How to Invest in Rental Properties When Local Market Prices Are High

TL;DR

To invest in rental properties when local markets are too expensive, consider out-of-state investing. Start by researching viable markets with favorable cash flow, connect with local partners for on-the-ground knowledge, and utilize resources like BiggerPockets for networking and education. Effective due diligence, understanding local economics, and building a reliable team are essential to success in remote property management.

Transcript

are you looking to become a better real estate investor then hang on because you're about to experience another episode of the world's most popular real estate podcast the BiggerPockets podcast but before we get to this week's show I wanted to invite you to become part of our community biggerpockets.com the real estate investing social network the ... Read More

Key Insights

• BiggerPockets is a valuable resource for networking and learning about real estate investing, especially for those in expensive local markets.
• Partnering with someone who has boots on the ground in your target market can significantly mitigate risks associated with out-of-state investing.
• Due diligence involves understanding local market economics, property management, and leveraging local expertise to assess properties.
• Utilizing strategies like buying, rehabbing, and refinancing can effectively build a rental portfolio even in less expensive markets.
• Building a reliable team, including property managers and local agents, is crucial for successful out-of-state investments.
• Investors should be wary of condo associations due to potential unexpected fee hikes and assessments.
• Monitoring and managing property managers closely is essential to ensure timely rent collection and property maintenance.
• Maintaining a flexible job or schedule can greatly assist in managing real estate investments effectively.

Questions & Answers

Q: How did Mehran Kamari get started in real estate investing?

Mehran Kamari started by educating himself through books and online resources, eventually discovering BiggerPockets. His initial motivation was to buy his own home, which led him to explore real estate as an investment opportunity. He bought his first primary residence in 2012 and began renting out spare rooms, gaining firsthand experience in landlording.

Q: What role did BiggerPockets play in Mehran's real estate journey?

BiggerPockets was instrumental in Mehran's journey by providing exposure to real estate investing and offering a platform for education and networking. It helped him connect with other investors, find partners, and learn about different investment strategies. The community support on BiggerPockets motivated him to take action and build his portfolio.

Q: Why did Mehran choose to invest in Milwaukee, Wisconsin?

Mehran chose Milwaukee due to its favorable price-to-rent ratios and stable market conditions. He emphasized the importance of understanding local market dynamics, such as employment rates and population growth, before investing. He also relied on local partners, like Don, who had in-depth knowledge of the area to guide his investment decisions.

Q: How does Mehran manage his out-of-state properties?

Mehran manages his out-of-state properties by partnering with local experts who handle the on-ground tasks, such as property inspections and management. He uses tools like Google Docs for communication and documentation, ensuring that he stays informed about the status of his properties. This partnership model allows him to effectively manage his investments from afar.

Q: What challenges has Mehran faced with property management?

Mehran has faced challenges with property management, particularly with a manager in Indianapolis who was consistently late with rent collection and report delivery. This experience highlighted the importance of having reliable property management and the potential impact of poor management on investment success. He advises new investors to thoroughly vet property managers and address issues promptly.

Q: What advice does Mehran offer for finding out-of-state partners?

Mehran advises investors to be active on platforms like BiggerPockets to connect with potential partners. He recommends looking for individuals who are knowledgeable about their local markets and have similar investment philosophies. Building trust and ensuring alignment in goals and ethics are crucial for successful partnerships.

Q: How does Mehran approach financing for his properties?

Mehran uses a combination of financing strategies, including traditional financing and the buy, rehab, and refinance method. He works with a portfolio lender for financing and occasionally purchases properties all cash, rehabs them, and then refinances to pull out equity. This approach allows him to recycle his capital and expand his portfolio.

Q: What is Mehran's long-term goal in real estate investing?

Mehran's long-term goal is to achieve financial freedom and replace his job income with rental income. He aims to build a substantial rental portfolio that generates enough cash flow to allow him to focus on his passions and spend more time with his family. He plans to reach this goal within the next four to five years.

Summary & Key Takeaways

• Mehran Kamari shares his journey of investing in out-of-state properties due to high local market costs. He emphasizes the importance of using resources like BiggerPockets for networking and education. Kamari discusses his strategies for building a rental portfolio, including partnering with local experts and leveraging the MLS for property deals.

• Kamari highlights the significance of due diligence and team-building when investing out-of-state. He advises on the importance of understanding local market economics and having reliable property management. His experience underscores the necessity of having boots on the ground to ensure successful property management and investment outcomes.

• The podcast delves into topics like financing strategies, the pros and cons of using leverage, and the importance of maintaining a flexible job to support real estate ventures. Kamari's insights provide a roadmap for investors facing expensive local markets, offering practical advice on overcoming common challenges in real estate investing.