How to build trusting investment relationships out of state?

[Sidney S.]

Hey all! 

My husband and I are priced out of the Northern Virginia market and want to invest in flips out of state. We have been looking in Baltimore and Chicago.

My question for everyone is, how have you built trusting partnerships with other investors who are out of state?  I ask as there there is a lot at stake when you don't necessarily have direct control over your investment all the time.

Thanks in advance for any and all responses!

[Wendell De Guzman]

Sidney, when partnering out of state, I recommend you do the following first:

1. Visit the city you're going to invest in. You got to know the market and not rely solely on what your prospective on the ground partner is going to tell you. For instance, ask real estate agents to understand the market and ask them to show you different places in that market (A, B, C, D and F).

2. Only invest with experienced investors not newbies. Ask to see their previous deals. Check the public records to see if their company indeed own those properties. Ask to see any properties they have now or working on.

3. Only invest with partners who are willing to have skin in the game - meaning, do not invest in a project if ALL the money is yours - you want them to have money at risk in the project as well. So if the project goes south, they lose their money too.

4. Talk to their team - their real estate agent, their GC, their lenders, etc. By doing so, you will get a sense of how experienced the prospective partner is by how good his/her team is.

5. Hire a good attorney in that state. Have him or her draft the Joint venture agreement in a way that protects your interest in the partnership.

Partnering out of state takes a lot of work but it can be done and can be profitable if you do it right. The keys are to know the market you're going to invest in and the partner you're going to invest with.