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On a previous post, I listed out the reasons why it makes more sense to invest in out-of-state real estate. However, just because it made more sense for us did not mean it was any easier. In fact, it was actually much more difficult in some ways.
Here were the challenges we encountered when looking for an investment property out of state and how we overcame those challenges.
There Were 49 Other States to Choose From
There was a time, right between when we decided to invest out of state and when we finally narrowed it down to Texas, that we had no idea where to even start.
We were able to quickly rule out California since their property costs were also quite high and we would face the same affordability issue.
Just another 48 states to choose from.
We Were Not Familiar With Other Markets
Living in New York City, we know which neighborhoods are good, which ones are up-and-coming, and which ones to avoid. It was an advantage we no longer had when we decided to invest out of state.
Since we had family and friends scattered across the country, we decided to take a look at their states first. This way, if we do decide on one of those states, we had people we can talk to and ask questions.
After speaking to family and friends and doing some research online on those states, we further narrowed our list down to Texas, Arizona, and Florida. However, we still had the challenge of figuring out which cities within these states and which neighborhoods within those cities to look for our first investment property.
Not Sure How to Decide
Even though we had visited our friends and family before, we never paid much attention to the areas from a real estate investing perspective.
Given the short list of states, we decided it would be good idea to just start visiting everyone and go from there.
Our first stop was Houston, Texas. While the property costs were much more affordable, our friends and family warned us that Houston’s job market was not doing too well at that time and it may prevent us from getting renters. That was enough for us to put Houston on hold for the time being and move on to the next destination.
Our next stop (and ultimately our last) was Dallas, Texas. Property costs were actually a bit cheaper than Houston and there seemed to be lots of growth with several big corporations relocating to the North Texas area such as Toyota, JPMorgan Chase, and Liberty Mutual Insurance. Given the economic and population growth in the area, we were excited about the rental market and optimistic about the potential appreciation in property value.
After learning more about the public school system and taking a look at a few properties (these homes were more like mini mansions compared to what we were used to seeing in New York), Mrs. PWDW and I fell in love with the area and that is when we decided that we would like to relocate to Dallas in the near future.
We Couldn’t Look at All of the Properties in Person
Not wanting to rush the process or make any rash decisions, we wanted to take our time to look for a good investment property with solid returns.
However, living in a different state meant we couldn’t go to any of the open houses, check out the properties that were listed, or drive around to scope out a neighborhood.
We had no choice but to rely on the realtors and the details that they provided us. We did as much research as we could online and used tools like Google Street View to check out the surrounding areas and neighborhoods (though they might not always have the latest pictures). Occasionally we did make trips down to Dallas, but there was only so much we could see and do in such a short amount of time.
Missing Key Contacts
In real estate, it is important to have the right people in place to get things moving and going right.
The people involved in a real estate transaction usually depends on your needs, the complexity of the deal, and the state’s requirements. You may need a real estate agent so you know what properties are available or a loan officer if you are taking out a conventional mortgage. You might need contractors if you need repairs done, especially if you are dealing with “as-is” properties. In most cases, you will need an attorney for the closing process. Who you need may vary with each transaction.
In our case, we needed all of the above and then some.
Unfortunately, our family and friends in Dallas weren’t able to help us with this since they did not invest in real estate. However, we did have a bit of luck getting contacts from online communities for real estate investors such as Bigger Pockets. We vetted the referrals by using business review websites and social media. We also reached out to each person and chatted with them over the phone, video conferencing, and email to make sure they fit our style.
Coordinating All of the Moving Parts
Despite it all, we still had concerns on how we can coordinate all of the moving parts from New York.
There was just too much we couldn’t do without flying back and forth, such as :
- checking out properties
- getting a proper inspection done
- overseeing repairs (if any)
- meeting potential tenants and showing them the property
- managing the property
- collecting rent checks
So What Did We Do?
We ended up using a reputable turnkey company that we found on Bigger Pockets. We decided to use them after speaking to a few of their clients, who all gave them rave reviews.
What is a turnkey company?
A turnkey company is a company that actively seeks, acquires, and rehabs distressed or foreclosed properties to sell to real estate investors. Once a property is sold, the turnkey company can also help with the tenant placement and property management.
A turnkey company pretty much takes the real estate investing from start to finish and delivers a finished and rented property to the investors.
Are we happy with our decision?
Only time will tell. We only closed on our investment property in December of 2017. However, I must admit that we have been impressed by the turnkey company’s operations so far.
Do you invest in out-of-state properties or planning to? If so, what challenges did you encounter and how did you overcome them?