Any out-of-town investment tips for a newbie?

Question

I'm just trying to sort out everything. For an investment property, I've been told to look in markets pretty far from me. Like in Texas.

Turnkey sounds 'safer' but then paying full price.

How do you put together a rehab team?

Do you use management companies, have local partners?

Thanks for any tips.

Jesse Sobel · Answer

Buying in markets that are not close to you is not as difficult as it may seem. You just have to have all of your ducks in a row. I have plenty of out of state and a few out of the country clients who excelled at buying in foreign markets because they can get better returns.

The key is having boots on the ground that your trust. Trust is the key word their. You have to make sure that you meet the right contractors and the right partners who understand the goal and know how to execute.

Meeting investors in outside areas are not nearly as difficult as you might think. Facebook is wonderful for marketing/finding partners and craigslist has an abundance of contracts eagerly waiting to give you a big on their potential next job.

Find the right people and travel to your market. Meet with everyone who will meet with you and pick their brains. Find the best route for you and reach your goal!

(If you ever come to the Philly Market lets talk houses!)

Steve A. · Answer

@Anthony Angotti thanks, makes good sense. Hope to start on a property that doesn't need a major renovation and we'll get recommendations from the contractors.

@Lance Robinson also good advice. I'll run the numbers when we see some turnkey properties to see if they make sense. Thanks!

Anthony Angotti · Answer

@Steve A.

For the rehab team I recommend taking on a property with less rehab as the first one. Maybe some simple projects. You'll have smaller returns but you will have that property as a place to try out a couple different guys for a few things. Once you find the most reliable you can build from there. If you find one good contractor ask them who the would use for their own house. I.E. if a plumber does a good job ask who they would use for electrical. Good contractors know other good contractors usually because they work side by side on a lot of jobs. Alternatively you could ask a local agent that works with investors or local investors from that area who they use. After you build your team go for the higher return properties with more work required.

For local companies usually people do the same idea and are successful. Start with maybe the top 3 management companies you can find. Buy a few properties (if you have money), and try out each one on each of the properties. See who does best and then change over management to one company that does the best.

Steve A. · Answer

Thanks everyone! @Andrew Johnson I appreciate the great response!

@Lane Kawaoka thanks for the reminder ✌🏼

Andrew Johnson · Answer

@Steve Apple For what it's worth, I think you're putting the cart before the horse.  The first step (my opinion anyway) is the find an area that you believe in.  It doesn't much matter what makes it the area you believe in:  population growths, demographics, geography, cash-flow, appreciation potential, etc. but you have the start there.  The reason I saw "it doesn't matter" is because what causes you to believe in an area is likely different that me or anyone else.  Otherwise 100% of real estate investments would all be in a narrow niche.  Anyway, I'm digressing.   Once you figure out the area you can start to look at what turnkey solutions exist and what other options there are in the market.  If you want a 10-unit apartment complex but the turnkey providers just have SFRs and duplexes the "preference" really doesn't matter anymore.  There just isn't a turnkey option available for you in some cases.  So my net advice is the figure out the area first and then assess local turnkey companies and non-turnkey offerings afterwards.

All of that said, my general thoughts would be that you don't want to combine: 1st Investment + Remote + Rehab.  Each of those areas has an element of risk to it and combining all three, well, you'd better make sure the reward it worth the risk.  Adding additional risk for the potential of another $20 per month in cash-flow never makes sense to me.

If you do want to go down that road you can get referrals to vendors from people on BP or start by getting referrals from your buyers agent.  They usually know property managers, general contractors, lenders, etc. and are happy to share those phone numbers.  And if they've worked with out-of-state buyers before, it will be far from the first time they have been asked to do so.  If the realtor doesn't have that info then, believe me, the property management company will.  I don't think I'd just a PM to function as the "General Contractor" on a large rehab but most good ones can oversee flooring, painting, etc.

Hope this helps.

David Faulkner · Answer

For a local perspective similar to mine on how and why you should stay put to make your REI profits, you should chat with @Llewelyn A. who is nearby you in Brooklyn I believe.

Steve A. · Answer

Thanks @David Thompson I'm going to read your article now.

Thanks @David Faulkner, I'll start searching for the 2.5k in a bit.

Steve

Steve A. · Answer

hi @John Spina jr, exactly what I've heard. We're not expecting anything in the 5 boroughs and that's why we're going west, as the expression goes :)

David Faulkner · Answer

Here's a tip for you: Don't do it!

Most of the people telling you to look at markets pretty far from you probably have something to sell you in markets pretty far from you.

For further details on why this is not the best idea IMO, based on 15 years of experience, please feel free to refer to my previous 2.5k posts.

Any out-of-town investment tips for a newbie?

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