How do you enter new real estate markets? Broadcasting from his hotel room in Casper, WY, after visiting a property he did a remote fix and flip on, Paul Lizell dives into some other potential properties to invest in, including multi-units and a self-storage facility. Break free from your limiting beliefs and think seriously about investing in markets outside your normal comfort zone. Join Paul to find out how.
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Entering A New Real Estate Market
In this episode, I’m going to be going over entering new markets here. I’m out here in Casper, Wyoming in my hotel room. I was out here looking at a fix and flip that I had done. It’s all completed and on the market looking great. We’re getting great activity on it. Hopefully, it moves quickly. A lot of showings. Let’s see where it goes. It’s not even a week that has been listed here. I’m hoping to expect some offers in the next week or two. I’m out here looking at other properties potentially. We were looking at one other one to fix and flip at $85,000, but there have already been people. I told Aisha, I figured we’d get outbid by the homeowner on this when somebody who wants to live there in owner-occupant and the highest bid is around $105,000. We’re out of that one. It’s the numbers don’t work for an investor, but it does work for no owner-occupant.
I’m out looking at small-level apartment complexes. We got a 12-unit and a 9-unit complex that I’m looking at right here and made offers. They’ve listed the twelve units listed at $475,000. We may know for $420,000 on that one, they countered at $450,000. The nine-unit, which is three duplexes and one triplex and four separate buildings they’re at $320,000 and I offered $285,000. They countered at $300,000. We’ll probably meet somewhere in the middle there. I’m hoping to be in the $290,000 to $295,000 number at most. These properties need a lot of work. Heavy renovations. They need kitchens and bathrooms. Two of the four buildings need new roofs. You have a new siding they need, a bunch of new windows, a lot of landscaping, and some concrete works.
What I was originally looking at is potentially a $350,000 budget. I’m moving up to that $424,000, $425,000 number. That is with a manager to somebody who’s going to be my project manager on this whole rehab project here is the realtor I’m using out in this area. He knows the market well. It’s great as far as the location because it has great transportation, there are shopping and food, and all that stuff all around. There’s a lot of new construction right around it, which is bringing the values up. It is also helpful.
What To Look For When Getting Into A New Market
When you’re going out to a new market, I want to do more here. It’s one of the reasons that I went out here. Most of you know, I don’t like to go to the properties, but if it’s an area where I’m thinking long-term or potentially thinking of moving to Wyoming where I am. I am looking at the checks, whole area, and places in around that Jackson Hole area. It’s pricey, but the real estate taxes are dirt cheap. Cost of living a lot lower. Insurance is going to be lower. Schooling should be decent. There are going to be smaller classes. It’s a higher-end area. I imagine I have some good private and potentially public schools there. Those are the things we’re looking at.
When you’re going to a new market, those some of the things you need to look at. Know what the cost is for utilities and property taxes because property taxes are impounded. You over the course of this show are important in cashflowing properties. If you’re in areas where taxes are high like New Jersey and New York, your cashflow is going to be diminished. Those places in California and there are other states too that are high. You’re going to get killed on cashflow and it’s going to keep going up every time your cashflow is going to get crunched more and more. Those are areas I don’t want to hold long-term.Make sure you're investing in areas that are desirable and growing. Click To Tweet
I do have a bunch of Pennsylvania rentals and the taxes are not bad on those. They’re decent, but I may move some of those into this area here out in Wyoming and more in Texas. Some other markets that are great for the long-term like Ohio, Indiana, and Tennessee. All of these are great markets for long-term rentals. Oklahoma could be good too, in some areas as well and even Kansas. You’re going to have a low cost of entry. You’re going to have low taxes and low insurance costs. You’re going to have lower rents for sure but your cashflow is not going to be crunched as much. You want to make sure you’re in areas where they’re desirable and it’s growing. What I like to do when I’m looking at new areas to go to, let’s say you’re in a major hub and growing area. You’ve got that circle and that’s pricey. I go outside that circle, there are two rings. I’ll go outside, one, your outer ring and I’ll try to buy it there. Another ring outside even further because the figure in 5 to 10 years growth will go out to those areas.
