When investing out-of-state, do you really need to visit area?

Question

I'm a new investor looking to invest out-of-state and have heard its recommended to physically visit the area you are interested in.  What exactly are you looking for or trying to accomplish with this visit?  With today's technology, what can you find in person that couldn't be found online?  Google maps seem much better than driving around neighborhoods.  What am I missing here?  Any advice would be greatly appreciated.

Bob Woelfel · Answer

@Esteban Cardenas...why wouldn't you want to? I use google maps all the time, but nothing beats seeing the neighborhood for yourself. If you plan on buying multiple properties I can maybe understand not going to visit each property at each purchase, but for your first couple I would highly suggest. There are a lot of out of state investors who buy in Kansas City. Some buy through turnkey providers and others buy on their own and develop a local team. Many times the neighborhoods they were told were B are actual C-. Listing pictures typically make a property look much better than it actually is as well. I can't count how many times I've gone through flips, turnkey properties and not been impressed by the work that was done. Some areas and neighborhoods are street specific as well.

I mean you don't have to, but if you're going to tie up a bunch of money in investment properties it feels like the bare minimum one should try to do. It's really hard to find people to care about your properties or investments as much as you. If they get the feeling that you don't care enough to even visit once, why would they care? Seems pretty risky to me. Your call.

I mean you don't have to, but if you're going to tie up a bunch of money in investment properties it feels like the bare minimum one should try to do.  It's really hard to find people to care about your properties or investments as much as you.  If they get the feeling that you don't care enough to even visit once, why would they care?  Seems pretty risky to me.  Your call.

James Wise · Answer

No you don't need to physically be there. You do need to research the area & make smart buying decisions though. If you follow the best practices I've listed below you'll stay out of trouble & have a smooth investing experience.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Ross Denman · Answer

I love Google maps, but sometimes your view can be 10 years old. It may not show you the 3 boarded up homes in your area or the one that is the shell of a home from a recent house fire.

Last year, I almost had a client purchase a home and had me visit it for him. What wasn't obviously apparent, even from Google maps was the metal recycling facility that was almost across from the back yard from the home... but the crunching and clanging sounds certainly showed up in the video I was shooting for them.

A few years ago I had a client purchase a couple of turn-keys from a local provider. They were in an "investment district" in town where most homes in the area are rentals. While the area is not unsafe, it's certainly not the suburbs. The tenant came in and asked about installing a heavy storm door or security door since there was no barrier to the outside when she opened the front door. I thought that it was a reasonable suggestion and asked the owner about considering it. He asked me, "Is the area that bad?" and I told him, "No, she's just a single mother in a neighborhood that occasionally has some nuisance crime." He visited Indianapolis a couple of months later and drove by his rentals. He was appalled that I let him purchase properties in an area like that. He said that he was scared to get out of the car.

I'm an investor, I work in property management, and there are no areas that scare me to walk during the day... I guess I'm used to the things you may see in various neighborhoods and know how to handle most unusual situations. My opinion of an area may be considerably different than someone who lives in a super suburban bubble and never deals with distressed homes or C to C- areas.

Also, I recently spoke with a new investor from San Diego who spent several days here. He spent about 2 hours in my office and told me that visiting was an eye opening experience and that the picture portrayed by many of the local providers was different from what he was seeing himself.

You're investing $10's of thousands of dollars or more and at least half of the trip will be a write off. I also think it's nice to meet some of the locals while you're here. Put a face to a name. See if they feel like the type of people you want to work with. While it's not necessary, my most successful clients know Indy almost as good as the locals and most of them visit once or twice annually. I have an Israeli friend who visits twice each year. She also knows the landscape, neighborhoods, changing demographics, and even many of the block by block areas.

For instance, did you know that on the near North Side of Indianapolis several north/southbound streets have beautifully, well-built custom homes and the in-between streets have cheaper, smaller homes. There's a huge difference between most of the homes on Capitol Ave or Illinois in comparison to Graceland or Kenwood. Typically, they are not even comparable, but they can be only 1 block apart.

Jimmy Dang · Answer

@Esteban Cardenas with today's technology there is so much you can get accomplished without physically being there. It's always good to see the area for yourself but I don't think it is necessary. I bought 3 properties without physically being there with boots on the ground. Finding people you can rely on is really the hard part

James Wise · Answer

Anytime man. Keep up the good work.

Mike D'Arrigo · Answer

@Esteban Cardenas If you're new and inexperienced and don't have highly trusted boots on the ground helping you that knows the area, you should visit the area first. Technology only goes so far. Google maps can give you a pretty good idea but it doesn't give the full picture. Cities like Indianapolis for instance can vary block to block and even street to street. Google maps doesn't adequately show the nuances and transitions of the area. Many of the people that I work with don't visit the market but that is because we've done this a long time and there is a high level of trust. For the few hundred bucks it would cost you to make a trip, I don't know why you wouldn't.

Mike D'Arrigo · Answer

@Esteban Cardenas something else I forgot to mention, looks can also be very deceiving. Parts of Detroit are full of all brick houses which look nice from the outside. Brick has good curb appeal and generally won't look run down, so from an outsider perspective just looking at the street on Google Maps, it looks pretty good. It can be a whole different story when you get there.

Adam Sankowski · Answer

Yes you do need to visit. I have bought out of state in KC and Indy. Now that I’ve visited Indy once I don’t have to go back when buying again if I don’t want to (but I’ve actually really fallen in love with the city) as I know the areas now and have great boots on the ground BUT the only way to know if your boots are the ground are for real are to meet them and see if what they are telling you lines up what your seeing. Indy to me looked way different in person than via google maps and just talking to a few people in the neighborhood your looking helps. In KC the neighborhoods were rougher and the turnkey rehabs were crappier than any of the photos I saw before visiting.

Plus I feel like on some cosmic level you need to step foot at least once where you are buying. These are real people that are living in our units and I just feel like we owe something to where we are investing to go there once. That’s the hippy in me but...

I’m sure you can do a lot of internet research and be ok but for the price of a plane ticket you can be 99.9% more confident in your decision. Seems like a crazy high ROI to me on the trip.

Teague Anderson · Answer

For me I need to visit a city to calibrate my analysis of it.  A C-class neighborhood in one city might be a B-class neighborhood in another city.  My wife and I have visited a few cities we've considered investing in, and we spend all day driving around.  We pick out some pockets with the cheap promising properties and see if the neighborhood and surrounding areas are really areas we feel good investing in.  Once we've done this preliminary work, when we look on Google maps we really understand what it's like.  We have since bought 6 properties sight-unseen, but we had a good feel of the city from visiting.

Also, we get asked by a lot of our team, "are you guys moving out here?" or "are you coming out anytime soon?"  I feel like its respectful to the people of the city and your team to at least have some interest in the area and showing that interest by visiting.

Esteban Cardenas · Answer

These are all very good points both ways.  Thank you everyone for the feedback.

@James Wise I will be sure to follow each of those practices you have listed.  Great stuff.  Thanks

When investing out-of-state, do you really need to visit area?

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