top 5 mistakes for out of state investing!

[Account Closed]

Ok If this is ok with Josh I would like people to chime in with what are the top mistakes when people invest out of state. I haven't seen much of a list besides a couple other threads about this but hopefully trying to get a bigger list. I have no experience and am interested in a couple different markets but a list that I can think of would be this.

1) No research on area/house. ( Some people won't even take a plane to see the house they are buying. Can be set up for code/building violations).
2)Property management issues (as always they won't take care of your property as much as you will, so maybe not doing enough research on a certain company)
3) No research on vacancy/neighborhood (maybe the area is extremely vacant and people don't visit and don't do the research to get it rented right away, also the neighborhood can look great in a picture but can be in a war zone..)

Everyone please input, if you have experience I want to make sure I cover all the aspects before deciding to invest out of state, this can be a great thread for anyone looking to do the same thanks!

[Gregory Childs]

John,
We do all of our investing out of state.
In normal real estate it is location, location, location. In out of State investing it is contacts, contatcs, contacts; verify, verify, verify; and spread, spread, spread.

What I mean is:
Contacts
You have to build relationships, just as you would locally - these can be built "virtually" but it takes time. You start with a couple of core contacts and build out from there. You also have to learn about the market sufficientlly so that you can speak with a level of authority about it - i.e. understand the difference from buying in Grant Park or Decatur (Atlanta GA) and how the client base differs based on your decision. You need to be informed - but allow your local contacts to be the experts.

Verify
Once you have the contatcs built you still have to verify the data. So, for the contractor example, you need to not only verify the history, reputation, licence, insurance, etc but once the project is underway you need a third-party inspector to verify the work is completed prior to a draw request being paid. That will cost around $200 for each verification; but will keep the contractor honest. The same goes with value estimates - always verify with a desktop appraisal ($85) or perhaps a BPO ($100+). And if your gut tells you different from what you are hearing from your local expert - go with your gut.

Spread
Assume something will go wrong and build a 10-15% spread. In Chicago we had a water leak in the basement that cost us $1,500 to rectify, in Phoenix we had a swift market downturn that kicked us in the rear on two properties (illegal immigration checks policy). In Atlanta we had one property that took us 6 months to move.. mainly because we wanted more that it was realy worth on the market.

Other than that it is really not that different than investing locally - in fact it has its advantages as you cant just drop by the job site to check-in on the action; so you go home and play with the kids instead.

We invest out of State because we want a shorter sales cycle and a lower entry point to provide a good cash flow product. It works for us!

Oh, one other thing - automate as much of the process as you can and get local representation (Attorney, Title, etc). That way you standardize your process and are certain you have complied with the local regs.

TTFN,

Greg