Investing in real estate in another state?

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bostonimproper
Posts: 313
Joined: Sun Jul 01, 2018 11:45 am

Investing in real estate in another state?

Post by bostonimproper »

I'm thinking of buying some investment property in the US and have about $100-150K liquid that I can drop. I'm looking for:
  • Regions relatively neutral to climate change effects over the next 30 years (minimal drought, fire, or flooding risk)
  • SFH in Class B neighborhood in turnkey condition
  • Ideally can buy in cash (for easier deal-making and to not take on unmanageable levels of debt to start with)
  • Cash flow positive with 70% LTV
  • Metro region is not hemmorhaging population
Based on the above criteria, I'm mostly looking in the Midwest, particularly Green Bay, WI and Detroit metro. Maybe also Providence, RI, but also wary because I'm kind of looking for geographic diversity in my investment and also Providence is such a college-supported town which... who knows what that means in the times of COVID. I'm using a combination of forum research and Google map "driving" to assess neighborhoods. Obviously there's not much I can do to walk through properties myself.

Questions for the ere-verse:
  • Has anyone purchased and/or rented out investment property from out of state?
  • How did you find local inspectors / property managers / handyfolk that you felt you could trust?
  • What are your thoughts on RE investment timing given the state of uncertainty in the broader economy?
  • Any resources for out-of-state investment and property management you'd recommend?

Lucky C
Posts: 739
Joined: Sat Apr 16, 2016 6:09 am

Re: Investing in real estate in another state?

Post by Lucky C »

The US Real Home Price Index (per Shiller's data, linked below) has only been higher that it is now over the period of December 2004 to October 2007. There has not yet been any decline due to the recession, only deceleration. I would not be surprised by a significant decline in home prices since the index is now 43% above the average since 1890, 54% above the median. There are good arguments that prices should be above the long term average since houses are bigger with more technology and higher building costs than in the past. However if you pull up the data and add a trendline, it looks like prices would have to fall around 20% to revert to the mean, and a decline from this high level could easily lead to falling below the mean for some number of years.
http://www.econ.yale.edu/~shiller/data.htm

So my best guess on timing is that it is like investing in real estate in December 2004. 10 years later in December 2014 the real home price index was 15% lower. While we only have that one bubble and crash to compare with the current home price index level, it seems to me that one would have to hope for continued record-low mortgage rates and continued asset bubbles in order to get appreciating home prices over about a 10 year time frame.

chenda
Posts: 1824
Joined: Wed Jun 29, 2011 1:17 pm
Location: Nether Wallop

Re: Investing in real estate in another state?

Post by chenda »

I have in another country if that is of interest ?

Mister Imperceptible
Posts: 1496
Joined: Fri Nov 10, 2017 4:18 pm

Re: Investing in real estate in another state?

Post by Mister Imperceptible »

Mister Imperceptible wrote:
Sat Jul 25, 2020 1:39 pm
Look at performance of real estate vs gold 2006-2012.
Mister Imperceptible wrote:
Tue Jul 21, 2020 3:48 pm
Raleigh-Durham NC

bostonimproper
Posts: 313
Joined: Sun Jul 01, 2018 11:45 am

Re: Investing in real estate in another state?

Post by bostonimproper »

@Lucky C My current thinking is that:
1. While housing prices at large are high on average, I think the biggest fluctuations in value in real estate are often based on hyper local conditions as well as relative value of the location versus others over time.
2. Home prices sometimes decline, but unless there's significant reform to address wealth inequality (which I don't see happening anytime soon), rents will largely remain stable or increase. As long as I'm cashflow positive I'm never forced to sell.

@chenda Yes, definitely interested to hear about your experience!

Lucky C
Posts: 739
Joined: Sat Apr 16, 2016 6:09 am

Re: Investing in real estate in another state?

