Out-of-State Investing: The Proven Strategies to build an Empire

Hello YouTube and welcome back. I'm Christian, this is Cody. We're joined by a bunch of people today. We have Solly, who is hosting with us for all of January, our co-host Solly Cayetano. Check her out, uh, on Instagram, lattes.and.leases. Same exact name for her YouTube channel. We're also joined by Caleb and Chuck. Conveniently, their YouTube channel is also Caleb and Chuck. So everyone, welcome to the channel. Today's topic, we're going talking about out-of-state investing. Now a lot of people have questions. Do I do it? Don't I do it? Is it too hard? How do I manage these properties? We're going to answer all these questions with the experts. We have a young team. Sole is 24, Caleb and Chuck are 19, Cody, you're 23 now.

You're in your 30s.

And I'm old. However, uh, Cody and I invest out of area. I'm going to let everyone else introduce themselves, but I'm going to start with, uh, Sole. Welcome back to the channel. Tell us a little bit about where you live and where you invest.

Thank you. So I live in Silicon Valley. It is literally the number one most expensive area in the entire country. And I invest out of state. So I originally started investing in Cincinnati, Ohio. It's about 2,500 miles away from home, um, buying everything virtually, not really flying out there for anything. And now I expanded into Augusta, Georgia as well, which is right outside of Atlanta.

So what you're saying is you can drive over to see your properties whenever.

I actually have a lot of properties. I've never been to Augusta, Georgia. And so I'm actually going for the first time sometime in January to just kind of see what I bought. And hopefully I like the area. That'll be fun.

How many properties did you buy in Augusta, Georgia? Like how many physical buildings do you own?

4, I think. There's 3 single families, an office building. I lose track. We're under contract for one, we'll close next week. So By the time this comes out, I told you guys I might have a warehouse under contract too. So there's a lot of things to see. It'll be fun.

You're buying so many properties you forget what you own. That's starting to—

I'm sure it guys happens to you. I mean, you guys have a portfolio 3 times as big.

If you drive by a black and white building in Moses Lake, it's ours. That's how we remember. We just color code.

Yeah, we had to color code all of our buildings. I have gone there to post notes a few times and I get home, I'm like, oh shoot, we bought another building. I forgot that one. So that happens to us too. That's— that is awesome. Caleb and Chuck, how about you guys?

Um, yeah, we own 28 units all in Texas. We live in San Diego right now. Yeah, not exactly cheap, kind of similar to Sully. We're in California, isn't really affordable here at all. We're about 1,500+ miles away from all our property, so quick little drive over there as well.

Now, are yours all in one area? Are you spread out all over Texas? Where in Texas are you investing?

Yeah, so we're in McAllen, Houston, and Laredo. So we're not just out of state, we're also all over a different state.

That sounds like a mess. Yeah, that sounds difficult to me. But we're gonna dive into how you guys manage that too, because I know everyone has a little bit different management style for how they're doing this, which is a great place to kick this off. For our portfolio, we invest in Moses Lake, Washington, which is over a very snowy pass in about What, 3, 2.5 hours away somewhere?

It's about 3 hours away, 200 miles-ish.

And then we have a resort and a triplex down in a city called Union that's about an hour and a half south from us. Cody actually used to live there until just a few weeks ago when he's back in Renton.

Back in business, baby.

So management, I'm gonna start with a little bit of how do we manage our units.

Well, we had to hire people. We couldn't do it by ourselves, so we actually got to the point place where we own the PM company, but we had to hire employees and get really core solid people in the org that can oversee maintenance because on our portfolio, there's a lot of maintenance, whether it's on the resort, which is a nightly stay. I think, Sole, you do some short-term, you have a couple short-term rentals, I think 2, right? 2.

Yeah. 2 short-terms, 2 short-terms, 2 mid-terms.

Okay. So we only have 1 short-term rental, but there's a lot more maintenance that we have on those than the resort.— or then on the multifamily, I'm sure you've probably seen something similar because you have a lot more people going through there. But we've just had to hire a bunch of people to help manage because we definitely can't do it on our own. Has that been the same for you guys, for Sully and Caleb and Chuck? Have you had to hire it out? Are you still managing it yourself?

Yeah, let's go Sully first. How are you managing both the short-terms and the long-terms? How does that work at a distance?

