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.
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!
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.
- 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.
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!)