Out of state MF purchases
I’ve got some money to invest and would like to get into real estate. As a newbie, it seems clear that I should start with multi family investment properties but I live in an area that is over priced, over taxed, and over regulated. Friends near me have never had good experiences with multi family units near me. I’ve read about some companies that you can go through to buy out of state property in hotter areas. Curious if anyone has done this. My goal is to sink some money in, make a little cash flow, and build wealth with not too much effort.
[{"id": "fn6d66z", "text": "You might look at some of the other threads on here about paying for management, pros and cons etc. Consider what that will do to your cash flow. Obviously out of state MF you would need management. I say this as someone who owns a lot of out-of-state industrial properties and I generally self-manage. But industrial is far different from multifamily. \n\nAlso consider...commercial real estate is not really \"low effort\" if you want to have good returns. Again reference other threads. If you want someone to source the property, improve it, lease it up, and maintain it...low effort...each step costs money and you might find there's none left for you.\n\nI started by doing some properties locally (wasn't MF in my case), did the work myself and learned A LOT,  before I branched out to better out-of-state opportunities.", "replies": [{"id": "fn6sg6j", "text": "Commercial is totally different from MF, no?", "replies": [{"id": "fn6urha", "text": "Many (nearly all, in NYC) people refer to Multi-Family as an asset class under the Commercial umbrella. This allows for easy distinction between multi, and single-family residential - which is clearly NOT commercial.", "replies": [{"id": "fn6xeus", "text": "Gotcha, I\u2019ve never considered MF as commercial but mainly who the renter is, individual or business. Your explanation makes sense though.", "replies": [{"id": "fn7mc1q", "text": "Typically anything 5 units and above is considered commercial. Both with building code regulations and with the lenders criteria.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "fn7mp8u", "text": "CRE, do you have triple net leases on your industrial properties and does your properties location have a strong demand for industrial zoned I-3 property? \nThanks and I appreciate any input. I\u2019m asking because of 2 potential investments I\u2019m making and curious to the market tour in.", "replies": [{"id": "fn8fg6z", "text": "I find it varies by market and size of the space (or tenant size, really). One of the smaller (tertiary) markets I'm in, no one does NNN, so we're modified gross (CAM + tax/insurance bumps) even on 75k+ sq ft spaces. I'd love if it was all NNN but some tenants would rather have rent bumps than tax risk. Kind of rambling but my personal bias is to stay away from full service at all costs. Its why I avoid retail and office. Self-managing properties I just don't have the time to deal with ticky-tack maintenance requests. \n\nPersonally just have I-1 and I-2 at the moment. Always a fan of the more flexible zoning but I'd guess I-3 demand strength depends on how heavily the region has restricted it. For example, one market I'm in has vacant I-3 land owned by the regional economic development office, so no point paying a premium for an I-3 building over I-1 when there's land available. My assumption included buildout at that level will cost sufficiently more than the shell that someone would want to own and/or have new build to suit. Versus more flexible light industrial users.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fn6dnio", "text": "Based on your intention, I suggest you find a deal promoter that you trust and invest more passively. If they are honest and good, you\u2019ll accomplish your goals without having to do the work.\n\nJust know that the promoter/his team will charge fees and you need to focus on whether the deal is good for you and accomplishes your goals, as opposed to what\u2019s on their side of the ledger (don\u2019t ignore it either, but reasonable fees are fine and should be expected as they\u2019re doing the heavy lifting).", "replies": [{"id": "fn6y29f", "text": "How have people gone about this?  I\u2019m so generally skeptical that I\u2019m going to miss something and get scammed.", "replies": [{"id": "fn7e5xm", "text": "We invested through Meridian Properties in Memphis - awesome experience.  [http://www.meridianpacificproperties.com/](http://www.meridianpacificproperties.com/)", "replies": [], "depth": 3}, {"id": "fn7mwn4", "text": "Your thinking very smart. Promoters and brokers are always looking out for their own interests. They have very limited knowledge in many areas.", "replies": [], "depth": 3}, {"id": "fn7rdxi", "text": "You want to understand the basics of real estate investment, then when they send you a deal you can vet the deal properly. Step 2 you vet the company, the same way you would when you're buying a stock. How long have they been around, what is the capital structure. Are they incentivised to fee me to death, or do they get bigger bonuses based on performance.", "replies": [], "depth": 3}, {"id": "fn8g0yz", "text": "It\u2019s a total scam. There\u2019s no alignment of interests, those guys just make money on fees. They don\u2019t care about you or your investment.", "replies": [], "depth": 3}, {"id": "fn8gmr6", "text": "I would suggest only looking through your personal network. If there isn\u2019t anyone, maybe go through professional/business connections. \n\nFor us, we wouldn\u2019t accept money from a person one of my partners doesn\u2019t know personally. Most of my colleagues who develop and raise (at least the ones I admire, make good deals and return for their guys), keep a close investment group of personal contacts. All the social media and class-lecture type guys I find to be snakeoil salesmen.