Real estate investments outside your hometown

[younginvestor2013]

Does anyone have experience investing in real estate outside your vicinity OR in your vicinity but not directly managing the property yourself (i.e., hiring a property mgmt company)?

I am very intrigued to purchase some real estate solely for investment purposes. I work in real estate finance and investments so I am fairly competent at analyzing a potential investment's feasibility (albeit I am still young in my career! :cool smiley: ).

The trouble is, I live in Chicago which is a fairly high cost of living town. Therefore, investing in most residential (or other types) of properties requires a significant capital commitment, unless I am willing to invest in smaller condos (which are generally not good investments).

However, I have looked at various markets around the country and seen many prices that fit in my price range much more (Las Vegas, Florida, Arizona). The trouble is that I am not on the ground and wouldn't be able to manage the property myself so I'd have to hire a property management company. I deal with these folks at my work daily, but this is on a different/higher level.

I'm wondering if anyone has first hand experience with this, and how the story went (positive/negative)?

Does anyone have comments or personal experience in real estate investments in general? My ideal price range would be 200-300K max, at which price a down payment would represent only about 13-20% of my overall portfolio. I don't mind tying up that cash given my horizon (I just turned 24).

[stephaniee36]

I have a property 6 hours away from where I live. I bought it as a vacation rental, 30 days before Hurricane Katrina hit. After the property was repaired I converted it to a rental property using a property management company. Maybe I didnt have a good company BUT, they didnt repair/fix issues to my standards. Granted it was a rental...I took it off the market in November 2012 and converted it to a full time vacation home. I did like the fact that they dealt with the leasing/rent collection, that said, I may not have rented to the same people they did. I have another rental near me that I manage. I have owned it since 2004, have had 3 tenants and no issues...

[traineeinvestor]

I have a house in my old home town that I keep as a rental investment. While paying someone to manage the property is an expense and takes a chunk out of the rental, they do a good job (as far as I am aware) and I'm happy with the investment. I did chose a manager with considerable experience and a good reputation.

[SunGuy]

I have thought about trying to buy dirt cheap property under $1k.

I saw some posts about places all over Detroit that you could get for similar prices.

But, I know you would still have to pay the yearly taxes.

[Elbata]

I like the Detroit idea too. I remember back in the 60's townhomes in DC were selling for a $1. Just had to fix them up after the riots. After George Zimmerman gets freed, I'm sure there'll be more condos all over our American cities for the same price. Just hold on a few months.

[FIREd]

Due to unforeseen circumstances, I became a reluctant long distance landlord. I hired a very reputable local property manager to handle the day-to-day operations. He has done a good job handling the basics. He found me a good tenant who pays his rent on time and takes care of the property pretty well according to the neighbors. He takes care of the small repairs diligently. But a few months ago, a storm did some damage to the backyard. He notified me very quickly and sent me pictures of the damage. I told him to present me with quotes for the repairs. He came back to me with a single, absurdly high quote from a guy who does not show up as a contractor on Angie's list, google, or BBB. Just reading the materials listed on the quote makes me very suspicious that he's trying to upsell me, perhaps for some sort of kickback. I asked for at least 2 other quotes but he has been dragging his feet. So I now have to step in and handle the situation myself which is nothing short of a PITA.

[clifp]

I couple of years ago I bought 4 (now 3) properties in Vegas. The prices were low 75% off the peaks, and rents were fairly high. Making the cap rates low double digits. Prices have gone up and rents have dropped so the deals are not nearly as compelling as they once were.

The pros for being a out of town landlord: Out of sight out of mind, I am not tempted to fix an small repair rather than hire a pro. The tenants don't know who I am.

The cons pretty much everything else.

Eventhough I have been going to Vegas 2-4 times a year for more than a decade, and and probably once every other year prior to that I am still not that familiar with the town I know the main areas, but which neighborhoods are good, I have to depend on my realtor. Likewise without reading the daily paper, I don't have a feel for the local economy. I don't know who to go to to get good repairs done cheaply.

I am on my second property manager, and while they are better than first, I can't say I am thrilled with them. In talking with other people with out of town investments, finding a good property manager is really difficult.

