Author Topic: Purchasing Real Estate You've Never Seen  (Read 41020 times)

catmustache

  • Stubble
  • **
  • Posts: 139
  • I jumped out of a plane once. So there's that.
Re: Purchasing Real Estate You've Never Seen
« Reply #50 on: July 02, 2014, 09:04:30 AM »
So excited about this thread. I've finally saved up enough money to buy a property in a different market (mine is way out of my price range) and was in the process of talking myself out of it even though I have a realtor and a property manager out there (no contractor yet), but it was so reassuring to know that other people have done it successfully.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #51 on: July 02, 2014, 09:19:55 AM »
So excited about this thread. I've finally saved up enough money to buy a property in a different market (mine is way out of my price range) and was in the process of talking myself out of it even though I have a realtor and a property manager out there (no contractor yet), but it was so reassuring to know that other people have done it successfully.

A few tips:

1. Don't rush into a purchase, but spend time getting everything lined up.

2. Have plenty of reserves for ifwhen something goes wrong; don't stretch yourself too thin.

3. Make sure you understand the legal processes where you're investing and/or have a good lawyer on your team out there.

4. You will never be "ready."  At some point you should take the plunge anyways.  This is true whether you are investing locally or not.  Taking action is always scary.

Good luck, let us know if you have any questions along the way!  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

not_a_trex

  • Stubble
  • **
  • Posts: 108
Re: Purchasing Real Estate You've Never Seen
« Reply #52 on: July 02, 2014, 09:06:56 PM »
So excited about this thread. I've finally saved up enough money to buy a property in a different market (mine is way out of my price range) and was in the process of talking myself out of it even though I have a realtor and a property manager out there (no contractor yet), but it was so reassuring to know that other people have done it successfully.

Same here. This post and http://forum.mrmoneymustache.com/investor-alley/article-why-real-estate-returns-are-higher-than-stocks-bonds-and-mutual-funds/ have motivated me to start spending time learning how to do it. I've started reading Building Wealth One House at a Time.

Unfortunately, RE in my area is too expensive for me. Does anyone think it's okay to have a remote property as their first investment? There's a lot about investing in RE that I don't yet have the hang of. I imagine that being hundreds of miles away may complicate things.

GrayGhost

  • Bristles
  • ***
  • Posts: 389
  • Location: USA
Re: Purchasing Real Estate You've Never Seen
« Reply #53 on: July 03, 2014, 09:39:32 PM »
Well, there's some value to jumping into jumping into something big and learning as you go along. Naturally, this is very risky and you should probably do far, far more research before proceeding.

I say, learn to walk before you learn to fly.

Zoot Allures

  • Stubble
  • **
  • Posts: 205
  • Age: 50
  • Location: Western Massachusetts
Re: Purchasing Real Estate You've Never Seen
« Reply #54 on: July 05, 2014, 07:24:35 PM »
mind = blown

I, too, am having a "eureka" moment on the subject of long-distance REI. I've always been in interested in real estate but have always lived in expensive markets where I could never see how people of modest means could get into the game, let alone generate significant cash flow. The idea of investing out of state always seemed a little scary and a lot risky to me. Recent posts here, as well as the content on biggerpockets.com and elsewhere, are quickly convincing me that it's not only a sane thing to do but actually a great idea. At this point I'm specifically interested in buy-and-hold single-family or duplex rentals in the Midwest.

I'm reading Gary Eldred's "Investing in Real Estate" and enjoying it quite a bit so far. I'm a novice, but a fairly quick learner.

I know that every great idea can feel highly urgent when you have that eureka moment, but it does seem like time is of the essence, with prices still quite low in some markets AND mortgage rates still low. I know the opportunities won't dry up overnight, but it does seem like now is the time. Anyone have thoughts on this?

Thanks to everyone for sharing their experiences and advice here. When the time comes that I'm looking at a specific property, I'll post the details here and will appreciate some feedback and help running the numbers.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #55 on: July 05, 2014, 07:30:09 PM »
I know that every great idea can feel highly urgent when you have that eureka moment, but it does seem like time is of the essence, with prices still quite low in some markets AND mortgage rates still low. I know the opportunities won't dry up overnight, but it does seem like now is the time. Anyone have thoughts on this?

It's never a good time to get into a bad investment.

Don't rush, there are always opportunities and possibilities.  Think about how big this country/world is. 

I know it's exciting when you first figure something out, so channel that energy into action steps you can do towards taking your first investment.  Get advice here and on BP and from experienced RE investors along the way.

The real estate market moves much slower than the stock market.  You'll have months, at least.  So start today, but don't buy tomorrow.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Zoot Allures

  • Stubble
  • **
  • Posts: 205
  • Age: 50
  • Location: Western Massachusetts
Re: Purchasing Real Estate You've Never Seen
« Reply #56 on: July 05, 2014, 07:44:15 PM »
I know it's exciting when you first figure something out, so channel that energy into action steps you can do towards taking your first investment.  Get advice here and on BP and from experienced RE investors along the way.

Indeed. And here is where my age is truly an asset. I've already learned the hard way about the importance of patience and due diligence. :)

I'm going to spend the next six months learning about this stuff and seeing how close I can get to a first purchase.

Thanks for the reply and wise words.