So I do a combo. So I have long terms, midterms, which are 30+ days, stays usually 3 months to 6 months, and then short terms. So the long-term rentals are mainly— a good amount are Section 8 rentals, and so government subsidized rentals. And those would be pretty difficult to manage myself out of state, so I have property managers who are really good at Section 8 rentals to handle those ones. It's pretty easy, pretty hands-off, and I like, I like that about it. My midterms, I actually manage them myself. They are pretty easy because the, the quality of tenant is really high. You have traveling nurses, traveling executives, and they're fairly hands-off. And so you place tenants every 3 to 6 months, and so far in the first year have had like almost zero vacancy, which is pretty cool. On the short-term rental side I personally think I'd hate managing that myself. So I have short-term rental managers do it. I know there's ways to like automate the backend of operations, but it's not my like focus at the time. And so I pay 20% to a short-term manager to manage those.

Nice. And something I hear all the time, 20%, that's a huge number for short-term rentals. How do your— how's your profitability look when you're paying a manager 20% of your, your revenue to run those?

It's pretty high. Honestly, if we had more Airbnbs, we would probably internalize property management. But with just two, I— in Cincinnati, it is not a destination market, it's a regional destination. So you get some interesting people who choose to vacation in Cincinnati. Um, they do well, like on good months they'll gross— uh, two of them, it's a duplex— will gross $10,000 to $11,000. And so even though you're paying 20%, you're still making, you know, 4, 5 grand net. On the slow months, you're probably booking 6 grand, 5, 6, 7 grand. And it's lower, maybe $1,000, $1,500, $2,000. But for me, there's, there's— I don't think about them that often. And so I think it's okay.

I'm okay with that. Passivity is a big deal. And those are fantastic numbers. That sounds like an Airbnb worth owning.

Caleb and Chuck have done a lot more passive stuff than we have, that's for sure.

Yeah, the model might be better. I mean, we really did this the hard way. We control a a lot because we own the employees and we coordinate the contractors. But I would say PM is more work than anything else we do by a large, large margin.

Caleb and Chuck, can you share for folks that are watching the channel how you guys manage your stuff out of state? Is it similar to what Sully's doing, or—

yeah, it's a little, a little different than both. So as we said, we're in 3 different markets in Texas, and it'd be awesome if one company serviced all those markets, but unfortunately they're all so far enough spread out that we have 3 different management companies, one for each property in each different region of Texas. So we are pretty passive with that. And then we kind of went through the vetting process and found them that way. But yeah, we use 3 different companies, one for each property.

Oh my. Now you've bought everything fairly recently.

Yeah.

What has your experience been with your property managers yet? Because I just, I guarantee you with 3 property managers, property management is a rough industry. You're going to have a problem with at least one of them. If not 3 of them. Have you had any difficulties yet working with your property managers or the results they've had in the first 6 months or so of ownership?

Yeah, so for the 3, there's 2 out of the 3 have been absolutely rock stars, more than we could ever ask for, on the ball with everything, and then just killing it, like going above and beyond with everything. And then the third one has been a little— hasn't been an issue, but just the response time is definitely more delayed than the other ones. The other ones, I can get a response by end of day every single day. That one will take a few days sometimes. No problems, issues they haven't handled yet. It's just sometimes I'm just like, kind of like, what's happening? And then they get back to me and it's all gone smoothly. But yeah, 2 out of 3 are rock stars, and that's— we were hoping it wasn't 3 out of 3 bad ones, so we lucked out there.

That's awesome. So how about you? Have you had any horror stories yet with, with property management, or have you been pretty smooth sailing?

Actually, I fired the property management company on my very first deal. I actually fired everyone who I worked with on that first deal, which was fun.

Another story.

Hammer. Yeah, I learned how to fire a lot of people really fast. Um, but because of that, I ended up self-managing that property, my first property. And I'll self-manage that one today just because it's, it's in a really good area and it's really easy. So I still have it. Um, but yeah, I, I fired him because it was 3 weeks. I was a BRRRR property, and so I couldn't really start the refinance until it was leased up, and it a hot, really hot rental market. And so 3 weeks into it, it was like zero inquiries. And then 4 weeks, zero inquiries. I was like, what's going on? Like, does my property suck? And so I decided to list it on Facebook Marketplace myself and got like hundreds and hundreds of inquiries of people wanting to lease it immediately for above— they kept on dropping the price too. I was like, this is ridiculous. Like, the rental market must be terrible. And so I was like, you know, this isn't working out. We're going to go separate ways. It turned out that they had an issue with their call center. And so they were getting hundreds of inquiries, no one was picking up the phone. And so after I fired him, I leased the property myself in about, I think it was like 3 days for more than he was advertising it for. And that is how— I mean, it's not terrible. I figured it out. I hired another property management company. But I think in the property management world, people have— give a lot of leeway when things aren't going well when they should be, you know, quicker to fire people who aren't performing.