That’s where you’re going to get major appreciation and lower cost of entry. Things to look for when you’re entering a new market and you want to do that. You want to set up a target and then go around there. Find out what is around there because there could be negative things. As far as landfills or other negative things in that area. Flooding because you don’t want to pay for flood insurance, which is another costly item in holding rental. I don’t ever get a property in a flood area unless it’s a vacation rental near the ocean or a Lake that will make up for it with higher rents. Otherwise, it’s going to eat up your cashflow and looking at some of the municipalities, townships, what they charge for trash, water, and sewer.
For example, I have a duplex up in Portland, Pennsylvania. What they charge for water, sewer, and trash is ridiculous. It is insane what the monthly cost is for that. That’s a property I’ll be fixing and flipping and I will never hold that area. It’s something that’s important when you’re looking at areas where you’re going to buy properties. My target market, as far as where I’m looking to not the best advice, but this is what I’m personally doing. I’m going to be looking more for rentals out here in Wyoming where I could put these properties into a 1,000-year dynasty trust and get extra protection and potential tax benefits.
I’m also going to be looking at properties in Texas. Potentially, some New Mexico too can be lower cost of entry and lower taxes. Nevada could be a market someone is looking at there. I’m going to also look at these low-income tax states where people are moving to. If you are interested in looking at what areas you’re going to have growth over the next decade, the no income tax states like Wyoming, Texas, Florida, Tennessee, Nevada. There are a total of seven. Alaska, Oregon or Washington. Washington, I would avoid that state for the most part. It got other high costs there and issues that you don’t want to deal with. Those are good markets to look at to hold rentals long-term. Idaho got great growth too. They do have higher taxes, but we have a lot of California people move into Idaho, Salt Lake City, Utah, Montana and Wyoming to try to ruin this state with their politics. Hopefully, they won’t.
Hopefully, people will move into are sick of what those politicians do out there and vote the right way. Time will tell on that. I know they’re trying to flip Texas, but good luck on that. You’re not going to be able to do that easily. They’ll always have Austin, but not much outside of that. These are the things that you’re going to look for when you’re going into new markets. They’re important things to buy and hold. Not just buy and hold though, but fix and flip because you’re going to get appreciation and there are many people moved in these markets. I was listening to Ken McElroy, who has a great YouTube channel. You should take a look at it. He gives great info on real estate in general.
There’s a 30-month supply in Manhattan, New York of real estate where the rest of the country is 31 months. Everybody is getting out of there and I can’t blame them. California is going to have a similar thing, New Jersey. Other states that are highly undesirable, people don’t want to live there anymore and move out of there. These are markets you want to avoid and you want to look at the low-tech state, low cost of entry, and good long-term growth. I do like Indiana and Ohio always. They’re Steady Eddie states. You’re going to get your cashflow is going to be good. You’re not going to get much appreciation, but that’s okay. If you’re looking for cashflow, a great market to be in is Michigan. I like Michigan long-term too. I’m still bullish on it especially outside of Detroit and Grand Rapids. There are many other cities near where you could hold rentals and do well on the cost or low.
The taxes and insurance costs are probably affordable there too. That’s another area I’m going to be looking in more Southern Michigan for rentals. You might get some appreciation. Some of those markets there, especially the suburbs going out an hour or away from Detroit where you’ll have a good demand long-term. If Detroit ever rebounds at some point, then those things will do even better. Detroit itself will do better. That’s my short show here from Casper, Wyoming. This is what you’re doing when you’re looking for a new market.