And by the way, regarding the actual subject of this thread, I think I would want to see at least my first property in person before buying. Partly because it would reassure me (though I do buy your argument about why such reassurance may not be necessary), but mostly because I think I would enjoy it.
« Last Edit: July 05, 2014, 07:53:31 PM by Spine »

Nords

  • Magnum Stache
  • ******
  • Posts: 3300
  • Age: 60
  • Location: Oahu
    • Military Retirement & Financial Independence blog
Re: Purchasing Real Estate You've Never Seen
« Reply #57 on: July 05, 2014, 08:13:09 PM »
I'm reading Gary Eldred's "Investing in Real Estate" and enjoying it quite a bit so far. I'm a novice, but a fairly quick learner.

I know that every great idea can feel highly urgent when you have that eureka moment, but it does seem like time is of the essence, with prices still quite low in some markets AND mortgage rates still low. I know the opportunities won't dry up overnight, but it does seem like now is the time. Anyone have thoughts on this?
Heh.  Gary Eldred only came on the masthead of that book on the fourth edition, and it's been in print since at least 1998.  It might even have been based on this 1989 (eighty-nine, not a typo) first edition: 
http://www.abebooks.com/servlet/BookDetailsPL?bi=11141648358&searchurl=an%3DAndrew%2BJames%2BMcLean%26amp%3Bfe%3Don%26amp%3Bx%3D0%26amp%3By%3D0

I don't remember what mortgage rates were in 1989 or 1998, but they were a lot higher than today and people were still figuring out how to make money in real estate.  In 2000 we were thrilled to get a 30-year fixed rate of 8%.

Today is the best day to start learning, but I suspect that you have another year or two to get smarter before you make your first buy.  Maybe three.  Possibly four.

I suggest that you start going to open houses in your local neighborhood on 2-3 Sunday afternoons each month.  Decide what size of house you'd like to own (either to live in or as a landlord) and start looking at them.  After you've done this 50 or 60 times you'll have a good appreciate for seller/realtor tactics and what makes a house worth buying.  You'll also learn about the types of real estate people who you'd want to put on your team.

My spouse and I did this in Hawaii for nearly 11 years-- mainly as a hobby for home-improvement ideas-- before we found our "dream" house.  Because we'd been to hundreds of open houses by the time we saw it, we knew how to move fast and buy it.  We made a $5000 mistake along the way, but that was also a great learning opportunity.
« Last Edit: July 05, 2014, 08:20:39 PM by Nords »

clifp

  • Pencil Stache
  • ****
  • Posts: 541
Re: Purchasing Real Estate You've Never Seen
« Reply #58 on: July 06, 2014, 04:24:41 AM »
I thought I'd share my experience in the buying real estate you've never barely seen.

I've resisted buying real estate all my life, other than a couple of houses. I didn't think I had any particular unique skill evaluating real estate and even with property managers it is still a hassle at times.   But I think Warren Buffett/Ben Graham observation that Mr. Market is manic depressive  and irrationally optimistic and foolishly pessimistic at times applies to real estate, bitcoins, gold, baseball cards, and tulips even more so than it does to stocks.

2009 and 2010 were an obvious times to buy stocks.  However, by 2011 I figured that most of the easy money was made in the market. I started looking at real estate in the beaten down areas, the California Island Empire, Vegas, and Florida. I ruled out Florida due to my complete unfamiliarity with the area.  Cash on Cash returns were in the low double digits and it was significant cheaper to buy than to rent.   My belief is that for both financial reasons,and psychological reasons the after tax cost to buy (with 20% down) should always be the same or higher than the cost to rent. If that isn't the case in a real estate market one of two things will happen over the intermediate term either rents will fall or prices will rise.

The first property I bought in Vegas, I spent about week looking with my terrific Realtor (Arebelspy recommendation.) in 2011.  The Vegas market was warming up but not hot yet, and there was only one competing offer.  By the time i was ready to buy again in 2012 the Vegas market was super hot. In almost every case I put in an offer for a place I was competing with at least 10 other offers and several more than 20.. I put in more than 30 offers to get 3 place in 2012. In one case a short sale that took 6+ month to close, I honestly had no memory of the place. I also put in some offers for place I had only seen in on the internet.  I am quite sure I would have done as well simply telling my realtor here is $350K go buy properties. 

Before I bought I did talk to everyone I knew who had owned rental real estate, including Nords.  I did get some good advice, but there is a difference between book learning and actual experience so at point you have to pull the trigger. Most everyone I talked to thought invested in Vegas "should" work out well, but I notice none of them were doing it, which gave me pause.

I have zero doubt that somebody with knowledge of any of the following: home repairs, property management, a realtor, familiarity with the local real estate market, construction, escrow/real estate law has valuable experience.  If you have these skill than certainly having boots on the ground is the way to go..

On the other hand, I also think it is more important to get an mediocre deal, in a great market, than get a good deal, in a mediocre market.  I think it is possible to identify significantly undervalued markets just using numbers. This is why I was not all surprised to see a list of 5 best RE markets, all of which were in Michigan which is exactly were Arebelspy is buying.

 

totoro

  • Handlebar Stache
  • *****
  • Posts: 2152
Re: Purchasing Real Estate You've Never Seen
« Reply #59 on: July 06, 2014, 09:10:54 AM »
I have to say that I've changed my mind on this topic.  I started reading through bigger pockets as a result of these posts. I'm at the point now where I'm trying to analyze all the issues at play for Canadians.  It is more difficult to figure out because of taxes, including estate taxes, but hopefully I can connect with someone on bigger pockets with more experience.  While I enjoy hands-on ownership and use of properties the roi from using the method arebelspy is using is pretty compelling and credible. 

jb_in_DC

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Purchasing Real Estate You've Never Seen
« Reply #60 on: August 11, 2014, 03:16:31 PM »
I've really enjoyed this thread and people's suggestions about how they build/use their team remotely to buy/renovate/rent properties that they haven't personally seen. 