My guess is when you are comparing an out of town property to a local one, you should add 10-20% to the price or subtract 1--20% from the income of what you'll get from the out of town property.

[lynxville]

Long distant rentals can be a pain in the butt. I am not fond of most property managers. It gets real expensive with them. Having 30 years experience in rental property, let me just say tennants are not what they used to be. Turnover and damage is on the rise.

If you had a realative or close friend to watch over the property I would say yes, otherwise you might get burned.

[MatatuPuncher]

Quote:

Originally Posted by lynxville Long distant rentals can be a pain in the butt. I am not fond of most property managers. It gets real expensive with them. Having 30 years experience in rental property, let me just say tennants are not what they used to be. Turnover and damage is on the rise. If you had a realative or close friend to watch over the property I would say yes, otherwise you might get burned.

^This. I have two out of town rentals (California and Arizona). Mother-in-law rents one, the other is managed by a family member. I would not be in these investments otherwise. Two much of a headace.

[harley]

It's all a matter of finding the right property manager, and out of town that can be nearly impossible. When we bought our rental properties in Reno we hired a company/guy that a friend of mine had been using with no problem for a couple of years. But in our case he was a nightmare. We finally dumped him, and using a recommendation from our RE agent we hired a different company, a mother/daughter team. They've been great so far. I'm keeping my fingers crossed.

[Cessna5354]

As discussed, the results can be good, or bad. No telling which way it can go. I have rental 1,200 miles away which has been the best of times, the worst of times, currently better than usual.
I have had property mgrs tell me how they scouted roof damage after a storm, and recieved $500 per after refering a roofer, etc. Quite bold that one. Others just instill confindence of which I could trust.

I could have done better holding bonds or stocks. It does present an aspect of diversification.

[younginvestor2013]

Unless I know the local economy and a handful of handymen, it seems like a long distance real estate investment might not be a good idea.

I am still intrigued by the idea, though. My parents are retired in a big retirement town in Florida and I’ve done a small amount of research (mainly on VRBO® is Vacation Rentals By Owner) on the rental market in their community.

Some of the places which one could acquire for $200-250K rent for $3,000-$4,000 a month during the high season (Nov – Mar). It appears even only renting for 6 months out of the year would prove to be a good investment. I wonder how many units are sitting vacant though, or have a hard time renting out? There has to be a huge demand now, and in coming years, for retiring baby boomers wanting to spend the winters down south. At the same time, I am always reading articles about how baby boomers don’t have enough money to retire, so I don’t know which to believe? I think it’s more my generation that’s in trouble, though.

I wonder if my parents would be interested in being my “property manager”….might give my dad something to do with all the time on his hands!

[annienz]

We have rental investment properties outside our home town, and they have proved troublesome. I've yet to find a good property manager in that area. I did try to manage them myself and while the rent collection was okay, the maintenance issues have not been.

I have accessed a pretty good handyman/ tradesman who keeps me up to date with what needs doing but overall the experience hasn't been particularly positive. I think early next year we're likely to sell one or two of them.

I manage the rest of the portfolio myself in our home town and that's not a problem. I've also found since handling the management myself, repair bills have reduced markedly as I'm not willing to jump every time a tenant requests something. I'm quite reasonable but some of the outlandish "repairs" that were done in the past by a property manager who didn't care how my money was spent were hard to fathom.

[gerntz]

It's a hassle for our local properties. Can't imagine the difficulties with long distance. Ugh.

[courtjustshan]

I own a vacation/retirement home in Florida that I just started renting. I interviewed several property managers in the are and then selected the one I felt most comfortable with. I live full time in PA currently, so it is a long distance rental.

Property managers don't a whole lot for what they charge, but then again, I view it as a necessary evil. I am fortunate in that we just rented to a couple to rent my place that has 4 years of positive history with this property manager. The house they were living in was foreclosed on.

I probably would not have done this, but I have family within 5 minutes of my place that will keep an eye on things and the house is also in a community with pretty strict HOA rules.

All in all, it is still a roll of the dice I suppose, but I feel I have at least a few things working for me not to encounter some of the bad renter situations I hear about.

