Trusting &quot;deals&quot; as out of state investor

http://www.outofstateinvestor.com/market-research-...

My husband and I are looking to buy a second house down in Indy now since his job recently promoted him to area supervisor in that area, and I actually just signed up for this website (Bigger Pockets) from a suggestion I got from this link:

There might be some useful input in this article for you. Figured I'd share in case you wanted some guidance on neighborhoods since this guy already mapped out some good and bad areas in a shareable Google map 😉 Hope this comes in handy! Good Luck! 😁

Jacey Bender

Property Manager · Franklin, TN · Member since 2018 · 3 posts · 2 votes

Have you been able to get on any wholesalers lists? When they send out deals, I would use the BP calculators to plug numbers into to get comfortable running them. I started analyzing at least 1 deal per day to get use to it. It takes awhile to find a diamond but you will if you keep at it!

Mark Krier

Real Estate Agent · Grand Rapids, MI · Member since 2016 · 39 posts · 29 votes

I know what you mean Scott... The lack of hyper-local knowledge is probably an issue in every market, but I think it's particularly difficult in Grand Rapids (I live and invest here). Plenty of reasons why, but mainly because the inventory is low and the neighborhoods are unique. I would suggest you analyze and run numbers on every deal you can without worrying too much about adjusting for local intangibles, and then just find 3 or 4 local people you trust to look over your numbers each time (i.e. Realtors, other investors, property managers, local lenders, etc.).

So basically my answer is to put in place a system that will outsource the solution to the problem rather than trying to solve it yourself.

I would be happy to check over your numbers and give you a quick opinion. Send me an email anytime.

Alan E.

Dallas, TX · Member since 2018 · 40 posts · 15 votes

@Scott Passman Simple answer is to find a good Realtor, their full time job is to know the market. Grand rapids will be hard to find something cash flowing from MLS from what I've heard. I'm currently looking there for a house hack myself. Every good price on the MLS will have multiple offers day one. Good luck on your hunt.

Andy Rumple

Wholesaler and Real Estate Broker · Indianapolis, IN · Member since 2009 · 438 posts · 293 votes

Once you know what you are after get on some wholesaler lists to access off market deals.

Jeff Schechter

Developer · Nashville, TN · Member since 2016 · 484 posts · 406 votes

@Scott Passman The overall condition of the property (affecting future repairs) and the ongoing management (practices that generate cash flow) are going to have THE greatest impact on your overall long term performance. And while the map that @Jesi Drake suggested is nice, it's google...typically about 5 years outdated. Things can change in many cities street by street...especially in Indy. We are doing extremely well in in areas that some BP investors stay away from - largely because they don't know what we know. Best suggestion - go visit the city and teams you want to work with.... start understanding WHO they are, HOW they do things, and develop relationships that will be beneficial for you moving forward. You can PM me for more info.

Mark Jones

Rental Property Investor · Indianapolis, IN · Member since 2017 · 104 posts · 47 votes

@Scott Passman for the intangibles, you need to find a property manager (or local investor) with experience in the exact location you are targeting. Not just the same city, neighborhood, or zip code. Here in Indy, if someone is giving you feedback based on a property 5 blocks away, they very likely are giving you an apples to oranges comparison.

Another thing to consider is that you may be getting conservative feedback. If something is even close to a borderline deal, a trusted advisor will probably steer you away. Otherwise if anything goes south once you own it, they now have egg on their face.

That’s why I’d find an experienced property manager who knows your goals and expectations.

Jacqueline Coombs

Rental Property Investor · Grand Rapids, MI · Member since 2016 · 262 posts · 205 votes

@Scott Passman All I can say is “Boots on the ground”! I am a Grand Rapids investor and all of my properties are within 10 minutes’ drive from me. I would never have bought some of them if I could not be here to monitor things. Most of what I buy cash flows fabulously (~2% deals) but are also class C rentals on the SE side that IMO take an in-area approach. In my experience, beIng on wholesaler-buyer lists here in GR has been a waste of time. ‘Nice websites but no deals that I have seen. I have been sourcing my own deals the last few years as it is extremely hard to find any through conventional means. That said, I guess it depends on what type of return you are happy with. I periodically see some good 1% properties listed on the MLS. The key to getting those would be to have access to them before they go live; pocket listings. If It were me, I would take an exploratory trip out here and network like crazy hoping to find one or two trustworthy contacts. I will personally vouch for @Mark Krier. Feel free to message me with any questions about GR! 😊

Matt K.

Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes

It's "easy" you just need to master one market and understand it as if you've grown up in/around it. It's by no means hard, but it is time consuming. Narrow it down to specific regions, understand it so you can know what a good deal in on buying but ALSO renting....

But take it further, understand the night life if that's your niche... where do these people work, where are they going out, why does that neighborhood 2 blocks away from xyz ALWAYS have listings/high turnover. Maybe you going after family in the burbs... what schools are in demand and why. Who has the best sports team, what area has the bus stop all the kids walk to etc etc...

Understand where these people are working, what the commute is like. Maybe that killer deal butts up to a major street and you have to cross it during commute making it impossible.... Maybe people pick an area because it's an easier commute vs different area etc etc...

All those things you did or maybe wish/should of done before YOU moved somewhere.... apply that to your rental.

Along with all this, understand your budget but more so the numbers that make up your budget. If you have have a buffer for even that worse case scenario then not a whole lot that can happen if you took the time to research best possible "deal" even if it goes little different than you thought. Understanding the numbers is easy, they behave in predictable ways.... people not so much. But the better you understand both, the better decisions you can make.

Mihir Bhimaraju

Investor · Indianapolis, IN · Member since 2016 · 232 posts · 133 votes

@Scott Passman I was there right where you're at about a year ago. I can relate to your situation. Being out of state has its own troubles. If you haven't reached out to any locals already, I'd be happy to have a quick chat and point you in the right direction.

2 Reply

Jason Carter

Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes

In Grand Rapids I suggest talking with

@Paul Leason and @Jake Thomas.

Then reach out to some local investors, looks like a few good ones are on this thread, ask them for input and referrals. Then contact their referrals. That's how you build a network. Take the info you get from one person and vet it through the others. You'll get a consensus and as those relationships grow so will the trust. Also, visit the area before you buy something. Drive the neighborhoods, view the property and buy the people you've been talking with coffee/beer/lunch. And try to offer them some value as well, even if it's just recommending them to other investors.

I didn't notice where you are located but I assume you'll be using management. GR has some great options there as well.

Best of luck!

Scott Passman

OP

Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes

@Jesi Drake Thank you for the site and the map. I didn't know about google my maps which has some great features to help me track things!

@Matt K. You really drilled into something I read about all the time and "know" internally but don't practice, which is being very specific. As a new investor, I'm trying to learn about a lot of different neighborhoods in each market to see which ones are worth investing in but what I need to do is pick 1-2 and just focus on them. It is much easier to track a couple square miles of real estate than 1/3 of the city to allow me to really get to know what is typical and what isn't. I will take this advice and reflect on how I want to implement. Thanks!

Thanks everyone for the great advice. That's why I love this community as everyone is so eager to chip in and help out.

Matt K.

Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes

Originally posted by @Scott Passman:

@Jesi Drake Thank you for the site and the map. I didn't know about google my maps which has some great features to help me track things!

@Matt K. You really drilled into something I read about all the time and "know" internally but don't practice, which is being very specific. As a new investor, I'm trying to learn about a lot of different neighborhoods in each market to see which ones are worth investing in but what I need to do is pick 1-2 and just focus on them. It is much easier to track a couple square miles of real estate than 1/3 of the city to allow me to really get to know what is typical and what isn't. I will take this advice and reflect on how I want to implement. Thanks!

Thanks everyone for the great advice. That's why I love this community as everyone is so eager to chip in and help out.

Go different route, define your target renter and find the best area that would fit that. If you're targeting young professional no sense in looking in the burbs with good schools.

You can always adjust and refine your search as you go but if you try to do everything at once you will have to much noise and it'll be hard to evaluate the deals for what they are on apples to appear basis.

Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

@Scott Passman Only you can say whether it's a good deal for you or not. What's a good deal for one person may not be for another. In order to build confidence in your ability to evaluate opportunities, you need to very clearly identify your criteria and ROI objectives. I think a lot of people spin their wheels looking for some imaginary deal without really defining what a deal is to them. If the property itself meets your criteria and the numbers achieve your ROI goals, them in my opinion, it's a deal.

4 Reply

Jim D.

Investor · United States · Member since 2015 · 415 posts · 487 votes

@Scott Passman There are so many different ways to make money in real estate that a good deal doesn't look the same to everyone. That could explain why you've gotten contradictory feedback from different investors. My advice would be similar to Mike D'Arrigo's above: define clearly what metrics you want to hit and be ready to act when you find something that meets that criteria.

I would definitely still run it by a couple other investors, property managers, agents, etc., but the questions I would ask them would not be "Would you buy this? Is this a good investment?", but rather more specific things to make sure you're going to hit your metrics, like "What would you expect this unit to rent for? What type of renters will I get in this neighborhood?" etc.

Scott Passman

OP

Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes

Thanks @Jim D. and @Mike D'Arrigo. I think you are both right on why the contradictory answers. A lot of the confusion stems from asking about properties in a certain neighborhood where one investor will note that it's a good area to look at while another will tell me it isn't based on crime, housing conditions, lack of cash flow etc. But like you said, perhaps I need to narrow down and define my criteria as there are a lot of reasons each could hold the opinions they have on the neighborhood.

Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

Originally posted by @Scott Passman:

Thanks @Jim D. and @Mike D'Arrigo. I think you are both right on why the contradictory answers. A lot of the confusion stems from asking about properties in a certain neighborhood where one investor will note that it's a good area to look at while another will tell me it isn't based on crime, housing conditions, lack of cash flow etc. But like you said, perhaps I need to narrow down and define my criteria as there are a lot of reasons each could hold the opinions they have on the neighborhood.

Scott, that's a very common problem. Everyone has their own definitions of property classes. One persons C class is another persons D class, One of the best ways to determine the class of a neighborhood is to understand rents and prices in various areas, If median rents are $900 and someone is telling yo that a house renting for $600 is C class, then you should be concerned. Trulia is a pretty decent source for crime rates so you should use that tool also.

Ali Boone

Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes

I think the key is to have someone with boots on the ground to work with. Someone who can tell you the good deals or point them out to your. Whether that's a turnkey provider or an investor-friendly agent or a property manager....someone. I would think it'd be impossible for there to be any way for you to be the one who can accurately find the good deals. You aren't there to see them all, you won't know the neighborhoods, etc.

I'm in CA and have mostly bought out-of-state. Turnkeys have been my preference because all of that stress is handled for me. But you can just as easily put a team together yourself. I'd pick the market, then create the team. Then let the properties unfold from there.

I don't know how else you'd ever be able to find the good stuff.

Scott Passman

OP

Rental Property Investor · Batavia, IL · Member since 2018 · 452 posts · 672 votes

Thanks @Ali Boone. This seems to be the prevailing ideology behind @David Greene to build your team first and let them bring the deals to you. Going back to a previous comment I'd made, I think part of the issue is I really haven't narrowed down exactly where I want to focus (Grand Rapids, Indianapolis, or even home market in Chicago suburbs) so I haven't fully committed to either yet as I'm trying to learn about all of them before making a choice.

Pat JacksonPro Member

Rental Property Investor · Reno, NV · Member since 2017 · 284 posts · 137 votes

Get on a plane, rent a car, and get a short term rental while you’re there. Don’t eat in the same place twice. Learn for 18 hours a day, burn the candle on both ends, and learn where you want to invest. It’s what you know and who you know.

2 Reply

Ian WalshBusiness Member

Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes

Confusion or fear of loss is being created due to lack of answers for yourself. When investing out of state, I strongly recommend learning the market you are going to invest in, meeting/interviewing the property management companies in person. You should do this with any vendor.