I wanted to ask people how, specifically, they deploy their team to find properties once you've identified the neighborhood you want to invest in.   Do you get on the MLS and identify a dozen candidate properties and ask your team 'Please go check out properties 1-12 and let me know what you think' or do you ask your realtor 'please focus your search on SFHs in XYZ neighborhood that can meet the 2% rule and let me know what you find?'

I'm happy to do the work involved with the former approach, although I worry that I'll be wasting my team's time by checking out a property that doesn't work for some reason that is opaque to me from a distance but would have been immediately clear to them.  But I'm also worried that realtors will find the latter approach rude and demanding...I mean, if they could just snap their fingers and find a nice SFH that hit the 2% rule just like that, they'd be likely to buy it for themselves. 

So, how do you do it?  Are your on-the-ground team members checking out homes themselves based on a broad criteria you've laid out, or are they checking out specific properties that you're identifying from afar?

And for that matter, are folks particular about the properties that you're buying, in terms of bedrooms/bathrooms, etc., or are you taking more of a if-the-numbers-work-that's-what's-important approach?  I've listened to podcasts on BP from these guys who will *only* buy three-bedrooms in a market full of two-bedrooms because they're sure that distinguishes them from their competitors, or who will *only* buy four-bedrooms in their markets because of some complex reason they've thought out, etc.  And I'm finding it challenging enough to identify, from a distance, good markets and neighborhoods and potential team members without adding into it the complexity of deciding whether I should be saying no to anything less than X-bedrooms. 

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #61 on: August 11, 2014, 09:29:58 PM »
I've really enjoyed this thread and people's suggestions about how they build/use their team remotely to buy/renovate/rent properties that they haven't personally seen. 

I wanted to ask people how, specifically, they deploy their team to find properties once you've identified the neighborhood you want to invest in.   Do you get on the MLS and identify a dozen candidate properties and ask your team 'Please go check out properties 1-12 and let me know what you think' or do you ask your realtor 'please focus your search on SFHs in XYZ neighborhood that can meet the 2% rule and let me know what you find?'

I'm happy to do the work involved with the former approach, although I worry that I'll be wasting my team's time by checking out a property that doesn't work for some reason that is opaque to me from a distance but would have been immediately clear to them.  But I'm also worried that realtors will find the latter approach rude and demanding...I mean, if they could just snap their fingers and find a nice SFH that hit the 2% rule just like that, they'd be likely to buy it for themselves. 

So, how do you do it?  Are your on-the-ground team members checking out homes themselves based on a broad criteria you've laid out, or are they checking out specific properties that you're identifying from afar?

And for that matter, are folks particular about the properties that you're buying, in terms of bedrooms/bathrooms, etc., or are you taking more of a if-the-numbers-work-that's-what's-important approach?  I've listened to podcasts on BP from these guys who will *only* buy three-bedrooms in a market full of two-bedrooms because they're sure that distinguishes them from their competitors, or who will *only* buy four-bedrooms in their markets because of some complex reason they've thought out, etc.  And I'm finding it challenging enough to identify, from a distance, good markets and neighborhoods and potential team members without adding into it the complexity of deciding whether I should be saying no to anything less than X-bedrooms.

Would love to hear others answers, but for me personally...

It's the first approach (sending them specific properties, not giving them a blanket criteria - though I do that as well with wholesalers, but not typically with a team I build), but not with nearly as many as you said (12).

You don't want to overwhelm them and annoy them.

Typically I'll start watching the market, spend quite a bit of time getting familiar with what is for sale in the areas I'm interested in.  Then I'll be able to spot what looks like a good deal based on various factors (price per square foot, location, etc.), and be able to send them the outliers - properties that look really good.  That way my percentage hit rate is very high and not wasting their time.  Of course, you'll sometimes hit unforeseen issues and it won't work out, but they'll understand that when it looks like a good property on the surface and turns out not to be for a hidden reason.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

jb_in_DC

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Purchasing Real Estate You've Never Seen
« Reply #62 on: August 12, 2014, 02:47:53 PM »
Thanks, ARS.  That makes sense.  In a lot of different ways, it all comes back to knowing your chosen market inside and out so that when something that looks good pops up you can recognize it immediately and take advantage.  I do like the idea of directing the realtor and the rest of one's team to 2-3 specific properties...it feels more respectful of their time.  I appreciate your thoughts!

sammybiker

  • Bristles
  • ***
  • Posts: 433
    • Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE
Re: Purchasing Real Estate You've Never Seen
« Reply #63 on: August 12, 2014, 09:57:39 PM »
JB-

I can only speak for how I do things.  I'm remote but I have spent some time in the area that I invest and truly recommend that you know the area first hand, even if it's only spending a few days on the ground, so that you understand the neighborhoods that you're going to be pursuing from afar.  A few hundred bucks towards a flight, basic hotel and car rental is a cheap investment vs the value you'll gain.

By the time you're calling realtors or having contractors walk the property, you should know it's in your "buy zone".  I buy 2 and 3 bd/1ba homes 700-1000sq ft homes in a great local school district.  The more renovation, the better.  That's enough to get me started and allow me to farm through the MLS and local wholesalers on a daily basis.

