Out of state listings become pending too quickly,how to commit?

Question

Hi fellow BP members; I live in Colorado Springs and want to invest in North Atlanta Metro area; Marietta, Kennesaw, Woodstock etc.. Anyway, I have a SDIRA set up as an LLC for rental property purchase in Nov 2016. Visited last year and unfortunately a couple properties fell through. Anyway, really want to purchase a 3-4 bedroom property for 130-170k. My downpayment cold be as high as $92500, so technically will cash flow although Cap rate max 6-7% is anemic. Lender requires a 40% downpayment for SFH in Georgia. My concern is that these houses go under "pending" status on sites like realtor.com. Is it possible to bid an offer sight unseen, out of state using a real estate agent in Georgia 1-2 weeks prior to travel there (flights booked first week of May 2018) and then pull out if concerning Building inspection or close the deal if attractive? Really want to close a deal here and move on with my life. If the property could be set in "pending" status, this would be advantageous as the property could be inspected, the financing initiated (lender NASB require up to 35 days to close) and less fear of losing the property because of out of state status. Otherwise, I fear the only way to do this is wait till land in Atlanta and the "right" property pops up in the 4-5 days we are "on the ground"; Also read several books that address this topic (David Greene and others) thanks in advance, Stephen

Katie Deskins · Answer

@Stephen Craul

I am a Realtor/new investor in the Savannah, GA area and the market is moving quickly here as well. More and more I am seeing buyers put offers on properties sight unseen and never set foot in the state they are buying property, nevertheless in the actual property. Like Account Closed said, you need to develop a relationship with a wholesaler/investor-friendly Realtor, etc. that you trust so that you can offer on these properties with more confidence from out of state. In the meantime, your strategy may work but understand that decent investment properties are typically in a multiple offer situation going to the highest and best bidder. If you are competing against other offers, you might have to sweeten your offer by putting down more earnest money. In Savannah due diligence periods are typically anywhere from 7-14 days (you can also offset some of that by requesting "banking days" or "business days," this throws off some sellers but gives you more time if they agree). If you already have a relationship with an agent, an inspector, and a lender that are all sitting on go I think you have a pretty fair shot at beating out other buyers.

If you are able to put a down payment of up to $92,500 and you are looking for SFH, you may want to schedule your trip for the beginning of the month when they do the courthouse auctions. See if the county where you are looking has their upcoming auction properties online, find out everything you can about the ones that interest you, and see if you can buy a property outright with cash off the courthouse steps. You can also visit sites like auction.com and bid on properties from there. You'll still be competing with other buyers, but your competition is narrowed to people with cash (and there are a lot fewer of those than there are buyers getting financing).

One more thing, I am not sure if you are using the lender you're using because you have a previous relationship with them, but with my lender the down payment for an investment can be as low as 15% (and I don't have any other investment properties under my belt or stellar credit). You may want to shop around for lenders. Hope that helps!

Account Closed · Answer

Hey Stephen!

***Full Disclosure: I'm a provider of out of state investment properties.***

^^^ I'll give you my perspective from the seller's standpoint. When I acquire an off market property at a good price and want to move it quick, before I even give the public (or even my large private buyers network) an opportunity I look into a shortlist of buyers I have a strong relationship with. These are buyers that communicate with me, make the transaction process smooth and don't nitpick me, and are serious about investing- not just viewing properties and making lowball offers. These buyers get first call on deals, and if they ask me for something specific, I go seek it out for them. I would suggest that you establish relationships with some wholesalers or any other provider that has rental property that meets your profile, and spend some time communicating with them and building a relationship. They will WANT to work with you. In fact- they're dying to have more buyers like you where they can create this pre-order atmosphere and move deals quickly. The problem is most buyers just want to come in and drop a low offer in a 1 sentence email when they haven't even shown that they're serious.

Side note: You should definitely be getting a higher LTV than 60%. My out of state guys get conventional financing at 75%-80% all day on properties purchased at around 70k. I'm confident you can as well.

Let me know if you need me to elaborate on the tips above! Good luck my friend!

Account Closed · Answer

@Katie Deskins is definitely right! one thing I would like to mention though, @Stephen Craul is that if you want to get first pick on off market deals you can't be making offers with all kinds of inspection contingencies. Inspect the property prior to offering and lock it up with a non-refundable deposit. Wholesalers and providers don't want to get locked down on a tight time frame just for someone to reserve their right to back out of a deal.

Stephen Craul · Answer

thanks for all the great responses; to further clarify; I rolled over several 401k from past employers into an IRA. IRS required non recourse loans which carry a higher interest rate (approx 6% for 20 years fixed for example and lenders require higher down payment, 40% as non recourse ). I have a real estate agent and discussing the possibility of agent doing and sending a video of property and property manager also review property as appropriate for rental. Seems like you need to place an offer before “on the ground “ as property does not last more than few days on MLS before status change to pending. On another issue, the SDIRA LLC was incorporated in Colorado so may need to register to do business in Georgia for eviction etc. Anyone know of a good attorney for a rental lease for Cobb or Cherokee county in addition to clarifying if it’s necessary to register to do business in Georgia even if PM most likely utilized. Thanks again, Stephen.

Jeff Zinsmeister · Answer

@Stephen Craul you should be able to do 15-20% down on a single family investment property. In state or out of state doesn’t matter to Fannie Mae or Freddie Mac. Do you have anyone that live in GA? I am wondering how you are going to manage the property.

Out of state listings become pending too quickly,how to commit?

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