Do you need boots on the ground for small projects?

Question

Hi,

I am looking to enter the real estate market and am currently deciding on which area to invest in. I live in NYC, but don't have enough saved up nor am I interested in investing here. I am looking at out of state markets- notably Florida (Orlando/Port St. Lucie/Tampa) /North Carolina (Charlotte neighboring cities)/Tennessee (Murfreesboro/Nashville area).

I am interested in doing fix-and-flips but am concerned about not living in the locality (especially given construction). Does anyone have any advice or have done this before? Is it a feasible approach on a small project?

Any help would be appreciated,

Thanks

Eliott Elias · Answer

Your life will be a nightmare if you don't have boots on ground watching over the project. Hire a PM for $1500 a month and 10% of the rehab budget as incentive

Drew Sygit · Answer

@Jeffrey P.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/... (BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service) 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😊 Please send us any feedback via email, as we do not use the DM feature here.

Lexey Vezzoso · Answer

Hey Jeffrey!My best advice would be to try and find a turnkey team to work with. Our company is an example of this...We have agents, property management, we typically coordinate any rehab that needs to be done because we have a trusted list of vendors etc. Our OOS investors love how easy and hands off we make it for them. I would interview some people and try to vet them as best as you can!Good Luck!-Lexey

Bryan Martin · Answer

It's feasible, but definitely some added risks. The main thing is that you find someone you can trust to be in your place. I'm also hesitant on recommending flips in the current economic environment. Not saying to not do it if the numbers work, but make sure you do as much due diligence as possible.

Kevin Manafi · Answer

Hi @Jeffrey P.,Welcome to the BP community and congrats on your first post!I would definitely recommend having trusted boots on the ground wherever you're investing, particularly if it's out-of-state (and particularly if it's one of your first deals). Especially with a flip project, there can be many complications that arise, and it's important to have someone in the area that can get to the project regularly to check on progress, deal with emergencies or contractor issues, etc.My advice would be to start somewhere closer to you first until you can get some experience under your belt and become more comfortable, unless you can establish a trusted team in the out-of-state area you want to invest in.

James Wise · Answer

Yes, you need a team on the ground.

Daniel Vineis · Answer

@Jeffrey P. Hey how are you. I live in New jersey and Invest up here and in Onslow county North Carolina. I would be happy to talk to you about that market and put you in contact with the people I use down there. I Actually found investing from a distance easier when I first started. You definitely need a team. Get David greens book on long distance investing. Its pretty much a manual on how to do it. He gives you interviewing questions for every member of your team that you need to get. I literally copy and pasted his Property manager Interviewing questions and used that to interview the one I use down there. This is what my process looks like. If its on the market I have my realtor go out and take a video of her driving around the neighborhood if i'm not familiar with the subdivision. Then she takes a video and pictures of the house. I gave her a list of large capital expenditures that I wanted her to ask the agent about and focus on when she walks the house. If its off market I have my contractor go take photos and a video and send me a quote. If I am in between contractors Ill have my agent go out and do it. I trust her so I am fine with this and if I don't take down the deal I refer the home owner to her anyways. Then my agent confirms my ARV for me. Once its under contract I get a few quotes and have my inspector go out. After closing my contractor goes out and does the work then sends me photos. If its a rental I have my Property manager go and do the move in inspection early and take photos. I give them a list of the work that was done so they can confirm it. I also ask my cleaners to do the same if they get out there prior to my property manager. If its a flip I have my agent be involved with the contractor and she will go and check in on the progress.