What are your tips for starting out BRRRRing remotely?

Question

* In general, how do you not get screwed?* What are red flags to look for?

Taylor Dasch · Answer

In my opinion, it would be finding a market that you like / have visited - even if you visit for the sole reason of scoping out the market in person. And then find a realtor who is very familiar with the market.  They should be able to connect you with contractors, wholesalers, etc.

Then I would become familiar with the market myself, analyzing at least one deal per day. Set High but realistic goals, form a criteria that will align with my goals, and let that real estate agent know. So long as I trust them, every deal that they bring me should be a pretty good deal.

Be sure to know the area that you dont like as well. I know in my market, I dont really like East Temple. A lot of "good deals" come up over there, so if I had a realtor send me something that met my criteria but I wasnt a fan of the location, they may think that I am not serious since I havent jumped on any of these.

A good Realtor can walk you through just about every step of the BRRRR so that you can be(almost) completely hands off. - Realized I totally skipped your starred questions lol!

*I would research crime rates, drive through when I visit, and ask the local investors.

* I wouldnt invest in an area that I dont feel safe at walking around after 8 PM.

* A rockstar agent will probably have investment propertys of their own. Fast communication, can give you a breakdown of the market as well as specific locations that could be good for buy and holds, flips, etc.

*If they have the trust of my realtor, that would be a good start. Then I would also call and interview at least 5. Also some PMs in my market will not manage older homes, so I ask: Do yall have an age limit, what do you charge, how do you advertise, do you have a team of contractors, and do they charge for using their conractors.

* I dont get screwed by making sure that I know the market that I am investing in.

* Red flags to me would be - high vacancy rates, low income, little job / population growth, no other investors are investing in the area.

Chris Seveney · Answer

@Jeff G.

I would not do it unless you hire a qualified general contractor who is licensed insured and bonded. They will cost 2-3x the cost of mom and pops but will most likely save you $ in the end because of the issues you will be dealing with and not being onsite to manage people

Best way I look at it is try leaving your kids home alone and checking in on them via video call a few times a week and expect them to be doing their homework, chores and keeping house clean.

Anthony L Amos Jr · Answer

* How do you know what areas to avoid in a city? (Walk the area virtually with Google maps?)Building your core 4 as mentioned in David's book will help alleviate any fear you have about remotely investing. Building rapport and feeling comfortable with your core 4 is important

* In general, how do you not get screwed?Be omnipresent. But if that doesn't work you need to hire slowly and fire quickly. Deal with licensed and/or experienced professionals that are held to a higher standard.

* What are red flags to look for?Work the numbers and listen to yourself. Get referrals and have a wide range of questions to ask. Make sure everything is documented.

Good Luck!

Eric Gerakos · Answer

My tip is to not do it in this market.

Lee Ripma · Answer

@Jeff G.

I started out BRRRing small MF remotely and then switched to stabilized value-add remotely. I talk about this on my podcast 373. Location matters and so does limiting your downside, hence my pivot away from BRRR and to stabilized value add. I vet locations first, then properties using VestMap.com. I look for stable or growing areas (not declining) that have incomes in the market consistent with C+ to B class areas. Schools matter depending on the unit size. VestMap.com pulls what I need to vet a location in 20 seconds. Then I dig in on the property.

Eliott Elias · Answer

You can get brutally honest feedback from a city just from talking to local businesses, and asking them their advice on where you should buy a home. Agents may not help due to steering, but locals can be honest. A real rockstar won't try to sell you, they have tons of clients and really don't need you. Too many ways to get screwed

Drew Sygit · Answer

@Jeff G.

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/... (links also available @ our website)

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

What are your tips for starting out BRRRRing remotely?

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