Today, we get to learn about out of state real estate investing and building a real estate empire. We are stoked to have Rick (they asked to remain anonymous) on the series to discuss:
How To Make Money Investing in Out of State Rental Property.
I met Rick at a bar. A group of people were talking about the high costs of living in cities and ways to make more money. We all agreed that finding a side hustle that could be done from home was the best way to make extra money. My ears perked up when Rick mentioned he had properties in multiple states.
I used to play a small game of out of state real estate. I decided to stay local because it was not a good investment for me. I had a single property in South Carolina. In order to maximize my potential income from real estate, I decided to invest in a second property. I was only making a small net profit with property management fees and out of state taxes. It was a difficult decision to stay in the rental business or not. I would see a loss due to maintenance costs. I budget for these costs so that I can minimize the impact on my bottom line.
I sold the property because my out of state rental property game was not good. I should have done more research before investing in an out of state rental property. I would have liked to meet Rick sooner. I was finally able to get to know him. Here’s Rick has a side hustle success story. It all started with an idea and a lot of hard work, as he was able to take his side hustle from a hobby to something that was generating a considerable income.
Out of State Real Estate Investments
What is your day job?
I work in advertising. I look for new and innovative ways to promote my clients’ products and services. Standard W2 job. My goal is to one day make enough revenue from passive income so that I can leave the world of 9-5.
Tell us about your side hustle.
Buy and hold real estate for a long time. Real estate is a proven way to build wealth over time, and long-term buy-and-hold real estate investing can be an attractive strategy for investors looking to maximize their returns. I invest in out of state rental property. The added benefit of this is that I candiversify my portfolio and reduce risk. I buy properties, rent them out, and hold them for a long time. I try to find properties that will appreciate over time in order to maximize my investment. For five or more years, or until I own them. I have to make regular payments of principal and interest on the loan.
Buy-and-hold real estate is a common type of real estate strategy since it is easier than fixing and flipping properties. You can hire professionals to manage your properties if you don’t have any experience. You can learn from other rental property owners how to manage their properties. The goal is to build wealth over time. By investing wisely and making strategic decisions, investors can maximize their returns and increase their wealth over the long term.
Where do you live, and where are your properties located?
I have properties in California, Texas, Nevada, and Ohio. I’m going to move to Ohio to be my primary residence. I am open to all countries. Outside of my desired geography, I’m willing to consider other opportunities. I look for the best return on my real estate investment. I look for out of state rental investments since California real estate is high.
How did you first get involved?
I bought a single- family house and rented it out. I used the income from that house to purchase more properties and expand my real estate portfolio. I wanted to start making money with AirBnB. The housing market collapse was good for me.
The property was cheap because I had a full-time job. Despite my limited financial situation, I decided to invest in the property. For other people looking to start investing in real estate, You should save as much money as you can. Setting a budget can help you reach your savings goals. It is best to have a normal W2 job. Stable income and a good credit score are important factors when applying for a loan, so it is recommended that you maintain a regular job.
Managing Remote Real Estate
How do you manage your properties if they are located out of state!?
This is one of the hardest parts of real estate investing. Figuring out the legal and financial landscape can be difficult, so it is important to do your due diligence before committing to any investment. Managing yourself from across the country is not a good idea because nobody will ever take as good care of your property as you will. It can be very challenging if you don’t have a strong team on the ground. An effective change management strategy helps to ensure that the transition from one state to another is as painless as possible, as it helps to ensure that the project is successful.
I self-manage in California and work for a manager in each market. I work closely with the managers and management companies to make sure that my career is well- managed across all markets. Some states require that you be a licensed real estate agent in order to manage, while other states don’t.
I prefer working with someone that allows me to be a bit more hands-on, but recommend a larger management company to newcomers, as it is easier to have someone more experienced, should problems arise (evictions, major repairs, etc.)
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How long have you been doing it?
As an on-site manager at the apartment building I lived in, I started managing a property in my early 20’s. I had no prior experience in property management, but I was eager to learn and discovered that I had a knack for it.
How to Find and Invest In Real Estate Investment Properties
Is it challenging to find a rental property remotely?
This is the hardest question to answer, but I will do my best. I’m willing to take a stab at it, even though my answer won’t be perfect.
