“I keep offering to pay for my husband to retire and mountain bike all day, if he’ll move overseas with me. So far he keeps turning me down, but we’ll travel the world sooner or later!”
Whitney Hutten is 44 and brings in around $15,000 per month in passive rental income. Clearly, she’s doing something right.
But her true genius lies in out-of-state real estate investing. In particular, she’s mastered the science of business systems to help her invest long-distance safely and profitably.
Very, very profitably.
Here’s her story, warts and all, to help you follow in her well-heeled footsteps.
Whitney’s First Forays in Real Estate Investing
“My first investment (unbeknownst to me) was a live-in flip in Fort Collins, Colorado, a college town an hour north of Denver. It was a form of house hacking – the proceeds brought in extra money and covered our housing costs while we’d lived in that house.
“I ended up doing three more live-in flips after that to build capital.”
But living in a work zone eventually gets old. Spouses and kids tend not to love it, and Whitney has both. So she switched gears and set her sights on buying her first rental property.
“My first straight rental was in 2016, in Broomfield, a suburb of Denver. I found it through a Realtor and put it under contract on Christmas Eve.
“We purchased it for $325,000 with 20% down ($65,000) using a conventional rental property loan. We really didn’t know how to invest for cash flow at that point, and it only cleared around $400 a month (at best!).
“We struggled getting subsequent properties to cash flow at all in Colorado. One day my daughter (who, at age three, I took on probably 40+ home tours) walked into a home with me. She ran through the home and came back with her report: ‘No shiny appliances, bathroom has funny colors, rooms are small, and it smells funny.’ She then asked for her Kindle and to go sit in the car.
“I knew right then that we needed a different strategy, because we didn’t have our time back like we wanted. It was just too much work to find good deals in that market. I went back to the drawing board, and realized we could earn far better cash flow out of state.”
“So, we put in around $2,500 in cosmetic repairs into our one rental property, placed a good tenant in it, and sold it 11 months later to another investor for $359,000. We went all-in to repositioning equity out of Colorado, and never looked back.”
Exploring Out-of-State Real Estate Investing
“When we started learning about out-of-state real estate investing, our minds were blown! We could invest in a linear market for cash flow and for appreciation.”
So Whitney and her husband started researching the cities with the best cap rates in the US. But they quickly realized that cap rates alone didn’t make a market, so they explored other metrics that made up the best cities for real estate investing in the US.
“We weren’t comfortable doing it ourselves alone at first, so we looked to find turnkey partners out of state for our first few deals. We interviewed over 40 providers in Indianapolis and Kansas City, trying to find the perfect partners.”
Whitney’s use of the word “partner” here struck me as slightly odd, so I asked her what she meant exactly. It turns out that her strategy involved not just buying properties long-distance from turnkey sellers, but finding sellers who also operated property management companies, so she could let them continue to manage the properties. It built in a form of accountability – they had to keep managing any tenants they placed, and maintain a long-term relationship with Whitney.
Even better, these combination turnkey sellers-property managers also clearly had good relationships with contractors. One less set of interviews that Whitney had to do herself.
Whitney’s First Out-of-State Real Estate Investments
After exhaustively interviewing turnkey sellers and property managers, Whitney decided to take the leap and put her trust in a few of them.
“We landed our first two out-of-state properties, one in Kansas City and one in Indianapolis. Then we quickly learned we needed to really focus on one market at a time, get to know it inside and out, build reliable teams there. We focused on Indianapolis, buying four properties though turnkey sellers and two below-market properties that needed minor updates.
“After that, we started feeling more comfortable. We felt confident enough to turn our attention back to Kansas City and diversify markets.”
That moment when you feel like you finally have everything under control? That’s usually when the floor drops out beneath you.
The (Involuntary) Switch to Investing Full-Time
“I was under contract with two out-of-state investment properties when I was let go from my job.
“I called my lender, and he said he could no longer lend to me. When my husband got home, he told me not to worry about anything because he had his job, and besides, this was the very reason why we were investing in real estate out of state: for cash flow and passive income. Then it dawned on me… he had a job! So I called our lender back, and by the end of the day, my husband was qualified to purchase the two investment properties we had under contract.
“But when we talked that weekend, and my husband said he wanted to put our investing on hold until I found a job. I then remembered I was getting my 401(k) back, and 90% of it was invested in a Roth account, so there were no penalties for withdrawing contributions. We decided to continue to invest.
“As I ran the numbers, I realized eventually we would fall short of where we wanted to be from a cashflow standpoint with the capital we had. It wasn’t what we needed to bring in, with me not working a day job. So I asked my property manager in Kansas City if he would teach us how to do the BRRRR method. And he said yes!
“Our next 13 projects were BRRRR properties out of state. To maintain capital, we did a few flips as well.”
The Key to Scaling Real Estate Investments: Building Business Systems
Is it just me, or did that move really fast?
It was fast – Whitney built her real estate empire in less than four years. But even so, it didn’t happen overnight, and she put in a massive amount of work along the way.
In particular, she worked tirelessly to build efficient, scalable business systems.
“After our first few out-of-state real estate investments, we realized we had to set up business systems that would allow us to scale effectively and manage all of the moving parts and ever-increasing cash flow. We needed solid players in each key position.
“I had managed teams before, and knew that metrics matter. When I started measuring the business and property managers’ performance as I would my own team, things stabilized. We also had to get detailed on measuring property performance, so we knew when to reposition our equity.”