As soon as something hits the MLS, I'll track down the listing agent and ask them all the questions I can.  I'll look up the owner and try and approach them too.  I dig as far as I can and 85% of the time, the deal is not a deal due to a number of reasons.  Most importantly, I don't bug my agent or contractor until I'm ready to make an offer (or in many cases, I've already made a verbal offer).

Keep in mind, getting used to an area and nailing down your criteria all takes time. After you put a few hundred hours into reading about your area, the neighborhoods, scanning MLS, researching recently sold numbers, communicating with other area landlords/property managers, etc...this will come second nature.  And when you send your agent or contractor out to visit, you'll know (as will they) there is a real good shot of this going through.

I'd highly recommend an inspection as well if you won't be there on the ground to review the property.

Don't forget, as an investor, you're going to be a whole lot easier to work with vs the typical retail buyer, walking through 10 different properties a week and bitching about paint color or something easily changed.  Your agent should appreciate you. 

If they don't, find another.

Wholesalers, when you find a good one (it's tough), will be even easier to work with. 

I've really enjoyed this thread and people's suggestions about how they build/use their team remotely to buy/renovate/rent properties that they haven't personally seen. 

I wanted to ask people how, specifically, they deploy their team to find properties once you've identified the neighborhood you want to invest in.   Do you get on the MLS and identify a dozen candidate properties and ask your team 'Please go check out properties 1-12 and let me know what you think' or do you ask your realtor 'please focus your search on SFHs in XYZ neighborhood that can meet the 2% rule and let me know what you find?'

I'm happy to do the work involved with the former approach, although I worry that I'll be wasting my team's time by checking out a property that doesn't work for some reason that is opaque to me from a distance but would have been immediately clear to them.  But I'm also worried that realtors will find the latter approach rude and demanding...I mean, if they could just snap their fingers and find a nice SFH that hit the 2% rule just like that, they'd be likely to buy it for themselves. 

So, how do you do it?  Are your on-the-ground team members checking out homes themselves based on a broad criteria you've laid out, or are they checking out specific properties that you're identifying from afar?

And for that matter, are folks particular about the properties that you're buying, in terms of bedrooms/bathrooms, etc., or are you taking more of a if-the-numbers-work-that's-what's-important approach?  I've listened to podcasts on BP from these guys who will *only* buy three-bedrooms in a market full of two-bedrooms because they're sure that distinguishes them from their competitors, or who will *only* buy four-bedrooms in their markets because of some complex reason they've thought out, etc.  And I'm finding it challenging enough to identify, from a distance, good markets and neighborhoods and potential team members without adding into it the complexity of deciding whether I should be saying no to anything less than X-bedrooms.
« Last Edit: August 12, 2014, 10:03:56 PM by sammybiker »

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #64 on: August 12, 2014, 10:04:00 PM »
The more renovation, the better. 

I'm the opposite on this - I look for ones in decent shape, needing minimal work.  I tend to pass on long distance full gut rehabs.  But either way works.

Keep in mind, getting used to an area and nailing down your criteria all takes time. After you put a few hundred hours into reading about your area, the neighborhoods, scanning MLS, researching recently sold numbers, communicating with other area landlords/property managers, etc...this will come second nature.  And when you send your agent or contractor out to visit, you'll know (as will they) there is a real good shot of this going through.

Yup.  This is exactly my experience as well.

I'd highly recommend an inspection as well if you won't be there on the ground to review the property.

I highly recommend one even if you are there, unless you are an expert yourself.

Wholesalers, when you find a good one (it's tough), will be even easier to work with. 

Yup. "Wholesalers" are a dime a dozen.  Good ones?  Heh.  Quite the rare specimen, in my experience.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

sammybiker

  • Bristles
  • ***
  • Posts: 433
    • Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE
Re: Purchasing Real Estate You've Never Seen
« Reply #65 on: August 13, 2014, 07:10:42 AM »
Agreed.  About a year into this, I've found one - likely the only real one in my area of 400k pop.  I had to be introduced to get onto his list, provide my background, proof of funds, etc.  But the couple of deals he's shipped me have been pretty fantastic but just outside my "farm" area.

ARS, have you dealt with lease-options at all?

Wholesalers, when you find a good one (it's tough), will be even easier to work with. 

Yup. "Wholesalers" are a dime a dozen.  Good ones?  Heh.  Quite the rare specimen, in my experience.
[/quote]

« Last Edit: August 13, 2014, 09:48:49 AM by sammybiker »

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #66 on: August 13, 2014, 08:36:19 AM »
Agreed.  About a year into this, I've found one - likely the only real one in my area of 400.  I had to be introduced to get onto his list, provide my background, proof of funds, etc.  But the couple of deals he's shipped me have been pretty fantastic but just outside my "farm" area.

ARS, have you dealt with lease-options at all?

I've done some seminars and such on them, but never done them myself, because every time I think about it, I think of the downside: then I have to sell.  I'd rather buy and hold, not buy and sell.  And then when I do sell, I have to redeploy the money somewhere. 

I'm more looking to build up a real estate portfolio to sit on and collect cash flow than one to constantly turn over, selling to a tenant, finding a new one to buy, fixing it up, getting it leased, meanwhile the next one sells, etc.

There are some great benefits to L/Os, but it doesn't fit in my personal investment plan at the moment.

It's always good to have as a backup exit strategy though.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

jb_in_DC

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Purchasing Real Estate You've Never Seen
« Reply #67 on: August 14, 2014, 01:53:10 PM »
Thanks, Sammybiker. 

I'll admit that it's daunting to read about spending "a few hundred hours" on getting to know a neighborhood, finding one's team, etc.  As someone who is, maybe, a dozen hours into the process, it's a steep curve.  But I found your advice really helpful, and ARebelSpy's as well. 

