Many people don't realize that owning real estate outside of their primary market is a feasible option, let alone an option with great potential upside. It's a way to spread out risk, earn better returns, take advantage of up-and-coming areas, and own in landlord friendly states.
Now, I'm by no means an expert in real estate. I've only been doing this for a year, but here are five reasons to consider buying an out-of-state investment property:
1. Affordability: Look at the San Francisco Bay Area (where I live!), Seattle, or New York, and you'll see one major theme - housing is EXPENSIVE. Like, REALLY expensive $. Oh, and really competitive too. It's tough getting into those markets without cash or the right partner, but that shouldn't crush your dreams of becoming a real estate investor. Explore other cities and states that have a good acquisition price to rent ratio. A good place to start? The Midwest and South (USA).
2. Diversification: to protect your returns in real estate, or any investment really, it's smart to diversify. If you put all your money in one market, and it crashes, welp, there goes the value of all your real estate assets. By investing in different markets, your portfolio will be tied to multiple market cycles, and better protected against volatility in the long-term.
3. State Taxes: it's true, tax rates are different depending on state. Buying rental property in states or counties with lower property taxes (like Alabama, Colorado, or South Carolina) can generate extra savings and better returns.
Because you have to file a tax return in the state you live in PLUS the state in which your investment property is in, states with lower income taxes can greatly impact your bottom line.
4. Entering Up-and-Coming Markets: there are a ton of up-and-coming cities out there right now. So, why not invest in one before it really blows up? Obviously, you can never predict the future, but here are some key indicators that could help in finding hot markets:
-Companies are moving their headquarters there, or are opening up new branches
-A decrease in average days properties are on the market
5. Rental Demand: some cities have a very strong rental market, where some are heavily owner occupied. Do your research around the country and figure out where populations prefer to rent. These are obviously areas in which your property will be in demand and very well may be outside of your home market.
Whether you're looking for your first property, your next property, or just trying to accelerate your voyage to financial freedom, you're going to need some cash. Here's where a good Side Hustle comes into play.
We're in the age of the Side Hustle. Or the Gig Economy. Our generation is finding more and more ways to bring in revenue. We're diversifying our revenue streams. I love it! So, what exactly is "side hustle?"
It's a way to make some extra money, outside of a full-time job, that either allows you flexibility to pursue a passion, or it could even BE your true passion.
Take a look at these great side hustles that will accelerate your income and help you purchase your next property:
My primary side hustle in 2016. Basically, I was a personal grocery shopper...I'd drive to stores, pick up specific items, check out, and deliver them. A couple times a week, I'd leave my office job for the day around 5:30pm and work from 6pm to 8pm. No, I didn't get rich off of Instacart, but an extra 40 bucks here, and an extra 50 bucks there definitely helped. Check it out and SIGN UP HERE.
Lime Scooter Juicer
Ever see those electric scooters zooming around town? They are EVERYWHERE in Oakland (where I live). Well, someone has to charge them at night. And that someone is ME.
I'm a Lime Scooter Juicer! Yup, after work on my way home, I pick up a couple scooters here, and a couple there...bring them back to my place, plug them in, let them charge overnight, and drop them back off on the sidewalk in the morning. I get paid on a per-scooter basis and am pulling in $8 minimum per scooter. So, the 4 scooters I charged last night brought me $32 this morning...all for about an hour worth of work. I plan to make $500+ a month on this side hustle....and this money is going straight toward my next investment.
To become a Lime Scooter Juicer, DOWNLOAD THE APP HERE and get $3 credit from me! I'd recommend trying a scooter at least once before signing up to become a Lime Scooter Juicer to increase your chances of getting the job.
My girlfriend's primary side hustle. She loves dogs, so naturally, taking care of them, walking them, and getting paid for it is a natural fit. She's built numerous relationships with local dog owners too, so you could (if you want) skip the middle man (Rover) after you build your network and keep 100% of the revenue.
This is a shopping rewards app, so I wouldn't technically count it as a side hustle. But, it's a vehicle to bring in extra cash. How does it work? Earn points by walking into specific stores (it uses GPS technology), and scanning certain items. You can then redeem these points for rewards such as Amazon, Walmart, and Target gift cards. Here's how I use the app: if I head out for a little lunch break at work, I'll stop by a store and scan a couple items. That way I'm making some extra cash on my lunch break! DOWNLOAD THE APP HERE.
