Investing in rental properties across country, good or bad idea?

[Tony Choe]

Hey BP family!

I wanted to get you guys' input on what your thoughts are investing in a rental property across the country. For example, I live in the Bay area and there is no way I can invest in a property around here anytime soon. I was interested in investing in a market like Orlando :

• Median Sales Price: $115,000
• Median Rent Per Month: $1050
• Median Household Income: $42,418
• Population: 255,483
• 1-Year Job Growth Rate: 4.6%
• 1-Year Appreciation Rate: 12.6%
• 3-Year Appreciation Rate: 38.4%

Here comes the catch, I could not afford or have the time to be traveling back and forth from California to Florida routinely to manage the property, etc. Now I could hire a property management company but I am not sure how much that will cost me and if I will be able to generate cashflow if that were to happen. So would a property management company be an absolute necessity or are there any other options on acquiring a property in locations like Orlando and generating income? Any suggestions or tips would be awesome. 

Thank you BP fam!

[Ralph R.]

@Tony Choe  I have to laugh.  Everybody on here claims to be  entrepreneurial yet whenever some body asks this question they all point out the difficulties. You cant do it, don't do it, here's why not and so forth!  Good thing Edison didn't say that or we would still have kerosene lights!  The correct question isn't "Is this a good idea?"  It should be "How do I do this?"  Your reasons are your own.  The reason everybody says no or don't or you cant is because they themselves don't know "how" to do it.

 I own 8 out of state units 3,000 miles from my home in bush Alaska.  Its an 18 hr trip just to get in the same state as my units.  Then there are units spread over 5 hrs drive apart, in 3 different towns.  I have learned how to do it and as a result I could do it wherever I choose.  My model could be adapted anywhere. 

No I didn't do it right to start off it was a learning curve.  If you are a new land lord like it or not you have a learning curve ahead of you anyhow.  You pick what you want to do then learn to do it. Simple right?  If you want to invest out of state go for it.  After all: "you do the things today nobody else WANTS to do, so that tommorrow you CAN do the things nobody else can do" get my drift?  A closed mind will do nothing more than limit your success. 

How do these posters know what you can or cant do, or if something is possible if they never tried it? Its all conjecture on their part.  Lots of them say stuff  and don't even own property!  They've never tried it so how can they know?  I AM investing out of state and I can tell you it isn't that hard!

Here's How you can do it if you want.  This is a brief description.  Feel free to PM if you want to talk more about it.  No Im not a guru or trying to sell something.  If I can help I will.

The trick is in networking, and finding a team.  I've learned to talk to people and pick out the guy trying to blow smoke up my butt from a honest dependable person I can rely on.  I talk several times to somebody when I'm building a team. 

The FIRST person you gotta find is the PM.  They are gonna manage your property the entire time you own it.  (hopefully)  They have your money, they control your asset, they keep the books for the property, they choose your tenants.  Your giving them the keys to the car.  That makes them the quarterback!  They are the most important part of the team.  Buying a house then saying "now what do I do?" Or "Renter disappeared in the night now what?" is typical on this site.  Its like putting the cart before the horse.  you gotta spend most of your time finding a GOOD PM.  They are your main reference.  no good pm in the area?  Then move on to the next area.  (never had this happen though)  I cannot stress this enough.

Now remember birds of a feather flock together.  Really good people in their profession will associate with other people that are good at what they do.  Its basic human nature.  Bank Robbers know other Bank robbers, Doctors know other Doctors right?  Its a good bet the best PM in town will know the best  realtor, and won't even hesitate when you ask them.  Start there.  Remember you still gotta do some due diligence but the realtor is a short term thing, not near as important as the PM. Still, vet him good because you may use him again.  When you find a good one stick with him!  once you find the property and after the sale he's out of the picture for a while.  He's gone until the next purchase. 

