We’re heading out (mid) west to buy real estate

Last year, at Camp Mustache 2015, I made a vow.

I sat around a campfire drinking wine with some of my favorite people on this planet. Seasoned real estate investors, radical minimalists, early retirement superstars. And I told them that this year would be the year I would invest in out-of-state real estate.

Everyone was so encouraging and so optimistic. Maybe it was the fireside bonding, maybe it was the pot fumes, but I felt like I was mere minutes away from being a real estate mogul!

I got home from Camp Mustache and jumped right in – poring over Bigger Pockets, calling all my investor friends, and starting to pile away cash for my new venture.

And then, nothing. Nada. I had my plan and my cash but I just couldn’t pull the trigger.

Until now.

But before I tell my Big Bad Plan, let me give you some background.

Why out of state?

Portland has been good to us. We have two investment properties right now – a single family home with a 1% rent to value ratio, and a triplex with a .85% rent to value ratio.

Would I make these investments again, given what I know now? Probably not. There were certainly better deals to be had in Portland in 2011 / 2012 but we’ve also been lucky enough to buy two properties right before the Portland market exploded which has effectively made us millionaires. Hard to complain about that.

Why not buy in Portland again?

Here’s the deal: Portland has exploded. It’s now one of the hottest real estate markets in the country. Both of our properties have doubled in value in the past few years. Which means it’s practically impossible to get 1% here. I’m sure somebody much smarter and more ambitious than I am is making a killing here, but I just can’t find a deal worth investing in.

My knowledge of the area and my connections here mean that I would be way more comfortable investing in Portland but the truth is I can find a way better deal elsewhere.

What’s the problem?

Plain and simple – I’m scared.

A. I’m a real estate minion. Not a mastermind. Not even a master. This is the next step and I am dying to take it, but I’d be lying if I said I wasn’t grappling with some serious imposter syndrome.

B. Right now we own four units across two properties. All within a 10 minute drive of our apartment. Buying those was hard enough – I can’t imagine what it’s going to be like to branch out geographically. The idea of buying a house that I’ve never seen in a city that I’ve never been to and renting it to people that I’ve never met terrifies me. But I can’t ignore the truth – we will get better returns if we invest elsewhere.

C. Now that I’m married, my financial decisions take on a little more weight. While I bought the other two properties, I only had to think about myself and my risk adversity. Now, my money is OUR money and my risk adversity is OUR risk adversity. I feel a lot of pressure to make a good investment and that adds to my hesitancy.

The best investment vs a good enough investment?

There are some AMAZING real estate deals out there. If you’re staring at one of them, congrats!

I’m not.

Here’s my issue – in general, it takes a bit of effort to find an AMAZING real estate deal. If you trying to find a brand new market, you have to pore over demographics, analyze regions, and have an appetite for data.

I’m working full time with a practically full-time consulting side gig, and a blog, and I manage four rental units (okay, Andrew does most of the work, but I help!). Frankly, I have the money and I have the passion but I don’t have the time.

For months I was frozen feeling like I needed to get the best deal. Was a 1% rent to value ratio enough if I could get 2%? Should I invest in the first market I hear about or keep digging for an even better market?

And then finally (finally!) I gave myself permission to get an OKAY deal. I’ve had money sitting in an account for almost a year now, doing nothing. A good enough investment isn’t ideal if I can get an AMAZING investment, but at this point my choices are no deal or a good enough deal.

And I pick good enough.

So what’s the plan?

Let’s rewind. A few weeks before Camp Mustache, I got rear-ended. I’ll give you the full story in another post but here’s the short version: I got $10,000. Then, I took some consulting income from 2015 and made it $15,000 and I have recently decided that was money I am ready to lose.

I’ve decided to take a baby-step and buy a rental property in the Midwest. Andrew has given me his seal of approval (brave man…) to try this out and we’ve decided that if it’s a successful investment then we’ll scale next year and hopefully buy 4-5 more houses or a multi-plex.

The details

  • I’m going to use the $15K as the 20% downpayment.
  • I’m not fully decided on a region yet, but I’m looking at Texas, Alabama and Missouri. Suggestions very welcome :)
  • I’m going to work with a turnkey provider.
  • I’m aiming for 1.5% rent to value ratio but I’m considering anything above 1% workable.

What’s next?

Because this is an experiment, I’m going to be posting updates so you can follow this process live.

I’ll let you know when I find the property, finalize the deal, and start raking in the dough (or not -AHHHH!)

Want to see what happens next? Read Part 2. 

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  • Our Land Lord is getting ready to sell our current house in North KCMO. He’s offered it to us before listing, but if we pass it might be something you’d enjoy. It’d probably sell for about 85k (3 bed, 1.5 bath, 1300 sqft), and it could for sure rent around $900. Coveted school district, on a quiet cul de sac, convenient location. Let me know if you’re interested!

  • What you’re doing is so ballsy — I love it. We own an out-of-state property, but it’s not super duper far from us, and we’re renting to a family member… so pretty much a totally different deal from what you’re looking at. I’d love to invest in more real estate, but I’m totally scared too. Plus I don’t want to get more mortgages. The whole thing just feels like so much trouble. Just saying that to let you know you are not the only one with those feelings! But I completely admire you for getting out of your comfort zone and making the out-of-state rental happen!

  • That sounds exciting. I really wanted to get into real estate did a bunch of bigger pockets reading but then discovered Mustache and well now I’m more about saving.

    Also I want my kids to travel internationally. So I seem to have competing goals.

    Can’t wait to read more about how this is working out for you.
    The Roamer recently posted…Big Savings & Happiness, Can you have both?My Profile

  • You are far braver than I am. Long-distance landlording isn’t something I will likely ever be comfortable with. I will be interested to read about how it goes when the time comes.

  • Wow, it sounds like you’ve got it all figured out! Portland is beautiful and thriving, but so are so many areas in the Midwest! Finding the right home for you or you and your family is a tough task that requires a lot of time and research, and it seems like you are well on your way on the right track! Nice post! Thanks for sharing!

  • Good luck Emma, looking forward to seeing how it turns out. I did my first out of state (out of country actually) purchase at the beginning of the year in Atlanta, just closing on my 2nd.

    You make a great point about getting over analysis-paralysis by giving yourself permission to find an OK deal. I had to get over that myself as well…part of the problem I think is when you head over to a resource like Biggerpockets, you rarely read about people talking about “ok” deals. It feels like everyone is talking about how awesome their deals are, how they won’t accept anything less than 25% CoC, 2% rent to value, buying 20% under market value etc. etc.

    Leaving aside the fact most people sharing numbers like that are full-time investors putting a ton of sweat equity into each deal, at the end of the day, I realized you’re much better off with 1 deal with “ok” ROI than 0 deals with “amazing” ROI.

    How are you planning to screen for a good turnkey provider, through referrals from other investors?
    Nate recently posted…How Much Should I Have In My 401(k) At My Age?My Profile

  • Thanks so much for sharing your adventure plans with us! It is so refreshing to hear someone not claim to be a real estate connoisseur. I definitely feel like you have something good on your hands and you bring up some questions that everyone should be asking themselves before stepping foot into a plan like yours. Keep the good articles coming!

  • I love investing in new properties. I love how much thought you have put into this post! You really are thinking outside the box on this. Thanks for sharing your experience. It was really helpful for me.