Identifying my goals is the beginning of it all. Cash on cash return is my main goal for some properties. This is the most reliable way to ensure a steady income on my investments. Since I am looking for higher equity growth over time, the return is less important for some properties. I will make a long-term investment in order to achieve this goal. Sometimes it’s a combination. There are different factors that can lead to success.
I identify the market that will suit my goal once I have a goal. The research stage is what I consider. I am gathering information and ideas to form the basis of my project. I look at a lot of things. I start looking into neighborhoods after picking an overall market. I look at the area’s crime rate, average home prices, and other factors to determine the best neighborhood for my investment.
I try to identify neighborhoods that are within my budget. I do some research on each neighborhood to make sure I’m making the best decision for my lifestyle. I like areas that are C+ or higher and recommend new investors to stay away from cheap houses in lower-class areas. Even if a house is considered low-class now, it could become a desirable property in the future, because the value of a house can go up or down over time. You will lose money if you invest from out of state in D/F areas. It is important to understand the local laws and regulations before investing in D/F areas, as this can affect your ability to make a profit.
How do you go about actually purchasing the property?
I reach out to real estate agents once areas are identified. I research the local area to learn about any changes that may affect the value of the property. I set up calls with whoever responds when I email 4-5 agents with what I am trying to do. I ask a lot of questions on the phone. If I find a real estate agent I like, I will ask them to set me up on a portal or send me updates from the MLS.
I begin to run numbers on houses. I compare the costs of each property to see which is the best investment. Once I have a long list of potential properties, I book a trip to the target market and meet with the real estate agent to have them show me houses. I’m hoping to find a property that will be both profitable and enjoyable. It’s important to get your feet on the ground and get a feel for the area. It will help you to decide if the area is right for you and your family. Even if I don’t make any offers, it builds a relationship with the agent and gives you a feel for what is available at what price range. It can help you narrow down the properties that you are interested in. I make an offer. If the offers don’t meet my expectations, I’m prepared to negotiate.
I start researching management companies once a property is under contract. I reach out to a lot of them and ask for sample contracts. I want to compare the different terms and conditions they offer to make sure I find the right fit for my project. I have a list of things I’m looking for, and I look for the management company that checks the most boxes. If I take my time and do my research, I will find the management company that is most suited to my needs.
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Passive Income Is The Goal
Describe your current portfolio.
Ten years ago, I bought my first property. Since then, I’ve been investing in real estate and my portfolio has grown a lot. I now own or manage 15 homes. I have achieved financial success through my real estate investments.
How much passive income are you making each month?
I make between $200 and 700 per door per month. It’s a great way to make extra money. The net fluctuates based on repairs and vacancies. When calculating the expected returns of an investment property, it is important to factor in potential maintenance costs and vacancies. I make about $5,000 per month across all of the properties. When I first started investing in rental properties, it was more than I expected. I’m close to financial freedom.
What are your thoughts about Real Estate Crowdfunding platforms?
To be honest, I have not done a lot of research on real estate crowdfunding, but it’s certainly an up-and-coming opportunity for newer investors.
Out of State Real Estate Investing Tips
Some quick tips if you’re thinking about getting started:
- Run your numbers. Just to be on the safe side, you should factor in unexpected costs. More will go wrong thanyou think. It’s best to plan for the worst and hope for the best. You should be able to pay for expenses in the beginning. You should set aside funds for unforeseen costs during your startup journey. I estimate 25% for expenses as a buffer. To make sure I don’t go over budget, I always round up the estimated expenses to the nearest whole number.
- Don’t buy in lower-class neighborhoods from out of state. Before investing in a property in a lower-class neighborhood, be sure to thoroughly research the area and consider possible long-term risks.
- You can’t control everything. Take some time to relax and think about what you can control. It should be profitable if you run your numbers correctly, and even if it costs a lot of money upfront. Ensuring that you’re making informed decisions and that your investment pays off in the end is dependent on having a plan and strategy in place.
- House hacking is a great way to enter the game initially.
If it was easy, everyone would do it. It takes a lot of dedication and hard work to be successful, but the rewards can be great. It is worth it if you are interested in real estate investing and you live in an expensive city. Real estate investing can be a great way to build wealth and financial security, so it’s worth exploring for any investor. You can get great deals out of state. Before you book your trip, be sure to research the best deals so you can maximize your experience.
It is easy to acquire single- family homes for less than $50,000 in some states. We put together a list of the cheapest states to buy a house.
