Investing in a different state

[maggie13]

I live in a very expensive state to buy property in so I am thinking of buying a home in another state, Ohio.  The property is already rented at $450/month and running the numbers I would have a small positive cash flow of about $290/month before my payments, $140 after payments.  I am buying the home with cash but plan on writing a credit line check to myself for the amount and making the payments out of the rent, the equivelent of putting the home on my credit card, which is why I would have a payment.  The current owner is an investor who fixes, rents and resells homes to other investors and he will stay on to manage the property.  I have the option of paying him 10% for regular management and I pay for any repairs that may come up or for 20% he will make any repairs out of his pocket...I don't pay for anything that needs fixing.  I have not seen the home in person and do not plan to as I am so far away.  I have seen pictures and ran Googhle maps, comps, etc...At a purchase price of around $12K, I would be paying less for this home then I paid for my truck.  My only real concern is how far away I am.  What do you think of this plan?  Has anyone invested successfully in another state?  Would you do the 20% and not have to worry about getting repair bills?  I am leaning in that direction.  I will receive a warrenty deed and title insurance.

[katherine1]

Hi,
My suggestion to you is, first of all go with the civil laws concerned with the property. Investment in the property is not a small investment it requires a huge amount and so as risk.
Also, you can hire an attorney to guide you in the legal matters. I think, this will do good for you.

[pete_houston]

Hi,
Never invest in a property without seeing it first.
If you give him 20% to manage it, you’re clearing 50 bucks a month?
 I would pass on this “deal”?

pete

[maggie13]

Pete - I would be clearing $290/month before my payments, $140 after payments.  That's after ALL expenses, including the 20%.  Also, for reasons I don't want to get into here, it would be impossible to go see the property, otherwise I would.  Thanks for your response.

[d1beard]

Maggie -- I'd be extremely leery.  This is a VERY cheap property, and VERY low rent.  I invest in the Cincinnati area, so I am very familiar with the Ohio market.  There is no way that he bought this, fixed it up, and can sell and make a profit at 12k, UNLESS these things are true:

* Property is in a very rough area, likely a war zone; tenant damage, vacancies, and uncollected rent will be high; you cannot discern this with Google Earth!
* The "rehab" was very poor, proverbial "lipstick on a pig"
* The house is very old, poorly rehabbed, and will constantly plague you with high maintenance fees

This guy could drop off the map tomorrow, leaving you completely stuck.

The rent is very low, and one significant repair could wipe out the entire year's revenue.

Most experienced investors would tell you to run run fast from a cheap house like this purchased LOCALLY.  And you're talking about doing it long distance?? 

I will be happy to introduce you to my property manager in Cincinnati, if you'd like.  She manages 250 units, and her partner looks for good quality houses on decent streets, inspects them, and recommends them to their owners for investment.  They'll do the rehab if you want (no markup on materials and very reasonable cost).  I'd trust them with my life, and I have no affiliation with them at all (I'm just a client).  They locate houses that can be purchased for $15-20k (sometimes a little less), rehab of $7-9k (typically, but of course it depends), and will rent for $700-900.  They know the area inside and out, what streets to invest on, and where to avoid.  They charge 8% of collected rent, plus half of a month's rent when placing a new tenant.

It is imperative that you work with a prop mgr that has some scale, and a good reputation, when investing long distance.  Trust is of paramount importance.  There are many guys selling so-called turnkey properties in war zones to long distance investors, and it virtually always turns out badly.

[tgauchsin]

Propertymanager used to love out of state investors - or as he called them VICTIMS - in Ohio.  Here's one thread, I think you should consider before buying out of state:  http://www.reiclub.com/forums/index.php/topic,8938.msg37533.html#msg37533