As they say in business, that which gets measured gets done. If you want consistent results when investing in real estate out of state – or anywhere, for that matter – you need to treat your real estate investments as a business rather than a side hobby.
Whitney started measuring key performance indicators (KPIs) that revealed how her turnkey sellers, Realtors, property managers, and contractors were performing. Those that underperformed she either stopped using or reeled in. Those that performed well she doubled down with. And any properties that didn’t perform as well as she wanted, she unloaded to move her money into higher-yield rentals.
She systematized all communication with her property managers, treating them as junior partners rather than vendors. Not wanting to constantly have to pull data out of them, she made it very clear what data and information she wanted in reports, and how regularly. She overhauled their tenant screening process, tweaking the criteria and procedures to make it her own.
Every detail of her real estate investing business came under the microscope. She systematized her banking, so all transactions automatically fed into a spreadsheet. She created checklists for every process, from due diligence on prospective investment properties to making offers to tenant screening to managing contractors. Once she had systems in place, she was able to delegate the repetitive work to a virtual assistant, freeing more of her time.
“It’s all too easy to get sucked into the day-to-day of working in your business rather than working on your business.”
(article continues below)
Mistakes & Lessons in Investing in Out-of-State Real Estate
No real estate investor has a perfect track record. In the first few years, all investors make mistakes, sometimes at great cost.
Like many investors, Whitney has of course overpaid for properties and overpaid contractors for renovation work. But out-of-state real estate investing comes with its own heightened risks.
You have to entrust assets worth hundreds of thousands of dollars to others. To property managers, to contractors, to tenants you’ve never met. And when you buy properties long-distance, it requires a certain amount of trust in others to be your eyes and ears, to tell you how much work the property needs, how it compares to comps in the neighborhood.
“I’ve trusted someone else’s numbers on ARV (after-repair value) and rents, and ended up overpaying. I’ve let a poor property manager stay in place far too long, causing enormous damage to my properties and tenant relationships. And, of course, I’ve been burned by construction crews who overcharged me for shoddy work.
“At one point, we looked to start flipping to build more capital so we could scale our rental portfolio faster. We leaned hard on our team in Kansas City. We were in the middle of three flips and two rehabs when we realized the property manager was no longer personally overseeing the contractor crew directly, and rather allowing them to ‘self-report’ progress. We only discovered the problem when I traveled to Kansas City and made a site visit, walking into one home that was listed for rent but wasn’t renting. I walked into a mess! The renovations were not completed as reported, even though we had paid the contractors in full.
“Long story short, we took a long hard look at our team and realized that one of the subcontractors under the general contractor was not doing the actual work, yet somehow was still getting paid. For this to happen on one home, we could have coped, but to happen on five homes at once was traumatic.
“We ended up moving the flips, but we’re still wrestling with one rental where all of the work was completed with one subcontractor. It’s been a nightmare.”
Whitney’s Tips for Other Out-of-State Real Estate Investors
Whitney went from no rental income to $15,000 in net monthly rents in under four years. She knows a thing or two about scaling quickly and effectively.
Her first lesson, of course, was that your hometown doesn’t necessarily make for great real estate investing. Sometimes, you have to look further afield out of state. But while most out-of-state real estate investors look to turnkey properties to avoid managing and negotiating with contractors, Whitney can’t speak highly enough about the BRRRR method.
“If I were starting again today, I would have learned the BRRRR strategy earlier. I would have paid someone to teach me!
“Find a coach to shorten your path to profits, and learn from their mistakes. If they save you from investing in even one bad deal, or making one analysis mistake, or help you rescue a transaction at risk of falling through, they have already paid for themselves.
“Pay to learn the skill sets you need to succeed in a short time, and carry those skills forward in your investing to start earning more money immediately.”
Live in an expensive coastal market? No sweat. Learn how to invest in real estate out of state like Whitney did.
Find your own unique competitive advantage. Whitney found her advantage in her ability to screen local partners, manage them, and create streamlined business systems. Yours may prove to be something entirely different.
“Don’t compare yourself to others. Remember, when you see someone who looks like an ‘overnight success’ there was a ton of hard work and hustle that went into where they are today.”
Whitney grew her real estate portfolio quickly, but she didn’t do it alone. Her husband’s steady income helped provide a stable floor, and she painstakingly built a series of teams in Kansas City and Indianapolis. When she interviewed prospective turnkey sellers and property managers, she had a checklist of over 40 questions for them. Each interview took 30-45 minutes, and she interviewed over 40 potential partners!
Today, Whitney helps others start investing in out-of-state real estate and working toward financial independence through her company, Ash Wealth. She walks them through the most important lessons, the most common (and expensive) mistakes, and helps clients build business systems like her own.
It takes work. But anyone can do it, and reach financial independence with rental income in a few short years, if they’re willing to put in that work.
Have you ever invested in real estate out of state? What were your experiences? If you’re considering it moving forward, where are you considering investing?
More Unconventional Reads:
About the Author
G. Brian Davis is a landlord, real estate investor, and co-founder of SparkRental. His mission: to help 5,000 people reach financial independence by replacing their 9-5 jobs with rental income. If you want to be one of them, join Brian, Deni, and guest Scott Hoefler for a free masterclass on how Scott ditched his day job in under five years.