\n\nI don\u2019t think the bigger raise models stack fairly for anyone but those charging the fees.  I\u2019d never do a deal (promote or invest) where the capital ledger is getting charged for things like raise fee, or where there is an AUM fee just for managed value. Only value add services should get charged.\n\nI\u2019d look for deals where the promoter is deferring ~50-80% of any service fees, like dev management (and only accept market fees).  Also, a good dev manager will have close GC relationship. Good idea to get a feel for market rates in your area to know whether GC pricing is market or less (should be less if GC is a partner). Good dev manager should also be able to finance without paying big broker fees. Mtge broker isn\u2019t a total red flag but it better be a complicated finance model if a broker fee is showing up.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fn6ecbl", "text": "If you want someone to do all the work for you like that, you might find REITs more to your liking.", "replies": [], "depth": 1}, {"id": "fn6el8z", "text": "Look into syndications. Being a passive investor/LP with a successful group is what you\u2019ve described. \n\nREITs do not qualify as real estate investing in my book (and many others) as it\u2019s basically just a stock.", "replies": [], "depth": 1}, {"id": "fn6gjrs", "text": "Just invest in a publicly traded REIT - it\u2019s tax advantages, you don\u2019t have to do any heavy lifting, and still get mailbox money. Right now is a great time to buy, stock priced have been hammered but there\u2019s no fundamental value impairment. If you want defensive income look at multifamily, industrial, and data center REITS. Stay away from hotel, healthcare/senior housing, and retail REITS (except Simon).", "replies": [], "depth": 1}, {"id": "fn6h85b", "text": "All these comments are right on. If you have any interest in Western MT I\u2019d be happy to visit.", "replies": [], "depth": 1}, {"id": "fn6lbrx", "text": "If you want cash flow with not too much effort then just buy REITs or look into connecting with a local developer/investor and becoming an LP through them.\n\nCRE is NOT a low effort asset class if you're a direct investor. It needs to be carefully managed.\n\nNow, you could look into buying properties that are 4 units or less, which are generally more equity plays than cash flow plays. Find properties that will carry themselves while you do some value-add work and then reprice to market a couple years down the road.\n\nYou can generate cash flow off those types of properties as well, but you need to find the right deals.", "replies": [], "depth": 1}, {"id": "fn6lgvx", "text": "Never ever start investing in properties unless you can drive to them in 15 mins.  Because you're gonna need to.    You make your money twice, when you buy and when you sell.  Buy at discounts.  Never retail.  On the flip side, you can always lend money on deals.  Talk to a local RE title attorney that specializes in landlord tenant RE investor deals.  They love placing money.  Can't tell you how many times I've done a small lend on non-respa, commercial deals and tripled my money in a few months.", "replies": [{"id": "fn70j6e", "text": "This is very good advice", "replies": [{"id": "fn71lgi", "text": "Thanks bro!", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fn6uos8", "text": "We have started a company to do that. Feel free to PM me", "replies": [], "depth": 1}, {"id": "fn7e35e", "text": "I live in California and only thing I own here is my house.\n\nI have hundreds of units in the Midwest. It\u2019s not hard.", "replies": [{"id": "fn7svst", "text": "Did you go through a particular realtor or management company or another type of entity?", "replies": [{"id": "fn89hmi", "text": "I built my own in house Mgmt company which sounds complicated until you learn what a Mgmt company does. All you need is an on-site or local manager working part time. Through the use of technology you can do all of this very easy. And def better than 99% of property Mgmt companies out there. \n\nNot only do you save, and dona better job for your properties but it comes with incredible tax benefits if you can qualify as a real estate professional.\n\nGood luck.", "replies": [{"id": "fn89t4t", "text": "That\u2019s a really novel idea. Thanks.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "fn7htkq", "text": "I have some off market MF deals that I am waiting to get into after this covid in Atlanta! Dm for more info", "replies": [], "depth": 1}, {"id": "fn7lg3s", "text": "So many options for groups to be an LP with. Depends on how much capital you want to put into deals. Cadre is a great option if you want to pick the specific deals.", "replies": [], "depth": 1}, {"id": "fn7m5ou", "text": "There are many ways but the best way is to be involved in every aspect. You have to be in control of every part and not have one or more links in a group be in a position to disrupt and cause you to lose money. \n\nThe most important thing to know is, what state are you in? This will allow me to suggest a turnkey transaction and ongoing cash flow with limited physical presence required on your part. This will also give you the ability to maintain full control and not be dependent on any other party\u2019s. This will obviously also make a suggestion to the closest demographic in which to get the best market rental prices and at a consistent 3% or less vacancy rate.", "replies": [], "depth": 1}]