I can't personally speak on life as a rideshare driver, since I've never been one, but the thought of it has ALWAYS been intriguing. Partially because I feel like I'd get a chance to meet such a wide variety of people. Life's all about connections. And you'd be paid for it! My thought though: make sure you have a fuel efficient car.
*UPDATE* I actually signed up and am driving for Uber now! I'm experimenting with the whole "networking" opportunity of being stuck in a car with strangers. I'll let you know how it goes!
Also can't speak for using Airbnb as a side hustle, but if you have an extra room at your place...why not consider renting it out and making a little extra cash? Sign up to be a new HOST HERE. And if you just want to use Airbnb for your next trip, SIGN UP HERE for $40 OFF!
Are you creative and can create a tangible product? Maybe it's time to start selling it online. Start your mini-business today!
Go through your closet, look under your bed, take a peek in the garage, and get rid of all the crap you haven't touched in a year. De-clutter your life! And add some digits to you bank account. Also - if you're at a garage sale, try to bargain down items that you can later flip for a higher price on Craigslist. Believe me, some people do this for a living.
Basically, people will post a job (such as...I need help constructing my Ikea table!) and you'll take on that task for a set price.
Write Content and Start a Blog
What questions do your friends always ask you? What skills or experience do you have that are unique? Answering these questions could be the foundation for a new online business. Take this blog for example: people still find it crazy that I buy real estate 2,000+ miles away from where I live. So, what'd I do about it? I started writing content, providing value, and building community. With consistant writing and an engaging audience, you can monetize your website through advertisements, affiliate links, ebooks, and online courses.
This list of Side Hustles could go on forever...
Bottom line: if you are struggling to save for a rental property, or want to accelerate your savings as I did, finding a side hustle can be critical in your investment career. So get yourself a side hustle! And check out this solid list of 99 side hustle ideas HERE!
Do you have a unique side hustle? What is it? Leave a comment below!
When you live in a hot market, it's almost impossible to find a cash-flowing property. Some people are fine with breaking even (or taking a loss) on their investment, in hopes of appreciation. But, I find it very important to cash flow from Day 1. Nothing in real estate is guaranteed, and you definitely can't assume appreciation.
After you've decided to Jump In and invest in rental real estate (long-distance or not), the first thing you need to choose is a market. One thing you need to remember, from Chris Clothier of Memphis Invest, is "cheap houses don't make a great market." The condition of the market is exponentially more important than the actual property.
So, where are you going to invest your hard-earned money?
This is not a question to be taken lightly as it can make or break your investment journey. You HAVE TO develop a relationship with the market you decide to enter and have strong connections on the ground. In my case, I traveled more than 2,300 miles away from my home market. Here's key criteria when selecting a market!
1. Steady Population Growth: Google your city name and take a look at population stats. You want to be in a city that's growing, as that proves demand. Population growth = more jobs, more renters, and it's a place where people WANT to live.
2. Diverse Economy: If your city is tied down to a single job industry, or one major company, what happens if that industry/company go obsolete? Jobs are eliminated...and say "bye bye" to renters. Choose a city with plenty of employers, industries, and occupations.
3. Entertainment Factor: This goes back to demand and desirability of your city. People want to live in a fun city, because where you live, largely dictates your life. Look for professional sports teams, major universities, night life, a music scene, etc. In my case, Indianapolis has an NFL team (Colts), an NBA team (Pacers), major universities (Butler, IUPUI), and up-and-coming hipster neighborhoods where hot restaurants and bars are popping up.
4. Rent to Acquisition Price Ratio: VERY VERY VERY important because this is where cash-flow is created. A general rule of thumb: find a market where properties bring in AT LEAST 1% of their purchase price in rent. For example: a rental property for $100,000 should bring in at least $1,000/month in rent.
5. Relatively Low Cost of Living: a market where the average cost of housing is no more than three times the average income of someone living there, shows that housing is still affordable. This is where you can buy a house, renovate it, rent it, and make a return on investment.
These are the basics I look at when choosing a market. But, you must DO your due diligence. DO your research. MEET and TALK with people who have invested in your target market and with the individuals who are going to be your "boots on the ground."
Most importantly - VISIT your market. Make connections, drive through town, see each neighborhood, soak up as much as you can. If you're prepared to plop down your money outside of your home market, you better know where it's going.