Many realtors do not invest themselves and so cannot judge a good rental.  Same with PM's.  You as the investor make the call as to weather the numbers are right.  The success or failure is all yours buddy.  Your the one making the decisions and the one whose gonna loose if your wrong.  You use input from the PM as to rent ability, rent price, LOCATION and so forth.  Input from the realtor as to comps, market value, tittle company and so forth.  Input from the bank about the loan.  YOU not BP, not any body else combine all this knowledge to come up with the right answer for your goals.  The right team, the right rental, the best bank etc.  Win, loose, or draw its your fault!  Nobody else's!!  Go for the deal or pass, but  if you offer make sure you can close.  Don't waste everybody's time if its too much for your ability or you can't qualify for the loan. 

Insurance agents, and banks are the same way.  As soon as you have the PM and realtor nailed down you use their recommendations for agents and banks.  I like credit unions because they have branches in many different towns.  Once you find a credit union you like and can work with it might help open the door to other towns.  I am always trying new banks, calling for rates, as many have different rules, and different loan products. 

I use the same insurance in all my areas but I use a local agent in each town.  That way I have a network of agents. None of those agents feel stressed when I call for a quote on a new property (and I call every time I do an analysis.) because they know if it works out they will get the insurance for it, and I get a real number for my calculations.  All numbers in the analysis have to be real.  No guesses.  As we get closer to closing I have most of them pegged dead on.  I know cash flow (real cash flow with all foreseeable expenses taken out) long before the due diligence deadline passes.  

When vetting any of these people you can rule out those that don't call you back or pester you with stuff to buy.  If they are rude or pressuring or not going to fit your style or clash with your personality check out another professional.  Follow your gut.

This is a very condensed version of how you can SUCESSFULLY invest out of state.  Its slow to start, but so is all real estate for most people.  The upside is I can move around if I need to, and it helps when the market drys up in one area and I can go find another.  no 4 plexes  available in town "A"?  okay ill check in town"B"  If I wanted to go to another state I could. 

I think the guy that can fish in all the lakes can catch more fish than the guy that only fishes in one pond don't you?  To me the person who limits their growth by trying to stay in one area and can only grow as big as the number of units he can manage himself is shooting himself in the foot. Do you really think our president Donald Trump has been inside of every property he owns? Does he even Know who is renting from him??  Don't be fooled the big boys don't manage 50 units all alone, they have help.  A book keeper, A CPA, somebody to call maintenance people, a lawyer does the evictions, somebody else does the screening, etc etc. They may claim they do it single handedly, but they spend that 10% PM fee elsewhere.  Maybe more if they don't screen well enough and get the wrong tenant.  I don't try to manage the individual units.  That's "micro management"  I  try to "oversee" the numbers from them and manage the PM's and realtors and other vendors I buy insurance from or get loans from.  I manage risk, I manage leverage, and I dig up the money to invest.  Somebody else can manage the house and the tenants.  Its only worth 10% of the whole picture anyhow why should I waste my time with it?  I can make more elsewhere.  Micro management=micro business in my thinking.  Im working on my 3rd purchase in a year, and as soon as its done we have located number 4.  That will have doubled my doors in 18 months, and I will have re-financed 3 loans in addition to buying 4 new doors.  2 of my properties i've never seen.  They do well, cash flow, don't have many vacancy's rent easily when they do come up vacant so why do I need to see them?  Can you see a stock when you buy it?  Talk about scary spend 100k on a stock you cant see!!   I do however always go look at the first property or two, and I do go see the towns before I buy.  (some of the trip expenses I can write off my taxes) after a while when I am sure I can believe what the Realtor and PM are telling me I will think about buying one I don't see in person.

I work a couple hours a day on this stuff before I go to my regular w-2 job.  In the past I have bought a $3000 dollar mule sight unseen, and she was 10 times better than the 3 mules I bought that I did see.  Ive purchased used snow machines I've never seen.  I've never done it but many people out here buy cars they never have seen, both used and new.  The only thing I ever bought sight unseen that was a bad deal  was a home made ice house for ice fishing I bought once.  That one cost me a couple hundred dollars  LOL.

RR