Post by Lucky C »

Yes I agree, more important than the home price index is the value you get for your own particular property which can vary wildly. And cashflow is more important than home price appreciation/depreciation if you're going to Buy It For Life. High asset prices just aren't helping get you a good ROI now like you would have gotten in 2012, but if assets prices are high everywhere (stocks, bonds, real assets) then that matters less. In fact buying a house that is 20% overvalued could be a smart move relative to buying lots of stocks at today's prices.

RealPerson
Posts: 853
Joined: Thu Nov 22, 2012 4:33 pm

Re: Investing in real estate in another state?

Post by RealPerson »

@chenda: yes please!

chenda
Posts: 1824
Joined: Wed Jun 29, 2011 1:17 pm
Location: Nether Wallop

Re: Investing in real estate in another state?

Post by chenda »

I jointly own a small property in Portugal, right on the Algarve coast in a small coastal resort. It was a pretty easy purchase. Iberia is like Europe's Florida so there are lots of foreign buyers and bilingual lawyers who can deal with both the purchase and administration of monthly bills and tax. Property law is not hugely different but Portugal can be a bit overly bureaucratic, like you need to meet the bank manager to open a bank account, but its not a huge problem.

I am not expecting any significant capital gains and long term I have accepted it might decline in value (especially long term with climate change, Portugal is already suffering from serious water shortages) So its more of a consumption/fun item rather than anything else. If I was looking for a long term investment with some capital gains I would be looking in or near medium sized towns/small cities above ~ 45 degrees north, close enough to a major city to benefit from the economic overspill and supply lines, but further enough to avoid the problems. Ideally with a nice diversified local economy to include a strong agricultural sector.
Last edited by chenda on Mon Jun 14, 2021 11:15 am, edited 1 time in total.

RealPerson
Posts: 853
Joined: Thu Nov 22, 2012 4:33 pm

Re: Investing in real estate in another state?

Post by RealPerson »

chenda wrote:
Sun Jul 26, 2020 5:01 pm
I jointly own a small property in Portugal, right on the Algarve coast in a small coastal resort.
What are the most positive and negative surprises in owning the property? Anything unexpected or something that became a bigger issue than you thought? I am concerned about the headaches of maintenance and of course taxes. Whenever I have considered a second property, the negatives have always far outweighted the pluses. What is your motivation in owning the property? Would you do it again? Why or why not?

My reasons in considering a second property in another jurisdiction are protection against confiscatory policies, spreading of risk of social instability, diversification of currency and as a hedge against inflation. Since I have a US and EU passport, those are my obvious choices as I don't have to think about visas and other administrative misery if I choose to make a longer term move. My permanent home currently is the USA.

chenda
Posts: 1824
Joined: Wed Jun 29, 2011 1:17 pm
Location: Nether Wallop

Re: Investing in real estate in another state?

Post by chenda »

RealPerson wrote:
Sun Jul 26, 2020 10:04 pm
What are the most positive and negative surprises in owning the property?
The main thing to consider is just you are paying two sets of tax/utility bills. Things are generally significantly cheaper in Portugal. There have been no negatives other than having to deal with a few extra emails from the lawyer every month. We bought it for leisure but its good to be bit diversified.
RealPerson wrote:
Sun Jul 26, 2020 10:04 pm
My reasons in considering a second property in another jurisdiction are protection against confiscatory policies, spreading of risk of social instability, diversification of currency and as a hedge against inflation. Since I have a US and EU passport, those are my obvious choices as I don't have to think about visas and other administrative misery if I choose to make a longer term move. My permanent home currently is the USA.

I would definitely consider the EU if you were willing/wanting to make the trip a few times year for leisure purposes. Alternatively you could speculate on buying some rural land with a ruin on it (thats common in Iberia) and sit on it with a view to developing or selling in the future. You can get some bargains up in the mountains, but get good legal advice because southern Europe is not entirely free of property scams. I prefer to be invested in property than in shares or bonds, just because I understand property investing much better than financial products. There are quite a few Canadians owning property here, some even from Vancouver who come over for a few months at a time.

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