I've found my 2 or 3 locations that I'm interested in, and I'm slowly getting to know the neighborhoods and typical rental rates for properties.  Do you literally keep a spreadsheet of properties you've found on Craigslist and the like, to use in comparing prospective properties?  That is what I'm thinking about doing, while simultaneously starting to build up a team in place.  These are within a 2 hour drive of my home, so it shouldn't require a large investment of my time to get out and check out the neighborhoods.

sammybiker

  • Bristles
  • ***
  • Posts: 433
    • Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE
Re: Purchasing Real Estate You've Never Seen
« Reply #68 on: August 14, 2014, 02:51:18 PM »
JB,

Exactly.  I keep a running spreadsheet of the properties I'm chasing.  Especially after some of them come off the market or have an accepted offer, blown me off for lowballing, etc...I'll hit the selling agent up every few weeks and check in, see if there have been any changes. 

Oh, man, if you're just a couple hours away, perfect.  Lucky guy to have good cash flowing properties that close!

Re: the hours, it may be far less, it was just a number.  You being closer to your investment area than I, you can probably cut down on those hours by spending actual time on the ground.  I'm not sure.  The good thing about real estate, especially if you're in it for the long run, is the hours are just a drop in the bucket in the long term.  All value added.

Good luck!

Thanks, Sammybiker. 

I'll admit that it's daunting to read about spending "a few hundred hours" on getting to know a neighborhood, finding one's team, etc.  As someone who is, maybe, a dozen hours into the process, it's a steep curve.  But I found your advice really helpful, and ARebelSpy's as well. 

I've found my 2 or 3 locations that I'm interested in, and I'm slowly getting to know the neighborhoods and typical rental rates for properties.  Do you literally keep a spreadsheet of properties you've found on Craigslist and the like, to use in comparing prospective properties?  That is what I'm thinking about doing, while simultaneously starting to build up a team in place.  These are within a 2 hour drive of my home, so it shouldn't require a large investment of my time to get out and check out the neighborhoods.

MoustacheDArgent

  • 5 O'Clock Shadow
  • *
  • Posts: 37
Re: Purchasing Real Estate You've Never Seen
« Reply #69 on: August 21, 2014, 08:57:05 PM »
I own 3 rental properties and the last two I purchased out of state and have never seen them in person.   They have both turned out to be good investments and I'm very happy with them.  My PM/Realtor takes lots of photos and gives me his opinion of the neighborhood.  He actually tells me no quite often when I email him properties I'm interested in, saying they are in hard to rent areas, bad neighborhoods and or have some bad feature I wouldn't have thought about since I live in Texas and the rentals are further north, such as exterior basement entrances - apparently a no no.  We don't have basements in Texas.  I'm becoming very comfortable doing this and agree with the things ARS is saying about not needing to be there.  I can zoom around the neighborhood and get a feel from google streetview, but I defer the my PMs opinion.  It was scary the first time I did this.  The second was a breeze.  I'm sure I'll keep doing it.  My first one is almost paid off.  I think I'll be able to quit my job in a few years doing this versus only investing in index funds. 

bearman

  • 5 O'Clock Shadow
  • *
  • Posts: 55
Re: Purchasing Real Estate You've Never Seen
« Reply #70 on: September 05, 2014, 04:09:36 PM »
ARS, regarding this ...

...I network with local investors, property managers, Realtors, and other experts

Do you join the REIA for each market you're investing in? If not, do you call the REIA and just start there looking for local investor contacts? Or do you call local prop management places asking if they can connect you to local investors?

Lastly, are local investors generally forthcoming about the important details (good neighborhoods, etc)? It seems (based on speculation, not experience) that local investors would be less likely to share details, because they don't get anything out of it, right? Whereas a prop management company (though arguably not the BEST source) would freely share whatever, because they want the business. What are your thoughts?

As always, thx for the info ...

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #71 on: September 05, 2014, 05:14:33 PM »
Do you join the REIA for each market you're investing in? If not, do you call the REIA and just start there looking for local investor contacts? Or do you call local prop management places asking if they can connect you to local investors?

I don't necessarily join the REIA, but I do usually talk to people going to the local investment clubs, yup.

Lastly, are local investors generally forthcoming about the important details (good neighborhoods, etc)? It seems (based on speculation, not experience) that local investors would be less likely to share details, because they don't get anything out of it, right? Whereas a prop management company (though arguably not the BEST source) would freely share whatever, because they want the business. What are your thoughts?

People are generally good.  Those with a scarcity mindset you don't want to deal with anyways.  In general I've found people are happy to tell you which neighborhoods are good, which to stay away from, etc.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

MMM4life

  • 5 O'Clock Shadow
  • *
  • Posts: 33
Re: Purchasing Real Estate You've Never Seen
« Reply #72 on: September 05, 2014, 09:46:20 PM »
Everyone has their own method. Personally, if you are just starting out in the RE business, I would suggest buying local or checking out the property in person. This will ease your mind when handing over that huge check. As you gain more experience in what to look for in properties, what questions to ask, what to stay away from, etc, you can start to move out of your local area.

For me personally (4 total properties, 3 rentals, 5th property on the way), the $100-400 in travel costs to check out the local area is worth it. The local street might be fine but there might be an extremely busy street that makes it impossible to leave the neighborhood or something that creates too much noise (constant barking dogs, in the flight path of airlines, etc). Personally, I also like to swing by the neighborhood at night to see what sort of action goes on when everyone is home. This is also in conjunction with working with knowledgeable realtors, inspectors, etc. Plus you can now turn that "business trip" into a "mini vacation".

