Someone local to manage a long distance BRRRR - does that exist?

Question

Hello all, I'm from AB Canada and looking to do long distance BRRRRs in the US. (I've done 4 local flips/developments.) I'm not married to a particular market yet, though I'm looking at Midwest or Southern states that are landlord friendly. I'm most apprehensive of managing the rehab aspect from a distance and making sure the estimated costs are correct, and would really feel a lot more comfortable having a local person oversee the project. (I expect to factor in this cost when running my numbers.)

Does this service exist? By whom - property management, realtor, hiring a local independent investor, another investor/wholesaler that specifically works with long distance BRRRR buyers? What's the best way to do this, and how much would you expect to pay for this extra layer of management/oversight? Any recommendations? Thanks so much!

Alora Glaze · Answer

We are out there! Just trust your gut and only work with licensed and insured professionals. Furthermore, establish firm expectations about communication and spending. Make sure you're getting the walk-through photos you need to have accurate representation of work being completed.Best of luck to you!

Stephen Brown · Answer

Hello Brianne. These exists. You just need to find the team that does them in those markets. You'll see these companies here on BP. Typically there is an agent that works at a firm that has connections to PM services and the like.

Corina Eufinger · Answer

It absolutely does exist.  Finding a PM that does rehab oversight (or whatever they may call it) is not easy but it's also something that in most markets you'll be able to find at least one who offers the service.

Being an OOS investor you will want to be sure you feel a connection and a rapport between you and the PM company.  Make sure it's a company that has attention to detail, can read a SOW, and is not already understaffed.  They should be able to provide you with a video of the progress and pictures of work this is subpar or done incorrectly.

The fees for this service will vary dramatically.  If they aren't GC licensed they will likely charge something more along the lines of hourly or flat fee.  A PM with an active GC license will likely work for a % of the total rehab cost.

Drew Sygit · Answer

We do it for our clients all the time.

But an OOS investor should be careful as there are so many ways they can get taken advantage of:

1) Buying the wrong property, wrong location, etc

2) Being overcharged because there's no transparency on actual costs and budget

3) Shoddy work because no pics/video are supplied

4) Crappy tenants are placed that destroy the rennovations

None of the above are discovered until an owner goes to refinance the property or sell it.

What should an investor do to protect themselves?

1) Make sure they understand location, location, location

2) They should have access to the bids and invoices from the contractors. A budget should be created and tracked. ***Also understand when renovating old houses surprises are inevitable, so budget will change.

3) Video is best to document workmanship, can even do live video walk-thru at the property. Should strongly consider highering independent inspector to confirm WHAT has been done and HOW WELL it was done.

4) Make sure you fully understand applicant screening standards and process.

There are more issues, but these are the basics.

Brianne H. · Answer

@Marc Rice true, what I meant was more that locally if I can get a property stablized with $0 in, I'd more than likely be losing money every month. I'd probably be looking at and ARV of $350k-400k, and rent on something like that would be $1700, being generous. I just don't see a way to make those numbers work since at this point I'm looking for cashflow.  @Jenkins Ramon Thank you for the suggestions! @Drew Sygit Thank you for the suggestions. I like the idea of having an independent inspector too, and staying on top of everything as much as possible. @Raymond Temprano Thank you for the suggestions. I've been majorly burned by a contractor before on our personal residence, even with having a contract, checking references, etc so having someone well recommended is crucial.

Henry Lazerow · Answer

It's going to be hard as to make a BRRR work as you need to do the rehab very cheap unless you get a crazy deal. When you are out of town it's unlikely you will have the connections to get it done at good prices. Your realtor can often give you connections for contractors they trust. I would be careful using the PM as they typically jack up the prices of everything as that's part of how they make money managing.

Raymond Temprano · Answer

@Brianne H.- You have received some good advice here thus far.  Being a GC, Property Manager, and Investor myself, I can tell you first hand having the proper team in place is crucial.  Yes, contractors can be shady and cause major problems as well as Property Managers.  You have to do your due-diligence and ask around in the area's your investing for referrals.  I would focus on finding a market and begin by finding a realtor/broker or a reputable GC.  9 times out of 10 they know or have worked with other people in the industry.  When looking for a GC look for reviews, ask if they use a project management software like co-construct which keeps clients up to date on projects, ask for previous works completed and references, ask to see current projects.  Always ask questions even if they have a simple answer.

Ramon Jenkins · Answer

" 10% fee on top of what the contractors are charging "

Heck,  I now feel underpaid additional 10 %

Typically if me and investors on same page

We would handle realtor portion, property management ( normal fees), oversee property renovations

at no additional charge and reselling properties at profits when ready ( cashflows, resell nice profits ).

Suggestion

Pick your market

Locate a realtor

Property manager that works in everyone best interest

Once everything in place : simply keep rising funding for purchases, locating good cashflow opportunities

and watching your numbers.

Good luck with investing

Marc Rice · Answer

@Brianne H.

When you’re doing a BRRRR most of the time your eventual ARV cash out number is not going to be 1% of rents like a traditional 1% rule cash flow buy. You’re trading cash flow for a fully stabilized property with $0 in.

Brianne H. · Answer

Thank you all for the replies! @Mike Dymski Yes, I agree, I know it's certainly not the easy way. The problem with my local area is that even if you get a deal and get your cash out in the refi, the monthly rent is maaaaaybe 0.5% of the ARV if you're lucky and cashflow is questionable at best, so that's why I'm looking to go long distance. @Dan Portka Thanks for the tip! I will check into PMs. Do you have any in any particular area that you would recommend? @David M. Very good points, thank you. Trust is big, which can be hard sometimes because I have also been burned before. @Lawrence Minor Thank you for the offer, but I probably won't be in WI. Hope you're able to find someone local who you can learn a lot from!