All Forum Posts by: Matthew W Harrell

@Matthew W Harrell

Over the last several years, investing in out of state rental property has become easier and more profitable. Here are some of the top advantages to being a long-distance real estate investor:

Advantages of owning out of state rental property.

1. Rental property is more affordable

Successful real estate investors know that money is made when the property is purchased, not when it’s sold.

If you try to invest in a market where housing prices have been increasing by big percentages year over year, the odds are that at some point the market is going to trend downward. That’s not being pessimistic, it’s simply that way normal real estate market cycles work.

Investing in a smaller secondary market where rental properties are cheaper gives you more of an equity cushion in case prices go down. Affordable houses also offer the opportunity for better returns from the minute you take possession of your property.

2. Potential returns are greater
There are two major financial benefits out of state rental property can provide:

Cash flow is higher when you can afford to make a bigger down payment. Let's say you have $25,000 to invest. Your LTV will be more conservative and your revenue stream stronger with lower debt service when you buy in a market where house prices are $100,000 versus $200,000 or more in a high-cost area.
ROI is greater when you invest in out of state markets that make sense. Buying rental property in undervalued markets where population and job growth is strong can create significant appreciation in market value over the longer term. Your return on investment is magnified with a one-two punch of healthy cash flow plus increased equity from appreciation.
3. Easier to find a market to match your investment strategy
Location has a major impact on your investment strategy for rental property.

For example, family-friendly suburban submarkets and some urban neighborhoods are perfect for single-family houses. On the other hand, densely populated mixed-use districts where people live, work and play are more attractive to millennials and singles willing to pay a higher rent for a smaller place.

Before researching out of state markets to buy rental property in, it’s important to know what your preferred investment strategy is to understand what you’re looking for.

4. Minimize risk with diversification
Diversifying an investment portfolio is a key strategy used to reduce risk.

That’s why many investors focused on the high-tech sector buy shares in the NASDAQ-100 – an ETF with a heavy focus on tech and biotech innovators – instead of buying stock in individual companies.

Minimizing real estate investment risk with diversification works the same way.

Instead of trying to choose the single best rental property in only one market, successful investors seek to minimize risk and maximize reward by holding one or two properties in the right out of state real estate markets.

Drawbacks to out of state rental property

1. Skipping due diligence and buying property sight unseen

To avoid one of the biggest mistakes that out of state rental property investors make, conduct in-depth research online and work with a local investor-savvy real estate agent and property management company to assist with your due diligence and property inspection.

2. Struggling to find quality tenants to rent your property
Long-distance real estate investors are buying rental property for the income it produces. That’s why they focus on turnkey rental houses and small multi-family investments. When the property is already occupied, cash flow from turnkey rental property begins the day escrow closes.

3. Unfamiliar with landlord-tenant rules, local laws, and customs
Some markets have laws that are heavily in favor of the tenant.

While the demand for rental property may be strong in these places, rules and regulations that side with renters can end up limiting ROI and cash flow. Thoroughly research local laws and market customs by talking to property managers and joining local investor groups to learn what the real estate market is really like.

Good luck!

Portland has nothing to do with 'facts'. why would you look at Portland?

When I first started investing in real estate, I was often asked if I was a growth or cash flow investor. I constantly heard people referencing the infamous “cash flow is king” saying, but I never really gave much thought to it. At the time, I was a high-income earner at the top of my game in my sales career, and the main metrics I tracked for my household were annual income and net worth. Today I know that it’s much more important to understand if you are a growth or cash flow investor, and I’ll walk through a few reasons why below.

Growth Investors

Growth investors generally want to see their net worth increase without much concern about the cash flow that is generated from their investments. The challenge with this strategy is that you do not get any benefit from the investments during the buildup phase. In addition, if you should run into any situations that cut off your W-2 income (think layoffs, medical issues, getting fired), then you don’t have any cash flow or readily available assets to fall back on.

Let’s consider an example where an investor puts $25,000 into a passive investment that generates 20% average rate of returns over a 5-year period. In this example, your $25,000 would grow to $50,000 in five years, $100,000 in ten years, and $200,000 in 15 years. That becomes exciting when you start to consider adding $25,000 per year into your investments going forward. It’s easy to see how the growth investor can get excited about this strategy.

Cash Flow Investors

Cash flow investors focus on one thing and one thing only – will this investment create monthly cash flow to help offset my living expenses. In this strategy, the investor focuses more on the cash-on-cash returns (COC) associated with a deal versus the internal rate of returns (IRR) of the deal.

Let’s consider the same $25,000 investment/year example above for the cash flow investor. If the investor can expect to get 10% cash on cash returns every year, the $25,000 investment creates about $208/month in income ($25,000*10%/12). While this is not something you’ll want to leverage to run out and quit your job in a year or two, it is a great way to gradually decrease your dependance of your W-2 and create a secure future for you and your family.

I know today that I was a growth investor when I had my W-2 because I was trying to grow my nest egg so I could someday become a cash flow investor and live off the income that the nest egg could generate. This strategy worked well while my W-2 income continued to grow, but it came to a screeching halt when I was laid off from that “safe,” corporate America job a couple of months ago. The old sales mantra of “Go to bed a hero and wake up a zero” had a whole new meaning to me that morning I received the call giving me the news.

My strategy today is a blended strategy that focuses on growth and cash flow to help maximize my monthly cash flow while growing my nest egg for the future. Only you can determine what strategy is best for you, but my biggest suggestion for you is to do something. Pick a strategy, jump in, and adjust as necessary.

The main issue is Multnomah county and specifically the city of Portland.. if you invest outside those areas landlord laws are not what everyone makes them out to be.

better deals are had as U move south from PDX  and SW Washington can work but careful of low end type situations.

No income tax in Wa as well.

and for the Texas idea keep in mind property tax's are sky high along with on going weather and soil issues so you want to be very careful there its not all about eviction laws.