All Forum Posts by: Shivam Patel

@Shivam Patel 

You are actually in a decent market (lucky haha) to get started, we have several assets in Houston where you can find favorable rent-to-value ratios. However, I'd advise steering clear of Harris County, particularly in Houston, due to the excessively high taxes. I've witnessed taxes double or even triple in some cases. When evaluating new properties, when you underwrite expand certain line item like tax and doubling insurance coverage.

That being said, I'm not sure where you stand in terms of net worth. Personally, I began with small rental properties as a non-accredited investor while working as an engineer. However, as you progress, you may find that these smaller properties become less suitable due to mostly liability for such small dollar profit.

@Shivam Patel  This is one of the most commonly discussed topics on the forums, so here’s my response taken from a previous thread:

Usually, "new investor" and "out of state" don't mix.

I'd suggest reading up on the topic on the forums, where you'll find many examples of inexperienced investors crashing and burning hard trying to do out of state (OOS) REI...the story is usually the same--they had no experience with REI, they couldn't find any cashflowing properties locally, but they saw that properties in other states (often the Midwest) cashflowed well on paper. So, they bought an OOS property (usually a freshly rehabbed A-grade house in a C or D area) because the house looked awesome in pictures, and the cashflow looked good on paper. Fast forward a few months, and they have non-paying tenants who are wrecking the place, and a MIA property manager who (understandably) won't put in the ENORMOUS amount of effort required to manage a property in a C or D area for a small-time client from another state. Think of it from the PM's perspective: if you were them, would you deal with the headaches of a C or D area (non-paying tenants, trashed properties, crime, etc.) for a 10% cut of a single property that rents for $1100-1800/month? ...I wouldn't.

To make matters worse, the property isn't appreciating (because it's in a low appreciation market, or even a depreciating market), and the tenant pool is primarily made up of people with bad credit, low/no income, and a history of property damage at the previous places they've rented. So, now the investor is stuck with a non-appreciating (or even depreciating) property, that only attracts bad tenants, that no PM in their right mind wants to manage. Not a good situation.

Let's put all that aside for a moment, though, and assume you can avoid all those pitfalls. You find an OOS property that appreciates, attracts good tenants, and is easy to manage. Even then, OOS REI will come with some significant challenges...

Specifically, one of the MANY reasons OOS REI is so difficult (esp. for beginners) is that it requires you to assemble, manage, and incentivize a team of people you'll be completely reliant on from hundreds of miles away (sometimes without even meeting those people face to face). That's a huge challenge, even for experienced real estate investors who understand everything their team needs to do, and who have the money to incentivize their team's performance. But, if you're not experienced with the things your team is doing (e.g.; finding, analyzing, acquiring, and managing a property), then it becomes exponentially more difficult.

Think of it this way: forming and managing a team of real estate professionals (agent, inspector, property manager, contractor, etc., etc.) without any real estate experience is a bit like trying to form and manage a law firm without any legal experience, or trying to establish and manage an auto repair shop without any automotive experience--those would be monumental challenges even locally, but doing it from hundreds of miles away is near impossible. Can it be done? Yes. Are there ways of getting started in REI that are a thousand times easier? Definitely.

Trying to go OOS for your first REI deal is a bit like trying to surf a monster 100 foot wave before you've learned to swim, or trying to ski a double black diamond for your very first run.

Fortunately, there are simpler strategies that are much better suited for a first time RE investor (house hacking, specifically). I've written a lot on the forums about all the reasons house hacking is the best strategy for beginner investors--feel free to take a look at those posts.

I'd suggest starting with a more beginner-friendly strategy, get your experience from that, and THEN (if you want), try the more difficult strategies like OOS REI.

If you're dead-set on OOS REI, then I'd suggest studying up on the books, articles, forum posts, videos, etc. on the subject, and talking with as many OOS investors as possible (ESPECIALLY inexperienced investors who tried OOS REI for one of their first deals). There are plenty of those folks in the forums. In particular, I'd suggest asking those folks about what types of challenges they encountered, lessons they learned, and mistakes they made with OOS REI ...It's a lot easier, safer, quicker, and cheaper to learn from other peoples' mistakes than to make your own...

Good luck out there!

@Shivam Patel While there’s no right answer for every investor I do think starting locally for your first property is usually the best option if at all possible.