As the saying goes. knowledge is power. The more knowledgeable I am about the property, the better I feel about it. How much is your peace of mind worth?

GrayGhost

  • Bristles
  • ***
  • Posts: 389
  • Location: USA
Re: Purchasing Real Estate You've Never Seen
« Reply #73 on: October 22, 2014, 01:04:22 PM »
Here are a few questions from a (hopefully!) someday long distance landlord.

What does hiring a property manager do? As far as I can tell, I can collect rent through Dwolla or squarecash or something, and if there are any problems with paying rent, I can hire a lawyer just as well as a PM can. As far as repairs are concerned, I like your idea of calling a contractor/plumber/whatever, telling them to set up a time with the tenant, and then okaying or denying the repair or getting it billed to the tenant as necessary. What exactly does a PM bring to the table? About all I've heard they can do for you is to sign off on insurance paperwork in case the house gets severely damaged or something like that. But surely a lawyer can do that too.

How do you advertise vacancies? Do you just use realtors? That's what I'm planning to do, or else I will post on craigslist/military by owner and forward all hits to a realtor. Obviously I'm not going to be there to do any showings myself.

How do you plan to sell properties? I understand that you're in this business for monthly cashflow, but if and when you want to sell your properties in favor of stocks and/or bonds, how are you planning to do that? I guess it depends on the state, because many states (like my home state) won't let you boot out paying tenants if you want to sell the property. Not to mention you'll likely have to do significant rehabs after 5-10+ years of rental.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #74 on: October 22, 2014, 01:29:15 PM »
What does hiring a property manager do? As far as I can tell, I can collect rent through Dwolla or squarecash or something, and if there are any problems with paying rent, I can hire a lawyer just as well as a PM can. As far as repairs are concerned, I like your idea of calling a contractor/plumber/whatever, telling them to set up a time with the tenant, and then okaying or denying the repair or getting it billed to the tenant as necessary. What exactly does a PM bring to the table? About all I've heard they can do for you is to sign off on insurance paperwork in case the house gets severely damaged or something like that. But surely a lawyer can do that too.

They manage the property.  You can do it long distance (the easiest way to do this, IMO, would be to use a home warranty for the repairs), but it's the turnover that gets you, IMO.  When you need to repair a place from the previous tenants and then show it to new ones, that's a pain.

How do you advertise vacancies? Do you just use realtors? That's what I'm planning to do, or else I will post on craigslist/military by owner and forward all hits to a realtor. Obviously I'm not going to be there to do any showings myself.

A number of ways, but it differs based on market and if I'm the one managing locally or it's long distance.  If you can manage all turnover through a Realtor, more power to you.  I know it can be done, but I think it's difficult, to say the least.  Not what I'm looking to do, but each person has a different level of stuff they'll tolerate.  I like to keep it low maintenance, for me.

How do you plan to sell properties? I understand that you're in this business for monthly cashflow, but if and when you want to sell your properties in favor of stocks and/or bonds, how are you planning to do that? I guess it depends on the state, because many states (like my home state) won't let you boot out paying tenants if you want to sell the property. Not to mention you'll likely have to do significant rehabs after 5-10+ years of rental.

I'll list them for sale, then sell them.  ;)

Any house that needs repairs before sale will need to have that done, a rental is no different.  And yes, you'll probably sell it vacant, so you can get the owner-occupant market as well and broaden your buyer's pool, but you can always sell it tenant occupied to other investors if you have to sell right away.  Or offer the tenants cash to leave, or whatever.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

usmarine1975

  • Guest
Re: Purchasing Real Estate You've Never Seen
« Reply #75 on: October 22, 2014, 01:33:43 PM »
GrayGhost,
    Many of the reason's you list not to use a property manager are exactly the reason I will only ever invest actively in local or rentals in which I can see and get to in a short amount of time.

The problem with your thought of not hiring a PM is that many boroughs, townships, etc... are now requiring landlord's that live more then xx miles from property to have an active local PM manage their property.  Using your realtor to show the property he is going to charge more then a PM would.  Don't get me wrong I tried a PM once and for me it didn't work.  The PM was managing too many properties and was not pro active with my properties.  Interestingly enough in my area most are Realtors and will spout that you are required by law to be a realtor to show property.  I have yet to see this law.

I manage my own, my tenants like that.  Many do not want to deal with a PM or with a Realtor.  I care about my properties a PM only cares about cash flow. (I do as well)  but I also am concerned about my property. 

Real Estate is not a get rich quick no work proposition.  It takes work, it takes money and yes you can get rich but not usually over night.  Other's here are far more qualified to answer questions regarding long distance land lording as they are actively and successfully doing so.  I have no desire to enter that world.  I like my properties local and in my control.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #76 on: October 22, 2014, 01:40:19 PM »
The problem with your thought of not hiring a PM is that many boroughs, townships, etc... are now requiring landlord's that live more then xx miles from property to have an active local PM manage their property.

What's "many"?  Do you have any hard data, articles, etc. on this?

I like my properties local and in my control.

Sometimes the numbers don't work out locally, so then you choose:
1) Take subpar numbers locally
2) Figure out the out of state puzzle to make that work
3) Don't invest in RE.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

GrayGhost

  • Bristles
  • ***
  • Posts: 389
  • Location: USA
Re: Purchasing Real Estate You've Never Seen
« Reply #77 on: October 22, 2014, 02:01:34 PM »
They manage the property.  You can do it long distance (the easiest way to do this, IMO, would be to use a home warranty for the repairs), but it's the turnover that gets you, IMO.  When you need to repair a place from the previous tenants and then show it to new ones, that's a pain.