I would advise interviewing several property managers, negotiating their percentage, setting defined decision making processes for incidental home repairs, check references, and also make sure your homeowner's insurance covers rental situations.

[wrigley]

Quote:

Originally Posted by younginvestor2013 Unless I know the local economy and a handful of handymen, it seems like a long distance real estate investment might not be a good idea. I am still intrigued by the idea, though. My parents are retired in a big retirement town in Florida and I’ve done a small amount of research (mainly on VRBO® is Vacation Rentals By Owner) on the rental market in their community. Some of the places which one could acquire for $200-250K rent for $3,000-$4,000 a month during the high season (Nov – Mar). It appears even only renting for 6 months out of the year would prove to be a good investment. I wonder how many units are sitting vacant though, or have a hard time renting out? There has to be a huge demand now, and in coming years, for retiring baby boomers wanting to spend the winters down south. At the same time, I am always reading articles about how baby boomers don’t have enough money to retire, so I don’t know which to believe? I think it’s more my generation that’s in trouble, though. I wonder if my parents would be interested in being my “property manager”….might give my dad something to do with all the time on his hands!

So you are looking for something to rent seasonally?

I was born and raised in Chicago and left for the Navy at the ripe old age of 18. I bought my first house in Virginia Beach back in 1986 and I still have it. It is being managed by a fantastic property manager and it is doing well for me. I currently live in Jacksonville Florida. This is a large military town with renters coming and going all the time. A town like this might be a good option for you.

Mike

[jkern]

I have three rental properties about 130 miles from my home. Sometimes I must drive there (2 hours) to make repairs and sometimes I can hire the appropriate contractor/vendor over the phone. It has worked out well over the last three years. One important note, you should buy properties that are going to require less maintenance (newer, condo or townhome).

[SVHoper]

Hi,

I had a decent, though not exciting property manager for rental in another country that worked acceptably for 10+ years however I felt I paid more for any work than if I had arranged the quotes and the managing agent definitely made more >>> $ from the rent than I did, though this was much more a consequence of my property selection prioritizing capital gain rather than cashflow.

I also have a trouble-free (so far) rental 400 miles away for which I had a mix of some family help to show prospective tenants, made some trips and have a reliable, handyman, mow and blow company and tree trimming company but no property manager.

So as others have said, it can be done. However, my 2c advice for a first home, would be to enlist family help or look for gentrifying areas in Chicago that will hit your price target, with cashflow and solid renters. I don't know Chicago but it I doubt it can be worse than LA and San Franciscan Bay area for property prices... and I believe it is still possible in these areas.

With good tenants :-) property management can be very easy $ which I like to keep to pay down the mortgage. I guess the math will let you make the decision local vs (remote + management fees).

Good luck - another small bit of advice is to have sufficient cashflow buffer that you aren't stressed by "unexpected" outlays or vacancies or e.g. latest tenant had quite a few requests which seemed strange to me as I would not pay for those in my home but since they << months rent, it was easy to say yes and let them feel like it was their home... as I want long term, happy tenants.

[Burnsie]

Quote:

Originally Posted by wrigley So you are looking for something to rent seasonally? I was born and raised in Chicago and left for the Navy at the ripe old age of 18. I bought my first house in Virginia Beach back in 1986 and I still have it. It is being managed by a fantastic property manager and it is doing well for me. I currently live in Jacksonville Florida. This is a large military town with renters coming and going all the time. A town like this might be a good option for you. Mike

Would you be willing to pass on the fantastic property manager you have in Virginia Beach? Thanks.

[nun]

I'd never invest in RE remotely, too much hassle and worry. Also the idea of buying a cheap rental does not excite me, I'd buy quality. I advise this from experience as I live in a 2 family house and rent out the ground floor apartment. I can keep an eye on the place, chose my tenant and the fixing and management is pretty easy. Buying a nice house in a good location has paid off in 100% occupancy over 15 years and good rental income. It also kept its price well through the down turn and is now showing good appreciation. Now that the mortgage is paid off the rent covers almost half of my income needs.