Investing From A Distance-- Is it for you?

I felt compelled to write this post in response to a comment made about the previous article. It is true that it takes a special breed of Real Estate Investor to invest from long distance away.  Are you able to be committed to the venture and overcome the problems you face? Or are you likely to get frustrated by roadblocks, and give up?  If you are the former, you may want to consider this strategy.  If the latter sounds like you, perhaps you should invest in Mutual Funds and not bother with Real Estate as an investment vehicle. 

Make no mistake, being a landlord is not for everyone, even locally.  It IS a second AND third job for most people.  You will have all the normal obstacles to overcome and also some serious handicaps to negotiate if you choose to invest from out of state.  These handicaps can be minimized and the obstacles negotiatied if you choose to.  The key is to make sure that the extra work is worth it.  If you are not up for a challenge and willing to risk small setbacks in order to learn and grow, don't consider investing in RE remotely.  It takes even more dedication and determination to be sucessful in a market you are many miles away from.

I have had to fire crooked property managers and contractors, dodge fraudulent business proposals, refuse to engage in unethical business practices and yes even evict a tenant or two.  I have also had to "fire" business partners that have held my company back from growing and adapting to change.  Quite frankly it helps if you develop the ability to smell BS a mile away.  I will be writing about what to look for and what to expect from good RE agents, property managers, and contractors in later posts. 

 Another thing to consider is how often will you be able to travel to the area in question.  If you cannot view a property before purchasing, please don't buy it.  Due diligence is key and having access to the property before a purchase is very important.  No matter WHAT the pictures look like.  There seems to be a proliferation of people purchasing properties that they have never seen on the internet.  Please DO NOT buy property you have not seen personally AND had thoroughly inspected by an independent professional.  This is a recipe for disaster.  I do NOT recommend a completely hands off process of investing because I will never advocate that you give others complete control of your money and investments.

You will also benefit from the ablility to inspire confidence in others that you have what it takes to succeed in this business.  RE Agents, property managers, and contractors will deal much better with someone who they deem likely to succeed.  This is even more the case when you are investing from a long distance away.

Management skills are also essential when dealing with and building a team of people that will help you achieve your investing goals in the area.  They will be your "employees" and will need clear direction and encouragement from you.

I have personally found that investing from Out-of-State is at times more stressful and usually more rewarding than investing in my own market.  Quite certainly I look to be rewarded for my pererverance by a 15%+ ROI on my OVERALL purchase price or I don't even give a second thought to purchasing the deal.  It is VERY important that you recieve a great return to offset the somewhat greater risks that are inherent in this type of investing.