Ah, so they do showings as well, for no additional fee? That definitely helps with the bottom line, as realtors charge (usually) 1/2 or a whole month's rent--and that's a pretty penny for either me or the tenant!
It's also good to know that they manage repairs. That'll really cut down on the time commitment on my end. Do PMs work with contractors of your choice, or do you have to use their go-to guys?
I hadn't heard of home warranties, but I might have to look into them. $50 a month for covering most repairs that might need to be done is pretty tantalizing.

A number of ways, but it differs based on market and if I'm the one managing locally or it's long distance.  If you can manage all turnover through a Realtor, more power to you.  I know it can be done, but I think it's difficult, to say the least.  Not what I'm looking to do, but each person has a different level of stuff they'll tolerate.  I like to keep it low maintenance, for me.

Well, as I will not be in the area, someone has to do the showings. That'll either be a PM or a realtor. My question is basically how you advertise, and if you get hits and forward them to the realtor/PM, or if they deal with the process entirely on their own.

I'm more than open to using a PM if it'll cut down on the time commitment for me, but I do want some bang for my buck. The more they do in terms of managing vacancies, managing repairs, and essentially reducing my time commitment, the better.

Tell me, ARS, for the properties that you use PMs for, what's the time commitment on your end like compared to the time commitment for properties you manage yourself?

usmarine1975

  • Guest
Re: Purchasing Real Estate You've Never Seen
« Reply #78 on: October 22, 2014, 02:13:23 PM »
I don't have compiled hard Data.  But I do know that Many municipalities, borough, townships in my area have all passed ordinances involving Rental Property.  Many is a relative term for me all the boroughs surrounding my area have passed a similar ordinance. 

http://lancasteronline.com/news/elizabethtown-s-rental-inspection-ordinance-passing-muster/article_4729f0e1-9138-5fd5-a1c8-2718f42c1cb4.html#facebook-comments

http://www.etownonline.com/Pdf%20all%20others/rentalordiance.rev.pdf    Page 6

This is from a borough I own property.  The Landlord's unsuccessfully fought this legislation.  The council decided it was important and didn't care.

Requiring inspections every 2 to 3 years
Requiring that a Landlord live within 20 miles or hires a PM that does live within that range.

I can only imagine that other areas are working on the same premise as they tend to follow suit.  It's certainly something one should look into when purchasing outside their area.

I don't pretend that long distance land lording can't work.  It's just not for me.  A personal decision.



What's "many"?  Do you have any hard data, articles, etc. on this?



Sometimes the numbers don't work out locally, so then you choose:
1) Take subpar numbers locally
2) Figure out the out of state puzzle to make that work
3) Don't invest in RE.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #79 on: October 22, 2014, 02:28:27 PM »
They manage the property.  You can do it long distance (the easiest way to do this, IMO, would be to use a home warranty for the repairs), but it's the turnover that gets you, IMO.  When you need to repair a place from the previous tenants and then show it to new ones, that's a pain.

Ah, so they do showings as well, for no additional fee? That definitely helps with the bottom line, as realtors charge (usually) 1/2 or a whole month's rent--and that's a pretty penny for either me or the tenant!
It's also good to know that they manage repairs. That'll really cut down on the time commitment on my end. Do PMs work with contractors of your choice, or do you have to use their go-to guys?
I hadn't heard of home warranties, but I might have to look into them. $50 a month for covering most repairs that might need to be done is pretty tantalizing.

Typically they have an additional fee.  They often have their own contractors, but not always.  You probably can have them use your guys, that's something you'd want to discuss with them when you're hiring them.

Home warranties are useful in certain circumstances, but useless (and a waste of money) in others, like many types of insurance.  It pays to know why you'd be using it.

Well, as I will not be in the area, someone has to do the showings. That'll either be a PM or a realtor. My question is basically how you advertise, and if you get hits and forward them to the realtor/PM, or if they deal with the process entirely on their own.

They handle it all on their own.  In my experience, and from talking to other investors, it's difficult to find a Realtor to do this.  But not unheard of.  But who do you get to check out and fix up the property after the previous tenants move out?  The turnover is the biggest reason to use a PM, to me.

I'm more than open to using a PM if it'll cut down on the time commitment for me, but I do want some bang for my buck. The more they do in terms of managing vacancies, managing repairs, and essentially reducing my time commitment, the better.

Tell me, ARS, for the properties that you use PMs for, what's the time commitment on your end like compared to the time commitment for properties you manage yourself?

Right, the scope of what they do and the cost is all negotiable.  You have ones that range from just finding tenants to doing everything.

My time commitment on the ones managed for me is much less - I'm just notified when things happen, I don't have to deal with it.

Of course, my time commitment on my self managed ones is quite small too, due to training tenants and setting up systems.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #80 on: October 22, 2014, 02:35:17 PM »
I don't have compiled hard Data.  But I do know that Many municipalities, borough, townships in my area have all passed ordinances involving Rental Property.  Many is a relative term for me all the boroughs surrounding my area have passed a similar ordinance. 

http://lancasteronline.com/news/elizabethtown-s-rental-inspection-ordinance-passing-muster/article_4729f0e1-9138-5fd5-a1c8-2718f42c1cb4.html#facebook-comments

http://www.etownonline.com/Pdf%20all%20others/rentalordiance.rev.pdf    Page 6

This is from a borough I own property.  The Landlord's unsuccessfully fought this legislation.  The council decided it was important and didn't care.