When it comes to investment strategies in real estate, there are a ton of options. One of the most common tactics, and the strategy I've chosen is Buy and Hold investing.
So, what exactly is the buy and hold strategy?
It's the process of acquiring real estate, to own and profit from by renting it out to tenants. It requires leg-work in selecting a property, financing it, and possibly renovating it. But when managed well, you could see years and years of consistent monthly returns. As long as your monthly rent is more than expenses, you've got yourself cash flow. This strategy is definitely a long-term play and requires patience, but can set you up for a bright future.
1. Monthly Income: each month, any rent that exceeds your expenses provides you with income. Here's the best part: if you have great property management in place, your rental checks could come in without much labor on your part.
2. Equity Buildup: your tenant is paying down your mortgage every month, meaning your equity in the property increases each month. Tenants even pay down your interest, which is tax deductible.
3. Wealth Creation: if you buy in the right market and neighborhood, your property could appreciate every year. The longer you hold the property, the greater the potential for appreciation.
4. No Urgency to Sell: as opposed to house-flipping which requires speed, buy and hold investing is long-term. Why is this a benefit? Well, if there's a market crash that impacts your home value, rents usually stay relatively stable, still bringing in consistent cash flow. This allows you to wait out a crash until market correction. In Buy and Hold, I always tell myself to not think about the overall property value as long as it cash flows. Appreciation is just icing on the cake!
1. Tenant Issues: it's no piece of cake having to deal with tenants. Some tenants can be very high maintenance and require a lot of your time. Without quality property management in place, don't be surprised by random calls at night and late (or missing) rent. Who wants that??
2. Maintenance Issues: no property is maintenance free, especially if you keep it long-term. A new furnace or a new roof become realistic expenses the longer you hold your property. So be sure to set aside a portion of your rent every month to cover capital expenses!
3. Liability: you can be liable for injuries or damage on your property, which can lead to legal action. Obviously, this is true regardless of what real estate investing strategy you choose as the owner of property, but the longer you hold a property, the more likely something could happen.
Buy and Hold real estate investing is just one tactic that investors can choose. What's your strategy of choice? Leave a comment below!
It's time to get personal. It's time to open up. It's time to document, in excruciating detail, my journey as a newbie real estate investor.
My biggest priority right now is to acquire a rental property in the next month, get it rent-ready by early 2017, and start collecting monthly cash flow in the form of good 'ole rent. Here's perhaps the biggest challenge: I'm looking for a property that's 2,300 miles away from where I live. Let me lay it out real simple - I live in the San Francisco Bay Area. I'm looking to buy a house in Indianapolis, Indiana. A place I've never visited...
I have NO IDEA where this new endeavor will take me, but I know the Jump In Real Estate community will play a key role in furthering your education, as well as mine. Because real estate is all about the Ups, the Downs, the frustration, the challenges, and the wins. So, follow along by hitting the nice pretty button below:
I promise there will be lots of pictures, actual numbers, and videos! And hopefully, this is property #1 of many, as I work my way toward a life of Financial Independence, a.k.a...EARLY RETIREMENT!
With that, I'll leave you with a few of my favorite quotes from the great Jim Rohn...along with a few of my own notes too:
"Happiness is not something you postpone for the future; it is something you design for the present." - Why does much of society accept the fact that they have to work until they're 65?? Design you "dream" life now!
"If you don't design your own life plan, chances are you'll fall into someone else's plan. And guess what they have planned for you? Not much." - Craft your life plan, Jump In, and take action!
"Formal education will make you a living; self-education will make you a fortune." - The value of continued self-education AFTER high school, AFTER college, and AFTER grad school, will positively alter your life.
"If you really want to do something, you'll find a way. If you don't, you'll find an excuse." - Bottom line: once you've crafted your life plan and committed to continued self-education, you have to execute. Find a way, not an excuse.
Just do it. Take Action! JUMP IN!
The theme of "get off your butt, and jump in!" routinely arises in every Real Estate podcast I listen to, blog I read, and mentor I speak with.
As someone who religiously works off of a "to-do" list, I've had the task of "real estate investing" taunting me for over a year. That's changing tomorrow. I'm making a move. I'm excited, nervous, and have no idea what to expect.
The potential of "passive income" has finally pushed me to take action. I'm determined to build monthly cash flow for a future of financial freedom, more time with family and friends, the ability to travel whenever, and work on my own schedule.