Tips for New Long-Distance Real Estate Investors

[Basit Siddiqi]

Hello Biggerpockets audience

I recently been reading a good amount of posts of Biggerpockets members sharing horror stories when investing long distance. There is also likely 10 horror stories that is not shared for every 1 that is shared.

I live in New York City and I invested in two long-distance cities successfully - Allentown, PA and Jacksonville, FL.

I would like to share the tips that I took to become successful while avoiding getting scammed or taken advantage of. The steps that I took are more on the active side so just a little warning - I am not teaching steps on how to invest long distance without doing anything.

1. Home inspection
Have a home inspection contingency on every contract where you will buy the property.
Get the home inspection and ask to speak with the home inspector immediately after he is done with the inspection.
This 5-10 minute conversation will allow you determine if you should move forward with the deal, allow you to understand what exactly needs to be fixed in the house and approximately what the cost should be. If you are unsure of what the cost to fix up the house - share the inspection report with a contractor.

2. Don't pay more than $10,000 
Never pay a any contractor more than $10,000 on your first contract with them. Avoid hiring a "general contractor" that will handle the complete project for you - especially if you never did business with the person before. This will avoid the person running away with your money and will allow other contractors to potentially provide feedback on his work(to see if they are good or bad).

Yes - this does mean having to individually hire and find contractors for electricians, plumbers, roofers, flooring people. This can be a good thing as you will be building your contact lists.

Once you do business with a specific person often and you see the quality in their work - you can expand the $10,000 threshold.

3. Don't pay contractors 100% upfront
Paying contractors 100% upfront doesn't provide much motivation for contractors to continue with the work. It also doesn't allow you or your property management company to inspect the work as it is being completed.

4. First deal is a SFH(1000sq to 1600sq)
If the first deal is a SFH - the overall project rehab(if any) wouldn't take too long or be too costly.
Once you built your references and have an understanding of the market you can scale up to multi-family unit

5. Travel to the area for a 3-4 day trip
I would consider making a trip to the area that you plan to invest in. Yes it is entirely possible to invest in an area by never visiting the area but if people are planning to have a huge net worth tied to a specific city, you may as well spent the money to visit for at least 3-4 days.

The trip doesn't necessarily need to be all business.
Plan the trip appropriately - tell your contractors, tenants(if you want), property management companies that you will be arriving ahead so you can meet with them. Spend 5-10 hours meeting your contractors and going over the properties.
The rest of your trip can be exploring the city, visiting museums, beach(if available), trying new restaurants, etc

On top of that - the trip can be a deduction.

There are many ways to build wealth in real estate and these steps worked for me. My tips are just suggestions and what worked for me and tips that I wanted to share.