t really know what to look for in an investor-friendly agent—and getting connected through this group. And referrals from other investors really helped us to make connections with agents that we’re familiar with working with investors. So I think that’s helpful from there. We’ve also found deals by networking with wholesalers at local meetups. And just really, networking has been the most helpful thing for us to find these people.
How much capital is required to get started?
Cecilia
So all of our properties have been multifamily. So two to six units, the two to four units will be conventional financing, or that’s at least the route that we’ve taken. So that’s going to be 25% down. We’ve come up with that in a few different ways.
Initially, it was just pure savings, just money that we had saved up from our jobs. And then we kind of moved on to using other sources. We got the great idea to use HELOCs through this group, which we had never thought about before. So we got HELOCs on our primary residence, and then one on an investment property that we have. And that helped us to leverage HELOC funds to purchase a property completely in cash. We then did the rehab and then refinanced into a regular conventional loan we’ve also used, HELOC, as the down payments on conventional loans. Those are kind of a couple of ideas or ways that we’ve used to get the initial funds but yeah, generally 25% down.
Alex
I use a HELOC off my main house for funding.
Sean
I also started with a home equity line of credit. And then I ended up through the educational company, I did some small business funding, I don’t know what we’re going to call it. It’s like lines of credit.
Pete
And I’ll chime in real quick. We spent time redoing our personal finances, and we ended up using a secured bank line of credit. And we also currently use an insurance-backed line of credit.
How many properties are you guys actually buying sight unseen?
Alex
So far, 100%. I mean, I saw a picture. Don’t get me wrong. I was given a picture and used Google Maps. You talk to your property manager. But yeah, I mean, sight unseen, there. It’s an investment. You know, it’s not a piece of jewelry, right? It’s there for investing in this. It’s about fundamental math. It’s not necessarily if the second room is pink.
Pete
Yeah, I’ll jump into that real quick. I mean, to Alex’s point, these are investment properties, right? I don’t necessarily need to look at it myself to decide if I live here or not. It doesn’t matter if it’s a rental. I don’t care in that regard. It’s more important, do the right people between getting a rehab done and the property manager? Have they looked at it? And are they on board with that property?
Cecilia
We bought our first two properties without seeing them before closing. And I actually would not recommend that. Now we do see every property in person before we follow through and close. We also ensure that either myself or my husband attends the inspection. We’ve just found that that’s really valuable information, to be able to kind of walk through the property with the inspector. And we’ve seen that kind of also helps. I know, we’ve all kind of seen these inspections, and they can be really scary. And sometimes you’re walking, and if you walk through with the inspector in person, they, of course, they have to make sure that for legal reasons, they’re noting everything. But they might point something out and say, look, I’ve got to call this out, but it’s really not that big a deal. Or the same goes the other way. They might write something in the inspection, and you think it’s not a big deal. And when you’re, you know, in person with them, you can ask them questions and just get more and more information that I think is really helpful. So I would recommend that, and that’s what we do.
Sean
Yeah, for me, it’s a little mixed. The only rehab in Washington I was able to drive to, so I went and saw it, but all the properties out of state. Most of them I didn’t see until after I purchased or closed. And then I’ve got a couple of buildings that I still haven’t seen. But you know, same as Alex said, I’m asking for photos and walkthrough videos. So I’m making sure that I’ve got full exterior walkthrough videos.
Have you been needed on-site during the renovation period?
Pete
No, no, I have not been needed on-site for any point of it. I have seen some of mine in person, but I was not necessarily there for the decision to buy them or for the closing or for the rehab. There is definitely a certain level of trust with the team that you have local in that area. And without that right team, and without that level of trust, we wouldn’t be where we are. So yeah, it’s it. It all comes back to the team.
What do you think it is that has given you the ability not only to jump in but scale really quickly?
Alex
Well, I would definitely say an abundance mindset. Agents Invest has been key and critical to that. Also, Pete, Sean, and I talk often. And there are calls like, Hey, I’m looking for another property manager in this area. We’re sort of on the same side, not competing against each other. Even even if he’s buying properties in Oklahoma, and I buy properties in Oklahoma, you should still keep that abundance mindset. I mean, we can’t buy them all. So just sharing that information freely has been great. That helps you to be able to grow quickly and to be able to find the right people.
Sean
I think the one thing I would add is just the idea of having someone referred to you. Starting from Agents Invest, you’re connected with an agent, that agent has something that they’re selling, but then that agent has contractors they work with, they might have a home inspector they work with. And then when you contact that home inspector, you find out, you know how deep the relationship is. The idea of a referred person definitely helps find, you know, somebody who’s qualified and will give you a good result.