To get the best down payment options you have to live in the property you’re buying but even if you decide to buy something an hour or two away from where you’re living now and visit it once or twice a month and either remotely manage it or just place it with a property manager you’d still be close enough to get a real feel for what’s going on and how to do things before heading OOS with the next property.

There’s nothing wrong with renting your living space and owning property if necessary or living at home or whatever your situation is.

I house hacked for 25 years in my B&Bs before moving into my current duplex house hack. It’s a great way to get your expenses paid for and sometimes even be able to write off other living expenses.

Remember it’s more important that you take action then what action you take. So don’t get caught up in analysis paralysis and just decide which move you want to take.

It’s also about the number of deals you analyze. Sign up for BPPro to get access to the Rental Calculator where you can analyze as many rental deals as you possibly can and plan to analyze 100 deals a week until you’ve found the perfect one to buy. Make lots of offers once you’ve found some good ones. Only a few offers will be accepted.

YOU CAN DO THIS!

@Shivam Patel

That you're excited to go into real estate investment for the first time is great. There are advantages and disadvantages to both strategies when deciding whether to invest in-state or out-of-state.

In-State Investing:
Knowledge: You probably know more about the rules, legislation, and local market in your own state of Houston, Texas.
Network: It's possible that you already know contractors, real estate agents, and other people in your community.
The Ease of Management: Especially when dealing with daily problems, managing properties in your neighbourhood may be more convenient.

Out-of-State Investing:
diversity: If your local market is competitive, investing in a different state may offer greater prospects and diversity.
Affordability: As you pointed out, certain states could have more reasonably priced real estate, which might enhance cash flow.
Market Dynamics: There are markets with varying development potential and economic trends that you may access.

Taking Out-of-State Investing Into Account:
Investigate the target market in-depth, paying particular attention to employment growth, economic data, and local real estate market patterns.
Establishing Networks: Establish a local network of contractors, property managers, and real estate experts. This will be essential for managing remotely.
Property Management: If you are unable to handle the property in person, think about working with a reputable property management firm.
Decision: The decision you make is based on your degree of comfort, your ability to take on risk, and your readiness to put in the time necessary to develop a network. If you want to invest out of state, make sure you do your homework well and assemble a reliable team of experts.

Remember that there isn't a single solution that works for everyone, and prosperous investors have used both in-state and out-of-state tactics. I wish you well in making your choice and that you succeed in acquiring your first rental home by 2024!

Depends on what your goals are. if you are doing it for experience, you should try it in your own market first. If you are doing it because you want the most bang for your buck, travel to a few places (Like Detroit) and go about building your team. 

Just think about it like this, what if you were asking about finding a job? Or catching fish?  If you already know that the opportunity is limited where you are would not migration be the only reasonable solution? 

Go to all of the local REIA meetings religiously and start meeting other investors. Call lenders and start having conversations. Find an agent and go look at properties. Call some PMs and ask about their services. Basically, pound the pavement and pick up the phone.

And, just to be blunt - we are not in a cash flow market right now unless you use some kind of creative strategy.  A garden variety LTR, whether in Houston or Ohio, conventionally financed, is not going to provide meaningful cash flow.  I think it's important that new investors who have been listening to podcasts from years ago reset their expectations as to what is possible.

House hacking remains the single best way for a new investor to get started.

@Shivam Patel

no, not unless you're going to go there in person to set up a team. 

Hey Shivam, I would first find a market that is suitable for you and showing signs of potential market growth. Then I would focus on growing relationships and building your core 4. The core 4 is essential to long-distance investing. It consists of a realtor, contractor, property manager, and a lender. Once you have this team in place, you should have the foundation to invest in any market confidently while not being there physically.

I think Columbus is a great option to consider. Plenty of multifamily real estate here and multiple, billion dollar companies are investing substantial amounts of money into our area, such as Intel, Google, and Amazon. Which in turn will bring plenty of other investors and general business into the market.

@Shivam Patel, while it can be debated, most will agree to invest in your backyard before pursuing out-of-state opportunities. 

Have you considered house hacking your first deal? If you do not currently own a primary residence and are renting, all the more reason to pursue this investment strategy. 

If house hacking is not for you, have you considered exploring other Texas markets 3-4 hours from you? I know many investors who solely invest out of state, some of whom have yet to see their properties. That being said, they can do this with peace of mind because they have a resourceful and reliable team in place (agent, contractor, property manager, lender). If you haven't already, read "Long-Distance Real Estate Investing" by David Greene before taking any action investing out of state. 

Best of luck!