These are the things you need to look for and know what you’re getting into. That’s why it’s good to go visit a new market when you’re looking to get into a new market. That way what the landscape is like and you get a feel for things, how many for sale signs there are, and what inventory looks like. I know inventory is short here. There’s a high demand for rentals, which I’m looking at these properties for because there’s such a shortage of rentals here. Some I’m bullish long-term here in Wyoming and also Montana. Montana is a little bit more costly depending on where you want to invest there but great states to invest in long-term and great states if you like skiing as I do. Take care.
What Mindset To Be In When Looking At A New Market
Following up on what we’re talking about, I did go visit the multi-unit property again for the third time since I’ve been here. I took a look at a self-storage facility too and it’s also for sale. Getting the numbers on that shortly, but it’s a newer place. It looks decent. It has RV parking as well. Two different parcels. One is 1.6 acres, which is what the facility is on and then there are 3.6 to 3.9 acres where the RVs are stored. A lot of wasted space over there too, could add more units if the demand is there for the self-storage. That’s something I’m looking at there too.
I want to get into mindset and what your mindset needs to be if you’re looking at a state or go into a new market. Most investors I talk to don’t understand how I buy blindly and all these different markets and then resell without ever going to visit the property. It’s a mindset. Most investors are control freaks. They want to see and touch everything and know exactly what they have. You don’t need to. It’s not that important. I don’t know why people feel it’s important to go see the place and know every little aspect of it. You’re looking at these properties. There’s a value of the property. Either buying it at a bargain price or you’re not. You either make a profit or you lose because of your own stupidity. You’ve got to look at the numbers and the numbers will tell you everything. It’s a numbers game. It’s not go see it, touch it, feel it, waste my time and energy, go and do all that BS. That is a monumental waste of energy.Your mindset is your most important thing in real estate investing. Click To Tweet
I don’t know why many people spend much time going out and looking at these properties. Have somebody else do it for you, get video, and get pictures. The quality on these iPhone cameras are out of this world. You get a good idea from pictures and send a company like BPO Photo Flow to go look at properties for you and paying them $30, $35, $40. You got to take a bunch of pictures so you don’t need to and they’ll even give you a short little write-up on the property. Your mindset needs to be, “I need to find deals. I don’t need to go out and look at these properties” If you can’t figure out how to get into that mindset, don’t get in virtual wholesaling because you’re going to fail. It’s not going to work for you. Stay local, find local rentals, and find local properties for you to fix and flip because you need that and you feel more comfortable that way.
I don’t want to tell you how to feel, but for me, it’s easy. I like virtual investing better. I do like that I can come out to a place like Casper, Wyoming here and go check out the market to see what it’s got both commercially and residentially, what the rents are, what the resales like, and what the properties on the market are like. I had a whole idea of what each market has. Each market is similar and different. Most markets have a ton of similarities. You’re looking for a Walmart in that area potentially, Home Depot, or Lowe’s, and some major department store like that. You know that there’s a large enough city for growth. If you’re looking in real rural areas, which I do at times too, you’re not going to have that. It’s a smaller town. It’s more retired people or people looking to get out in the middle of nowhere. There are plenty of those people. There are buyers in that market.
For some reason, some investors get in this mindset that there aren’t buyers for rural properties. This whole pandemic has switched. Everybody’s thinking and you have a ton of people looking at rural areas and way more now than ever. It is the market that has come to what my investment style was, which is great for me because we’re having a pattern of year too. I know I’m going to run into more competition buying these rural properties because of it, which is fine. I’ll shift and adjust from that. Wherever the people are flocking to, I’ll shift and go to another spot, market or area that’s being neglected and I can pick up things at a good price.
I want you to understand your mindset is your most important thing in real estate investing. If you want to virtually invest and have rentals in different states, you’ve got to have the right mindset or you’re not going to be able to deal with it. For these properties here, my realtor who already does manage properties would be my property manager. He would be my boots on the ground. He’d handle everything. I may have a website like Buildium that handle the rent and everything. I can collect and get all the rents that way. I’d rather have that personally because I want to come directly to me as much as possible and then I’ll pay him out or it comes to me and I could probably set it up a percentage goes to him or his company and pay it that way.