Now, first of all, that is a great lesson that you need to learn. Cody and I have, uh, we do a lot of firing. I wish we didn't, but like, especially I want to be friends with everybody. I know, and I, I have found that there's some barrier between— if you're, if you're too close with the people that you work with, it tends to negatively affect their work. I mean, you can have partners, but when you have employees You have to have just enough distance where it's like, you know, at the end of the day, I might fire you and it's probably not gonna be great for our relationship.

Don't fire me, otherwise it'll be terrible for our relationship.

That would be not good for anything that we're doing. That would also not be good for the bank accounts. Partners are one thing, employees are another thing, and contractors are a whole third category. But yeah, when you contract things out and they don't work, being quick to fire when you realize, hey, this is not what I want to do. Um, good job identifying that fast on your first deal.

So what systems do the three of you use to scale? Because you've, you've mentioned on past videos that we've done, Sully, that you're working on a warehouse, you're working on more rentals, you've done office. And I know Caleb and Chuck, I know you guys are just— you're gonna buy up all of Texas, which I didn't think was possible until I met y'all, but what systems do you have in place to actually keep scaling? And when you're going through this, the firing process or the hiring process allows you to keep saying, because we bought our 100+ rentals in the resort and we've had times, like even last month, we're like, huh, this is a lot. What are you doing to manage all that? Like manage the managers, manage the systems, the people.

Either of you can go first.

You guys can go first. Let's go first. Sure, let's do it. Yeah. So starting off, yeah, on the management side, we have obviously the 3 different owner portals. And then one thing, one system or just thing we do to try to stay up on that is I try to just— we both try to stay in touch with them as often as possible. Granted, it can get a little annoying, I imagine, for the managers when you have me asking you a few pretty amount of questions, but I just like to stay on top of that just because I'd rather ask than not ask with that. And then yeah, as we keep scaling, it's— I mean, we plan to keep, hopefully keep buying in the same area so we won't have to constantly use new and more management. But we do plan to scale into some new markets as well. So it'll be the same process of just vetting the managers heavily and getting a plan for the property. That's one thing we really honed in on and got it right for our third one. We had a few different companies down to the last second and it was like, okay, like we just asked them, finally went through the plan and then the third company we end up going with, just their plan for the property rocked, and that's how we decided to go with them. But as far as systems go, we really need to level up, especially for like tax season. Like we have absolutely nothing going for that because we've never done that before. So yeah, we're learning that. We've got our CPA going, just figuring out all the bank accounts and all that stuff. But yeah, figure it out when we get there, guys.

I got a bookkeeper. Seriously, I didn't realize how cheap they were. I think it's like $100 or something for them to do all your transactions, but they do like everything for you. And then at tax time, you just submit it to your CPA and like, boom, done.

Dropping bombs.

Yeah, we had our bookkeeper ended up being our CPA's wife. But we learned that after we bought a lot of real estate. I actually think I shared that on my BiggerPockets episode 605. It's like, what problems do you want? Like, well, I don't have any rentals that have tax problems. So let's focus on the rentals. But we spent all our time there and we got to tax season. I'm like, Oh no, I don't know what I'm doing. I didn't commingle accounts, and that's as much accounting as I know.

Don't cheat. Yeah, you can use that.

Well, that's the only thing that we did right, so I, I feel your pain. Learn it early.

So, Sole, you have a bookkeeper. What other systems do you have in place to keep sane? Because while the game is simple, there's a lot of pieces.

I would say my partners are my systems. Probably not a, like, a true system, but it has become very, um, focused what people's jobs are. So like, I don't focus on acquisitions. I have a partner whose job is only to do acquisitions. So all the, the metrics, like the tracking, how many offers are we getting at, how many deals are we analyzing, I don't even— I look at it, but like, I don't do any of that work. I have another partner who owns a property management company and owns a construction company. And so that's how I've expanded and scaled into Augusta, Georgia, is because I can then access his company. And he's a partner, and so he cares about our success. And so he deals with like renovation management, property management, that type of stuff, and I don't have to deal with that either. So it's not really— it's a system, but I would say, I guess, having clear job descriptions with partners where you can leverage what they're good at is a really good way to scale, which obviously you guys are all partners right here, so you guys know how great partnerships are.

So I guess the last question really for today— thanks for elaborating on that and on systems, because a lot of people worry about the systems— how the heck did you pick your markets? I mean, really, because I wasn't comfortable going out of state, didn't know what the heck I was doing. You both are in— well, all three of you are in California. Which as far as pricing goes is not the cheapest area to be. How did you land on Texas and how did you land on a whole bunch of different areas?

Augusta, like, what—

why did you pick the area that you picked?

You want to go first, or you want us to take it?

