Out of State Investing - Purchasing Sight Unseen??

Question

Hello, People of BP!

I want to know how those of you who are out of state investors do it. Do you actually travel/drive/fly to do a walkthrough on the property before you make an offer? I feel like that lapse in time could jeopardize a potentially great deal. However, it seems woefully irresponsible to purchase sight unseen. Looking for some advice here. Thanks!

Sean Carroll · Answer

@Michael J. Beasley Before I developed my team out in Cincinnati I would have to fly out there so it was a big pain. I would fly out to view, then fly out again to get bids from contractors and set up a lockbox.

Now I view properties online via Redfin, determine if I want the property and what I want to do with it, then I pay my General Contractor to go out and view the property and take a complete walkthrough inside and out video and send me a report of what needs repair and the cost to do so. Then if I go with him he refunds the $100 off the last draw.

Now if it is a house that is rent ready I then ask my agent to go view it real quick to make sure I am not missing anything.

Both of these take a good team and trust. I still fly out once a quarter because I am a little bit of a control freak and I like to take them out to dinner after the projects for that quarter are complete as a thank you and develop both a personal professional relationship with them.

The big thing I want to make sure is that they know I am not taking advantage of them and what they are doing for me is greatly appreciated and that as long as they help me grow I will do everything I can to help them grow as well.

Greg H. · Answer

If a few hundred dollars in airfare or a day of your time skews a deal then do not invest out if your area. I say area and not out of state because I live in Texas and a property can be an 8-9 hour drive for me and still be in Texas

There is NO substitute for the eyeball test. I usually never see a property before I have it under contract and typically walk away from $3000-5000 worth of earnest money every year. But in my 28th year, I have never closed on a property that I personally have not seen. I never ever would trust a "team"

However, putting on my Broker hat, I have rescued several investors that have purchased site unseen. And I mean by rescued is minimize their losses

There are not to many places that you can't get on a plane in the morning and go see a property and return in the evening. This trip could save you tens of thousands of dollars

Thomas S. · Answer

Your eyes on the ground first viewed the property and give you a review. You may then choose to get the property under contract with plenty of escape clauses. You then hop a plane and proceed with your due diligence.

If you do not have trusted eyes on the ground do not invest out of state.

Brian Garlington · Answer

@Sean Carroll Looks like you're hear in the Bay Area and you invest in Ohio as well.

@Michael J. Beasley  You need to decide what you are looking for and then decide on a market for out of state. Betting on Appreciation or hoping for a growing market? There's plenty of knowledgeable people on here to give you ideas.  As for me,...I've  chosen steady, boring, cashflow and I chose Cleveland. Why, because with due diligence I've been able to close on 3 different rental properties out there that are all at least the 3 % rule in "C" Neighborhoods. Two Duplexes and a SFR.  I also have a couple of rentals here in the San Francisco Bay Area and they are NOT even meeting the 1% Rule. I'm still cashflow positive on one of them and the other one I'm Househacking in so it's not bad at all. I would say once you pick a market, it's worth it to fly out there. Interview some agents and property managers first and get their feedback on where to buy rentals. Make sure the agents and PM's you interview also own investment property so you'll know you're dealing with the right mindset.

1. Even so, what I do when I see a property i like I call the listing agent directly. I let them know I'm preapproved with a lender and want to ask a few questions about the property.

2. I ask them, "If I was standing right in front of the property itself, is there anything obvious I would see that would catch my attention from the outside like peeling paint, missing roof shingles, mattresses on the porch  or a rotting fence?

3. Why are the owners selling?

4. How flexible are they on their asking price?

THEN I would call my agent and prospective property manager that I've picked out and ask them if they can drive past the property to see if they see some obvious things wrong.

THEN I would have my agent write an offer, contingent upon an inspection, appraisal and verification of rents.

Your inspector will be happy to talk with you by phone about the inspection as well.

So far this has worked for me on 3 out of state properties.

Greg Scott · Answer

I've bought, rented, and sold several rent properties without ever seeing them.

• Worried about the area?  - You can do that research online.  You can even google-drive the street.
• Worried about the condition of the property?   Hire an inspector.  Have them take lots of pictures.
• Worried about over-paying?  Get a bank loan and the appraisal will tell you the value.
• Worried about rehab?   Buy turnkey or get a solid contractor to give you a quote.
• Worried about renting it?  Talk to a qualified property manager.

If you know the area is solid, you know the property value, what it will cost to put it into rentable condition, and what it will rent for, what more do you need?

Jay Hinrichs · Answer

I think it depends.. if your in the business so to speak its easier to trust others and use on line methods.

however if your embarking on your journey I would think a trip to your first purchase is warranted.

just check on the Morris/Oceanpointe threads and see what happens when folks buy site unseen and put blind faith and trust in the seller marketer..

Account Closed · Answer

All three of my rentals (two out of state and one an hour and a half from me) were bought sight unseen.  I relied on photos, Google Maps, and other online resources.  I bought them at a VERY low price.  One had a missing air conditioner (stolen) which I didn't anticipate.  Not a big deal.  One had a mold issue in the based....that was a big deal.  The third just needed a bit of rehab.  My biggest challenge was getting keys to the places (I had to break into one of the homes when I took possession - it was a holiday weekend and it is in a small town with no locksmiths available).

James Wise · Answer

Good question Michael. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Joseph Cornwell · Answer

@Michael J. Beasley

I assist several out of state buyer clients in Cincinnati. The way we typically structure the acquisition is by identifying a property that meets their metrics or is very close. We then write the offer sight unseen to save time (they cant physically come see the property anyway, and I do not have time to look at every property every client has a slight or moderate interest in). If we can get the property under contract within their criteria, then I do an initial walk through, I take a lot of notes, photos, repair estimates, and videos if needed. I try to be their eyes and ears. If there is nothing of substantial concern, we move forward with our inspections, and then to closing assuming there are no surprises or issues that pop up. I have had a lot of success with this model and done a lot of out of state business. Any good agent who works with oos buyers should be doing this for you. Luckily for my clients, I am doing my own rehabs and buying my own rentals, so I can give pretty accurate repair estimates, and contractor referrals also.

Caroline C. · Answer

We have almost always taken a trip to see the property firsthand.  In a market we are familiar with and already own property, we might get it under contract first and visit during the due diligence, but when starting out in a market, seeing everything firsthand is important, as well as meeting the team on the ground you want to work with, especially if you are new to investing and you are risk averse.

When we feel we are ready to buy, we schedule a trip, and a couple of days before the trip look at the current inventory, whether tk operator, MLS listings from agent, or wholesale deals.  This way when we get there, we can look at the interesting ones firsthand and are in a position to move right away, and have the comfort of viewing the property, street and neighborhood first.

If you schedule your trip around a local REIA meeting, you can make further connections and maybe even find better deals!

Out of State Investing - Purchasing Sight Unseen??

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