There are many different resources out there for you to use that you don’t need to go to these markets. Maybe you want to go see at once like I am here. Now I know what it is. The only reason I’d come back out here again is to go manage and look at the project as it’s going along or because I enjoy it out here. Maybe one vacation out here. You’ve got the Platte River out here. You could do some fly fishing. There are ski mountains for skiing here locally. They’re a little smaller. They’re not as good as they are in Jackson Hole, but it’s still going to be decent skiing out here. It’s a nice area and it’s close to Denver, spend 1-hour and 5-minute flight from Denver. It’s easy to fly to Denver then fly up here.
You have to have a mindset that you’re okay owning in an area where you can’t easily get to. If you can’t shift to that mindset, don’t look at virtual investing. I love virtual investing and that’s the mindset I’d rather have. I’d rather have things in areas where I can’t get to because then I’m less likely to go do anything to those properties. If you want it for maintenance, send somebody out there once every six months or once a year to take a look at the property, assess it take pictures, photos, what needs to be done, what doesn’t need to be done, and you can keep up with it that way. It’s easy to do it in this day and age with technology guys. There’s no reason for you to have rentals within twenty minutes of you, which many investors near me in Pennsylvania.
I want to be within 20 or 30 minutes of my rentals and I don’t get that mindset. Don’t over manage everything. These guys are over-managed control freaks and there’s no reason for that. You don’t need that. You can sell manage without a property manager out of your market. You can hire a realtor. Here’s a little piece of advice. What I do a lot of times when I’m running these properties that you have two different options. If you want to do it low costs and make as much money as possible, get a lockbox put on that unit. You can get an electronic lockbox if you want. Give out codes that people go see it then have them go to either Cozy.co to sign up in an application or Buildium or whatever other resource you’re using or Propelio. There’s a bunch of other ones out there that do similar things and then you manage the whole process. You send out keys or you have somebody get them keys and get them access there and then they’re moving in.
The lease is all done through DocuSign. Everything you need is done electronically. They will scan and email you all of the documents that you need, their pay stubs, their bank statements, their application, and everything else. Everything is going to be done that way. It’s simple. If you want to go the realtor route, which I’ve done several markets as well. You have realtors take them there. Realtor gets, does, and takes the application. Does everything and make the recommendations to you that you should or shouldn’t take these people based on such and such. They either get the first month’s rent or half the first month’s rent, whatever you want to do. I would entice the first month’s rent because they are going to be more motivated to rent it for you than getting a full month’s rent as a nice commission. You can either keep them on as property manager and have them handle it or do what I do where I take it over from there. When I renew the lease, it’s all done in DocuSign as I do.
With all my tenants when it comes to renew, everything is sent to them through DocuSign and they sign it. Everything’s updated and rent increases. Everything can be done through email and text messaging at this point. As far as notifications, my tenants reach out to me through text message or email when they have any issue or reach out to my VA. One of the other, you can have everything go through your VA. If you want to get larger and have more units, have a virtual assistant help you with doing that. They can manage all your properties for you if you train them. It is simple, as far as finding contractors out in that area, not hard to do. In states, it’s easy to find guys and easy to find a handyman. If you’re dealing with a realtor, they will know local contacts, handyman, HVAC, electricians, plumbers, or whatever you need. It’s easy to manage properties virtually. I want you to understand that and get in that mindset.
I’m going to end on that. I hope you enjoyed this episode and we’ll be trying to increase how many we’re doing. I’ve been doing two a month. I’m going to try to increase this and maybe do one per week to get more episodes out there, get more information to you, and get more good guests booked for you with all details. I do plan on having my agent out here in Casper on an episode, he’s going to give information. He has detailed numbers on this Casper market from 2005 on. That’d be an interesting deep dive on a market for a fifteen-year period here. I’m looking forward to that interview on that one, look for that one coming up soon. Thanks.
- YouTube – Ken McElroy
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