Are you considering buying real estate outside of the state you live in?
In this video, I'm going to show you the things that you need to consider
before you jump in and start buying property
outside the state where you reside
and then how to structure those deals from a tax and asset
protection standpoint to make sure that you're going to be protected.
All right. Let's get started. All right. So here's the thing.
I know what it's like buying real estate out of state.
I myself invest outside the state which I reside in.
There's a whole reasons why I'm not going to go into why
I don't invest in Washington state, namely the government.
But like I said, I'm not going into that because they screw you over.
Excuse me.
The thing about it is that when you're buying out of state,
you want to make sure you're doing it the right way
because there's a lot of risk that comes in to buying property out
the state in which you live in.
So here's the thing.
I know when you go out there, people can say, hey, there's great deals
outside in these other states.
And there are I as I stated, I invest outside the state.
But here are the things that I like to look at.
I'll show you over here.
First thing I'm going to tell you, you want to do, if you're going to buy
real estate outside of your state, number one, visit the area.
All right.
This is important.
You want to go out and understand the area in the market which you're investing in.
You know, there's nothing that you can.
I personally believe that's going to be able to replace boots on the ground.
If you're going to go out there and you going to try to use
the Web and Zillow and all the other things out there,
data tree and things
to prop string to try to identify the market and get a sense for it.
I'm sorry, you're probably going to buy yourself a problem.
All right.
If you don't know someone who is operating in that particular market,
that can tell you, hey, you buy in this side of the street, you're good.
You buy on that side of the street, bring your shotgun to collect the rent
because they don't pay.
Those are the types of things you just can't really discern
from looking at, you know, Google Earth and other apps like that to try to see
what the property looks like, you got to go out there.
I remember when I first started buying out of State, that's the thing I did.
I did actual buying tours.
I took an entire week where I went.
I visited the markets where I intended to buy, and I actually aligned myself
with a realtor there to show me around,
although I wasn't using the realtor at the time,
but I still went there with with that in mind
that I wanted to get a sense for the area.
So then I geographically marked out the areas that I needed to stay away from.
So that's the first thing I would tell you to do.
Make sure that you visit the area where you're going to buy number two.
So now that you've settled on the area where you want to invest
in, then I would make sure who's going to manage the property.
So the next thing is going to be property management.
You got to be looking at that as well.
All right.
So I ran into this problem when I went out and I found this area,
the person that I hired to manage my property initially
in Indianapolis, well, that person was stealing from me.
Well, actually, that individual didn't.
He died in as kids were stealing my rent rental income.
And so this was my mistake.
You know, I was a rookie. I was just making it.
It was my third deal that I did.
And I figured out here, I need to align myself with stronger property managers.
So then what it is
I started looking for better property management because that's key
to making this a success because you're not going to be there.
And so you want to make sure that you have someone who is looking after
your interests and that's going to be your property manager.
And the best thing to do, of course, is get references from that property manager
to ensure that other people validate exactly what they're saying.
So you want to be looking at that now if you're going to get financing,
one of the things you could do, too, is try to get it set up, financing,
look, maybe with a community lender.
All right.
Now, I think this is important because if you go out there
and you find a community bank that is willing to invest into their local
market, which a lot of them are, that's why the community lenders,
maybe that's who you want to use for your financing.
Now, the reason why I'm going to look for a community lender in a market
is because they know the area better than a national bank.
So if you're dealing with something where the comps
and you're looking at the market, you've got this mortgage broker,
they they're in Arizona and they're trying to determine
whether or not the property comes out.
What the ask is in North Carolina, Shelby County, well,
they might not be able to do that because they don't know that
market very well, whereas that community lender, they're aware of the market.
They know what the tenant or the the the client tells like there
and they can maybe take on more risk or they're willing to evaluate it
differently than someone else that is typically writing what we call
a qualified mortgage, which is that Freddie Fannie stuff.
So I would try to align yourself with a community lender.
Well, there are more points, of course, that
go into this, but these are the big the big three that I have, of course.
And number four, you want to make sure that it appraises.
All right.
And that kind of goes into
into what we're talking about there with using the community lender.
And that a lot of times, you know, when you're looking at property,
it may not appraise for what the the seller is asking for it.
Now I do put this with a bit of a caveat here on the appraisal
because I buy property on occasion
that does not appraise for what it's being sold for.
But that's not the reason I'm not buying for appreciation.
I'm buying for cash flow.
So if the property cash flows at a
at a rate in which you're comfortable, it's giving the return that you want.
Well, then maybe that's not such a big deal,
but it's good to know you got a strong appraisal on that property.
And of course, the fifth thing is you want to have a good inspection done
when you're buying out of state, you want somebody to go through there,
try to get a warranty, too.
If you can do it, get that inspection done.
And the reason why that's important, because you see, ever know
what type of defects you're going to have, the last thing you will do
is get into an out of state property.
And of course, maybe it was local.
You could go out there and you could fix it.
Maybe it's door trim or door jamb that's off that needs to be repaired.
Or maybe it's some plumbing works like plumbing work that needs to be done.
You could actually do that.
But when you're out, when it's out of state,
you're not going to be the one doing that. So there's going to be a cost there.
And then your property management, depending on if you did a good job here,
maybe tacking on 10%, 15% to that repair cost.
And so you want to make sure on the inspection
you're determining whether or not there are problems with that property.
So you're not buying those problems. Now, once you got that nailed down,
you figured out you're going to buy the houses.
Then the question becomes, how are we going to set this deal up?
What should I be doing?
Well, if you're using a local community lender
here to buy it or you're buying for cash, then what I would do from a structuring
standpoint is I would create a limited liability company
in most instances, or I would use a land trust.
Now, I know you're probably watching this right now.
You're thinking to yourself, Well, Clint, which one should I use?
That's just the point. It really depends.
And that's why,
you know, I would encourage you, if you're sitting there right now
watching this video and you can't decide where you want to go
and you're thinking about investing out of state, there's a link down below in the
in the show notes for a free strategy session.
Yes, you can reach out to us and we'll give you a free strategy session.
We'll help you analyze whether or not in the market you're investing in.
It makes more sense to either use a land trust or a limited liability company.
And what are what are we looking at there when we're making that determination?
Well, number one, how are you structuring the deal that's going to be important?
Number two, we're also looking at what do you want to do with that
deal later on down the road?
Do you want to do a refi on it?
Maybe you're buying for cash.
And so you have to figure out what your your plan is, your near-term plan as well.
And then what is your ultimate exit strategy with this deal?
And so one of these structures
here may be better than the other, depending on what it is you're doing.
So you're going to want to get that set up, one of these types of entities set up.
And then if you want anonymity, I would also have a holding company down
here.
You know, I talk about this a lot of Wyoming limited liability company
as as my holding entity for my LLC.
These are tied into my structure as possibly a trustee or something
like that for anonymity purposes, so that when I close
my tenants, my out-of-state tenants do not know who the owner is.
I think that's very important.
I've dealt with many clients that had their name
associated with the property and it's all the way across the country.
I remember the one of our clients lives in California and is served in his home
by a process server for a property he owned in Florida.
I mean, how look how far that is.
And they were able to track him down and serve him right then and there.
So I would look at using anonymity to buy out of state.
Setting up the right structure in this
method will really help you propel your investing forwards.
Be sure to click on the show notes.
Take advantage of that free strategy session we're offering for you
to help move the conversation forward, to help you decide, you know, hey,
what are the things that I need to be focusing on
for that next deal that I plan to take down that's out of state?