Paul LeasonPro Member

Realtor · Grand Rapids, MI · Member since 2012 · 172 posts · 70 votes

Thanks for the mention @Jason Carter

@Scott Passman lots of great advice up above and I have to also agree with @Jacqueline Coombs that wholesalers have not provided with me any great properties for a LONG while. Seems like they have got too greedy here and then network with other wholesalers to sell their deals. I’ve had the same house come to me through 2 different wholesalers and one was $5k more expensive than the other. They are just marking it up and there’s no skin left on the bone for the investors. And with a wholesaler you are not being represented, so they will sell you a property. Being out of state would be difficult unless you have someone here to vet the property. I think @Mark Krier would also agree with me on that. Hook up with one of the Investor/Realtors here and let them guide you to a good property. @Mark Krier @Jim D. are both good choices. Best to list down some questions, give us a call and interview us. See who you like and feel most comfortable with and proceed. If you have the opportunity, come up to GR and do a tour. As @Mark Krier stated, neighborhoods here can change block to block so its hard to define n’hoods to buy in and those to stay away from.

Lastly be confident of your numbers. 1% is doable here with PM. Not a lot higher. If that is not going to work then you’ll struggle to find the house that meets your needs. GR is now a long term buy/hold imo. We got lucky back a few years when 1.5% was the norm!

PM: do the same interview process l. We can suggest 3 PMs, then call them and see who you like the best.

616-717-1901

Peter Ledger

Investor · Salt Lake City, UT · Member since 2018 · 63 posts · 45 votes

Hey @Scott Passman I definitely know how you feel! We've been flipping here in Cleveland for a couple of decades now and do help OOS folks pick up turnkey properties. No matter what strategy of REI you are looking to get involved in, there will always be differing and competing opinions. I think you need to pick your market, and then go there for a visit. Meet people face to face. Develop a relationship with an investor or an agent that you think you can trust, and then go from there. Even within a certain city/market there will be differing ideas and advice. The big conflict here in Cleveland is East side vs. West side, or even city vs. Suburb.

@Sammy Lyon recently flew out here to Cleveland to do just that. Sammy met with a number of people to find who might be trustworthy. Sammy, you want to provide any insight?

2 Reply

Caroline C.

Investor · Jacksonville Beach, FL | NYC | Tamarindo Costa Rica · Member since 2014 · 182 posts · 130 votes

@Scott Passman I would first settle on a market, then spend some time visiting the market, attending local REIA there, window shopping on TK or wholesale deals in the market, so you start to become more comfortable with what is out there and what you are willing to settle for.

Keep in mind that when you invest on the lower end of the rent scale, success and failure is dependent on what tenant is put in place by your property manager - on the lower end of the rent scale, you have to be willing to accept that you might have a tenant that eventually doesn't pay, or when they move you are stuck with a multi-thousand dollar set of repair bills. But there is more potential upside because the cash flow will be higher.

For all the talk of putting 'the right team in place', it really comes down to this - if you get a good tenant in your place, all will be great, but if you don't, it will be a headache. So I'd focus on that aspect of it, talking to PM's, and other investors about their experiences with tenants at various rent price points.

If you go more higher end, your cash flow will be lower but the tenants take better care of the properties and tend to be able to pay rent consistently and on time - less headache.

But pick a market and spend 6 months visiting it, meeting people and looking at deals. Meeting other investors at local REIA is the best way to get straight info, you WONT get it from the people trying to sell you something.

Matt K.

Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes

Originally posted by @Scott Passman:

Thanks @Ali Boone. This seems to be the prevailing ideology behind @David Greene to build your team first and let them bring the deals to you. Going back to a previous comment I'd made, I think part of the issue is I really haven't narrowed down exactly where I want to focus (Grand Rapids, Indianapolis, or even home market in Chicago suburbs) so I haven't fully committed to either yet as I'm trying to learn about all of them before making a choice.

You should have a really solid foundation of knowledge prior to building your team. So many people can present offers that aren't anywhere near what they appear....

Not that you need or will know everything, but you need to know enough to spot the BS...