Lending vs. Investing in Long Distance Rental Properties

[Eric Graig]

I'm new to BiggerPockets and am dipping my toes into real estate. I'm trying to figure out the comparative advantages and disadvantages of real estate lending through a site like RealtyMogul or PatchofLand (others?) versus actually becoming a landlord. I live in NYC so local landlording is out of the question. I have capital available for both options. Mainly I'm interested in the comparative risks, rewards, and headaches.

Any thoughts/advice?

[Michael Seeker]

@Eric Graig - that's a great question!  What jumps out right away is that as a lender you do not get to take advantage of many of the bigger benefits of being a direct investor.  Appreciation, amortization and depreciation all come to mind.  I don't know anything about online lending pools, but your returns are probably going to be tied to the risk of the deals the money goes into.  If the funds are going into riskier development projects you might get 10%+, but if/when the market turns these will be the most likely to default.  If funds are going into passive deals, then you're probably looking at low/mid-single digits (unless borrower/deal is questionable) which isn't anything to get excited about.

Have you considered partnering with somebody who operates and a more favorable market or looking at being a passive investor in syndications?

[Eric Graig]

These are good points, much appreciated. And yes, I am interested in the right sort of partnership. The challenge of course is finding the right partner. I'm trying to recruit a real estate agent I know in the San Antonio market. This book (https://amzn.to/2U4TwBy) by RM Andrews has a lot of non-hype advice. Best case is to find an area that is at least driveable from NYC, perhaps upstate NY or Pennsylvania. Step one is to figure out how to screen locales and within locales, neighborhoods. 

[Matthew Irish-Jones]

@Eric Graig you will learn a lot less investing in Patch of Land type companies, it is more comparable to stock investing than to land lording.  There is a lot more involvement with long distance investing directly.  You also have far more control of the outcome.  You get to pick your realtor, lender, property manager, insurance broker, and your home.   You are intimately tied to the process, have decisions to make in regards to all of your vendors and your investment, and receive all of the benefits of RE estate investing.  However... you also receive 100% of the risk...so you have to be careful.  

There is enough information on this site to get started and make good decisions.  RE investing is less complicated than the Guru's make it out to be.  Do your research, find reliable vendors, pick a good market, have a clearly defined strategy and you can make it work. 

It also has to do with the amount of time and your personality type.  There is certainly more involvement with directly investing in RE.  As with anything in life or any industry, the more time you commit, the more you learn, and the better you execute, the better your returns.

Good Luck!

[Eric Graig]

Your comments are much appreciated.