I can go. Um, so originally mine was Cincinnati. So I knew I went for work about a year maybe a year and a half before I started buying anything just to go. I toured the market. I met one investor, total of one, and he was nice enough to like kind of walk me— he owned a couple rental properties and walked me through the market and said, I'll introduce you to an agent. And, um, that was the only market I knew outside of California, so I didn't— I wasn't even smart enough to be like, and there are other markets I should look into. It just worked for my budget. It seemed like the rents were pretty high. And I knew one investor who was making really good money. And that's kind of like the pieces I put together in order to choose my market. Looking back in hindsight, like Cincinnati has so many great things going for it. There's high levels of appreciation in some areas. There's a great amount of big companies there, up and coming, blah, blah, blah. And then when I went to Augusta, Georgia, it was because I had a partner there. And so he had his competitive advantage was in construction and property management. So it was like really a no-brainer. If the whole team is in-house, then like why not leverage that and buy more units?

That's great. So you visited a market, it made sense because you'd seen it and you had someone there, and then you also had a partner who was local to another market. You had available resources.

That's awesome. Yeah, Caleb and Chuck, when we met you guys, you guys were looking at Nevada, if I recall correctly. How the heck did you end up buying in Texas?

I'm glad you guys didn't buy there though. I like when my tenants have water. That does not— we don't—

I just visited. They'll find the water. There's a well out there. If there's a will, there's a way. They'll figure it out. We'll ship some water bottles over there.

Well, how did you land on Texas, boys?

Well, there just wasn't really enough inventory. Like, what's different with our strategy from you guys is more of a shotgun approach. We're just looking at a bunch of on-market deals. So If there's only a couple deals in Northern Nevada, we can't really implement that strategy. So we had to move somewhere that also had great population growth.

Yeah.

I still love that Northern Nevada market personally, but it was cool. I was like, "Awesome. Good market." There's 2 deals in the market. I'm like— And I know everybody who's even looked at the MLS has seen those 2 deals. It just didn't make any sense. They didn't want to carry. So then we kind of had to get to a point where we're like, "Okay, we're going to pivot. Where are we going to go?" And it's like we want to go somewhere where they liked landlords, there was a ton of population growth, and there's a ton of inventory. Got on LoopNet, typed in Texas, and the rest is history from that point on.

Yeah, you guys called every single broker in Texas. You met the good ones and the bad ones.

Still adding a few more.

You've done 3 deals. How many calls do you think it took you in Texas to do those 3 deals?

That is a great question. At least, ah, probably 600, bare minimum. Maybe upwards of 1,000.

Well, Dolly, did you do, did you do close to that amount? I know I didn't.

Sorry, my camera is about to die, guys. Editor can cut this out.

No, we're not editing. We're good. How many calls did you do to get your first deal?

Oh, one.

All right.

There's a lot of different ways to do deals.

Maybe two. Two. I did two deals. Second offer I put in though, I got that property. I was shocked too. It was a really competitive market. It's super competitive. It was 2020, like market was ripping. And I was like, no way someone would accept this conventional loan.

Everyone, Soli's course is coming out here shortly.

Learn how she does it in 2 calls. Yeah, you can do it in 2 or you can do it in 600.

However, the amazing thing is no matter what your strategy was, whether it was a shotgun approach of, hey, I'm just going to call my way to success. Which you got— I mean, 28 units at 19 is ridiculous.

I— that is ridiculous. Seller finance, zero money out of pocket.

You guys are the fastest growing teenagers that I'm aware of in the nation, and I know you're not using mom and dad's money for the whole thing. Like, you guys are raising private capital, you're figuring out, you're starting from nothing. Incredible. Sully, I like your systems a little better. By a little—

yeah, I do too.

Yeah, but you could do this for no matter where you live. Choose a market. The thing that I heard out of this was high population growth, appreciating areas where people want to move. I know that's true of Augusta. I know that's true of Cincinnati. Well, I know because you just told me. I know Augusta solely says since we're trusting you. Um, we invest in Moses Lake.

You look at the population growth over the last 100 years, it is doing well.

Yeah, Texas. It's— Texas is famous right now for just having ridiculous growth, so both in the size of the people and the population. Fun fact, McAllen, Texas is the most obese, uh, city.

Oh my gosh, Caleb and Chuck cannot leave.

But we're not gonna edit that out.

Oh, all right, well, we appreciate you guys being on the channel today. Thank you, Sully. Thank you, Caleb and Chuck. We appreciate everybody sticking through this 21-minute long video, and if you have questions for anybody on this call, drop them in the comment section below. Make sure to like and subscribe to not only our channel but everybody here.

Lattes and leases. Caleb and Chuck.