Investing out of state

[James Pettinelli]

I was initially trying to invest in locations within 1-2 hours driving distance of where I live in Northern VA, but then it occurred to me that that's a very limiting approach. But how do I invest out of state? How do I protect myself from a bad purchase if I can't see what I'm buying? I'd be grateful for any advice people have for long-distance investing. Additionally, I'd be interested in areas around the country experienced BP investors really like to plant their money. Thanks!

[Spencer Hilligoss]

@James Pettinelli - when we were first getting started, we worked through the same series of decision points. Here are a few things I found helpful when vetting markets and properties, "sight unseen."

Educate yourself: pickup a copy of @David Greene's book: Long-Distance Real Estate Investing

It's enjoyable and easy to apply. There are plenty of books that hit on this topic,  and this one is more residential focused, but some of the strategies/tactics apply to commercial, as well (assuming you're looking for commercial properties, since that's the forum we're in)

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Set your investment criteria - after some self-education, this is the next step since it will guide the markets and submarkets you choose. what are your 'investment criteria?' 

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Vetting properties: To your question of "how do I protect myself...?" this is more of a question related to the mid/late stages of your overall approach, whereas the the recommendations above are fundamental 'getting started' steps. Vetting really comes down to people and process. Most of these tips are covered in the other reading/education you'll find out there already, but here some of the things we did:

- If you are doing true 'long distance' investing (not easily driveable), I recommend focusing on finding/building at least a couple local relationships in the market you decide to target. Get to know people who live in the area, whether that's vendors, partners, other investors, etc.

- Get inspections with reliable local partners. Cross-check the inspection reports from each partner, with the other partners... and listen closely to how they discuss the findings. Example: it's interesting to compare the opinions of local insurance professionals vs. inspection companies

- We used WeGoLook.com and it worked well for what we needed it to do. You don't exactly get a detailed report or professional picture and video, back. But it gives you a nice visual gut-check on the specific block and submarket you're looking at, if you don't plan to travel to the property, prior to close

- Go deep vetting the market/submarket with publicly available data sources (like city-data.com). Get to know the recent history of the neighborhood you're looking at

- During due diligence, hold your ground (in a professional, friendly manner) when asking the seller for key documents, like rent roll and bank transaction statements. If the seller isn't willing to prove economic occupancy...  you're taking their word for it (and taking on some risk)

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Most important: Regardless of which asset type you focus on, strongly encourage first-time out-of-state investors to work with an experienced partner. Whether that's a turnkey single family rental, a multifamily syndication structure or a great deal you want to buy outright, and are willing to give a % of returns away to an experienced local investor who will ensure you don't strike out on your first one (better to 'hit a double' than strike out altogether, right?)