Remote investing, what do you think?

Question

I've heard the phrase "live where you like, invest where it makes sense" (or something like that). What's your opinion on investing in multiple states or investing far away from your home? Pros, cons, why it does/doesn't make sense for you (and if your a distance investor, how do you go about finding those remote properties). I'm still very much in the process of figuring out where I want to live, and where is a good place to invest (I'm basically 100% flexible on where to live).

That leads to my next question - what are some good cities/areas right now for cash flow investing (for 80k - 280k properties) and would you invest in a town that is losing population?

James Wise · Answer

Disclaimer: I sell investment property to out of state investors.

Some people live in an expensive market and want to devote little time to investing. Going out of state can work for those people as you can work with people who are able to provide you with everything in one convenient  package in a market that has a much lower barrier to entry then your own.

There are downsides of course. Everything will cost more when you have to pay others do work on your behalf. If you run into a problem with your management company making a change is difficult when you are hours away. If you want to look at your properties in person that will usually be time off of work and a large travel expense. You are an outsider to the new market so you either need to take the word of a team you trust or do a lot of due diligence on that area and meet teams as well as teams to backup those teams if it goes south.

If you are looking to be hands on and get the savings associated with that I agree with others that investing close to home is where you want to go. The folks that want to invest passively should understand the pro's and the con's of doing so.

Terry Kerr · Answer

Here is the other side.  We have never invested what you really would call close to home as we live in farm country and the closest growing town was over an hour away.  We chose a town where we had relationships with people we could trust. We currently live on the income from those investments.  We also have invested in florida, and 4 1/2 hours from home.  We no longer have the florida properties, not because they were to far from home; we just couldn’t find a property manager that we could work with in that area.  The houses 4 1/2 hours from us have a property manager that is great to work with and they are working.  It’s all about the manager and if you plan to build a large portfolio you will want a manager.  We have friends with properties a great distance from their homes.  Their success is having good property managers along with finding great deals.  Just our experiences.   Another key to our success was a mentor when we started, without him we would have fallen flat.  We didn’t do everything he did but we could see what worked.

The last part of your question was about population.  I believe you must look at why the population is moving.   Jobs gone and not coming back probably not a good area to be in but many have made great money in Detroit.  What is your comfort zone?  With the internet you can learn any market and connect with people anywhere.

Make your connections learn your market and you will do great.

Just my two cents

Jim Genis · Answer

@Joe Henry, I bought my first 2 properties 8 years ago in Madison, AL (part of Huntsville) while I was living in San Diego. Both of those properties cash flowed and were rented out very consistently. I found 2 keys to making this work:

1. Have a killer property manager. The one I used managed about 300 houses and had a virtual lock on the rental market for SFRs. This meant they were THE source for house (not apartment) renters and they had a full pipeline of leads. Plus, they managed everything very professionally. As a result, our vacancy rate was extremely low.

2. Buy in great school districts. We found the key to getting good, consistent tenants was to buy in a top school district. It does mean that you're paying more for the property (and maybe a bit lower cash flow than you'd ideally like) but the payback is (a) higher quality tenants who take care of the property better; and (b) longer term tenants and lower vacancy. Since repairs, turnovers, and vacancy can kill your numbers, this gave us consistent performance.

The result for us was steady-eddy income and NO headaches at all. We kept forgetting we owned them!

Hope this helps. Good luck!

Jim

Mark Ainley · Answer

@Joe HenryI think it is all about having a relationship you feel comfortable with in the beginning as you are buying and confident they will rise to occasion down the road when issues arise.  No matter what, over the years you will have issues but knowing your property manager will react swiftly and in your best interest is what sways the answer to your question one way or another.  Without that relationship( I look at it as a partnership) you must not invest far away.

I think it was on BP the saying "average investment with a great property manager is better than a great investment with a poor or bad property manager."

Karen Barber · Answer

Disclaimer:  I work for a rehab company in KC

Buying out of state, while it may seem scary can be a good choice.  Sure you have to find a Property Management firm to handle the rental portfolio for you.  If you have a strong one they will do their best to make sure that it is tenanted at all times.  However, before purchasing a house, ask if it is tenanted, look at only tenanted houses if you are concerned about cash flow.

You also have to think of this on a emotional level.  If you purchased a house close to home, you would probably manage the house, know the tenant.  While knowing tenants is good, it also can put an emotional connection there.  I think everyone wants their tenants to do well & succeed in life, but you also want your tenant to pay your rent on a certain day in full.  If you know them you might get taken in by a sob story about how they didn't have the money to pay all their rent.  If you allow them to get by once, then they might continue to try to get away twice or three times.  If you hire a PM Firm, it's there job to collect the rent to you the owner.  They can tell the tenant, the Owner demands his rent so they PM team won't get involved, it's there job to do this & when it is our job, sometimes, we leave emotions at the door.

When it comes to buying a property in a city not close to you. Do your research.  Go online, check the school district, ask questions to the company selling the house, what school district is this in.  Go to the county records, check taxes, go to trulia & check the crime areas.  Tell the company you are buying specifics on what you want as an investment property.  Ask questions.  If they are interested in helping, if they are truthful & honest, they will take their time & answer all questions, you should be able to reach them by phone, email & even texts.  Do your homework, figure out what your yield will be, figure out you appreciation, your cash flow just like you would with any property.  If you can, visit that city for a day or two, meet the company you are buying from, the property management firm.  Do your own homework, do demographic studies on the social anchors, on the job industry in the area, on schools, even churches in the area...

John Thedford · Answer

I agree with Ned. The investors I have talked to that purchased turn key rentals paid a high price and have to pay management fees on top of that. If you invest close to home, you can handle the management and keep an eye on the properties much easier. The only exception to this would be a commercial property such as a strip center where turnover is less frequent and leases are typically 5 years or longer along with rental increases already provided for in the lease. If dealing in SFR or smaller multi-families I would stay as close to home as possible.

Ned Carey · Answer

I believe in investing close to home. Investing from far away increase both your costs and risk. It is a rare area that doesn't have good deals within a one to  one and 1/2 hr drive.

The best investors really know their market. It is rough to get to know a distant market. Also some of the best deals come from being out in the marketplace every day.

Alicia Horton · Answer

Hello Ali,

My name is Alicia - I'm a realtor in the Kansas City Metro area. I'm looking forward to networking with more investors. If I can be of any services to you please feel free to connect with me.

Have a blessed day! :)

Brady Hanna · Answer

@Joe Henry- I definitely agree with others who have said it is more difficult than you think investing away from your local area.  What I would recommend is get your feet wet buying a property within 45 miles of you and dealing with that for a year or two before you jump in with 2 feet all the way across the country.

There is a reason that most wholesalers will have their target list be non-owner occupied owners who live out of state.  It is because they thought it was easy and now are desperate to dump their property.  Just my 2 cents.  :)

David Faulkner · Answer

https://www.biggerpockets.com/forums/311/topics/22...

Any questions?

Remote investing, what do you think?

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