Alex
Yeah, and I would say, I think your question was, you know, how did we scale so quickly? I’m only at five in ten months. And maybe that’s a lot, maybe that’s not a lot? I don’t know, but it’s totally doable.
Cecilia
I would definitely agree with the mindset piece for sure. I think that’s absolutely critical. I would also add, or one thing that was really impactful for us, is we went on the Oklahoma City trip and there was a speaker there that talked a lot about I’m starting with the end in mind. And we kind of went through that exercise, which really made a big difference for us. You know, we just kind of thought about what we want our life to be and work backwards from there. And that’s just been super helpful too, for us to just understand what our next step needs to be. And to keep us motivated. I think growing quickly, for us, at least, has definitely been a lot of sacrificing. And it definitely helps if you can, when you’re, you know, in the middle of a challenge to think, you know, oh, well, this is why I’m doing it. And this is where we’ll be, you know if we just keep moving forward. So definitely recommend that as well.
Can we touch upon the cost of inaction?
Sean
If I step back and look to see what I would have done differently, I wish that I would have started buying to hold earlier. Starting in 2014, Seattle flipping houses was great. But what I missed out on was that a flip would sell, and then whoever bought it, they could resell that, that flip for $100,000 more in just a year, or sometimes even ten months. And so I was missing out on that fast appreciation, growth. And sometimes making, you know, much less than even the contractor was making. And so the idea of just starting buy and hold really, as soon as you can, whatever means you can, the, for me, you know, the idea of, of over-analyzing and not taking any action caused me to be where I am today.
What is one of the biggest challenges to investing out of state?
Alex
I would just say fear of the unknown. You know, it’s not physically there in front of you to look at. And so you have to rely on other people to tell you where things are. You should follow the trust but verify rule. Sure you have a contact and have your third party/property manager go out and take pictures every week for you. So, the biggest challenge for me just was that I wasn’t there to see it. I wasn’t sure where we’re gonna be. I didn’t know how close they were gonna come to their timelines or the budget. I tried to communicate as much as I could, but, you know, not all contractors want to communicate a lot, right? They just want to go in and get the walls painted and walk away. So yeah, I would just say just fear.
Pete
Yeah, to add to that. I think there’s a lot of good resources and books. David Greene from BiggerPockets has a book on long-distance real estate investing, which is kind of a good primer to help get you started. With that said, you know, there’s definitely no harm and going to visit the city and meet a lot of these people in every city that we invest in. While we have bought without having been there. And without having met the team in person before, I definitely do get down to those areas and shake hands and kiss babies, as they say, you know, to take that relationship to the next level, right? There’s a certain amount of trust. And I think, if you’re always just a voice on the other end of the phone, it’s harder, or I should say it’s easier in that case for people to try to cheat or lie to you versus if it’s somebody that they know and have met and know that they’re going to have to meet with again in a few months.
Is there one last thing you want the audience to know?
Alex
So there’s a thing that a lot of people say it’s a ready fire aim. And I just would laugh when people would say that. But the reality is, I know quite a few people that are just in analysis paralysis, and they’re probably never going to purchase. They’re just going to be thinking about it, dreaming about it. But the point is, they’re just not going to take that action. And so I would just say, I don’t think anybody’s going to be 100% ready to take action. No deal is going to be perfect. Because the perfect deal will be snapped up with somebody with a lot more experience and who knows how to make that decision in three minutes. So just what I would just say is, you know, what is what Jen says, Time heals all real estate wounds.
Cecilia
Yeah, I would definitely agree with Alex. And I would add to just don’t be don’t beat yourself up. If you make a mistake, you’re gonna make mistakes. And I think mistakes are really helpful in this business. That’s just how you learn and you just, you know, continue to move forward.
Pete
From my picture, you can tell what my priorities are, I’ve got a two-year-old son at home. And it kind of came down to the point where I decided what scares me more: buying an out of state property, or having to work for the next 20 years and missing a significant portion of growing up with my son. So it comes back to the point of what is your motivation to do this and to get through all the challenges? Thanks.
Jennifer
Amazing. You guys are so amazing. Is this really valuable for you? Let us know in the comments. If this was helpful, if you guys enjoyed hearing from these four incredible, amazing panelists tonight, there were so many golden nuggets there. And it’s been such a pleasure for us to get to know each of you and traveling with you guys. And watching your journey.
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