Requiring inspections every 2 to 3 years
Requiring that a Landlord live within 20 miles or hires a PM that does live within that range.

I can only imagine that other areas are working on the same premise as they tend to follow suit.  It's certainly something one should look into when purchasing outside their area.

I don't pretend that long distance land lording can't work.  It's just not for me.  A personal decision.



What's "many"?  Do you have any hard data, articles, etc. on this?



Sometimes the numbers don't work out locally, so then you choose:
1) Take subpar numbers locally
2) Figure out the out of state puzzle to make that work
3) Don't invest in RE.

Even in your example, you can live far away and not have a property manager.  The borough just wants someone local they can serve papers to:
Quote
the  owner provides the Borough with the name, mailing address and telephone number of a manager residing within twenty (20) miles of the municipal limits of the Borough, authorized to accept service of process on behalf of the owner

I'd give them the name of my local legal counsel.

You can also hire someone to act as your resident agent in that case as another potential solution.

Or you just get a property manager if you have to. 

All the solutions to this aside, I'm betting this is way more rare than common.

But even if it were true of every jurisdiction, and there was no way around it, I don't see that as an unstoppable barrier to investing out of your local area.  If the numbers make sense, with that cost added in, and they don't make sense in your area, why would you let some law that you can just follow stop you?
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

usmarine1975

  • Guest
Re: Purchasing Real Estate You've Never Seen
« Reply #81 on: October 22, 2014, 03:03:57 PM »
No the law doesn't stop me. It's my own personal decision.  I have plenty of opportunity in my local area to pick up Rental properties.  I have no need to go outside my own area.  Again it's a personal decision and not necessarily one that the number's may or may not support. 

The ordinance was only brought up because the question was "do I need to hire a PM"  and yes you presented some other possibly viable solutions.  The problem is the inspection every 3 years, the inspector wants someone at the property and typically the owner or PM.  (not saying you couldn't pay legal counsel or another to represent you)  Just saying that it may be a requirement.  I can't speak outside my State.  Nor can I speak for every municipality in my State, Pennsylvania has far too many.  But I can say that of all the Landlord's I know in my area and outside these ordinances are common.  I also know by reading the local papers every time one is passed they write an article about it and usually reference 3 or 4 other area's that have implemented similar ordinances.  In my area I can say it's the Norm.

usmarine1975

  • Guest
Re: Purchasing Real Estate You've Never Seen
« Reply #82 on: October 22, 2014, 03:10:04 PM »
Understand arebelspy,
      For you and others it works and you are comfortable with it.  I make no judgement nor do I criticize you for doing so.  IMHO it is a personal decision.  And for me I have just decided not to.  Not because it can't work, or it can't be profitable.  I just don't desire to do it.  I am too Hands on. 

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #83 on: October 22, 2014, 04:22:41 PM »
Understand arebelspy,
      For you and others it works and you are comfortable with it.  I make no judgement nor do I criticize you for doing so.  IMHO it is a personal decision.  And for me I have just decided not to.  Not because it can't work, or it can't be profitable.  I just don't desire to do it.  I am too Hands on.

And that's 100% valid, and good for you.  :)

I'm too hands off, and too interested in maximizing profit over being able to drive to my assets.  Every person should evaluate their own priorities, inclanations, personalities, etc.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

maki

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Re: Purchasing Real Estate You've Never Seen
« Reply #84 on: October 24, 2014, 11:16:28 PM »
i'm with arebelspy. i own properties in areas i have never even visited, and average 12%+ ccr. a lot has to do with the team you have in place, as he said. a good property manager, several good home inspectors, etc.

i don't do rentals, though. i do land contracts/agreements of sale. everything else is the same.

GrayGhost

  • Bristles
  • ***
  • Posts: 389
  • Location: USA
Re: Purchasing Real Estate You've Never Seen
« Reply #85 on: November 02, 2014, 07:29:26 PM »
How do you get contractors and such to give you estimates before you close? They have to visit the property to give you accurate quotes, after all.

For that matter, how do you close without being in the area? Can your lawyer sign the documents for you?

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #86 on: November 02, 2014, 09:23:41 PM »
How do you get contractors and such to give you estimates before you close? They have to visit the property to give you accurate quotes, after all.

Yes, they visit the property during the due diligence period, or before it's under contract, depending on how you do it.

For that matter, how do you close without being in the area? Can your lawyer sign the documents for you?

I sign digitally where I can and sign and overnight where necessary.  I've closed on many properties without being within 2000 miles of the property.  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

olivia

  • Pencil Stache
  • ****
  • Posts: 770
  • From Consumerism to Minimalism
Re: Purchasing Real Estate You've Never Seen
« Reply #87 on: November 02, 2014, 09:41:21 PM »
Interesting-I'd like to buy some rentals myself but I think I can stay local.  Not opposed to going out of my area though.  Thanks for the info, all.

jnc

  • 5 O'Clock Shadow
  • *
  • Posts: 99
Re: Purchasing Real Estate You've Never Seen
« Reply #88 on: November 03, 2014, 05:24:56 AM »
How do you get contractors and such to give you estimates before you close? They have to visit the property to give you accurate quotes, after all.

For that matter, how do you close without being in the area? Can your lawyer sign the documents for you?

Like ARS said, for documents requiring fresh ink signature, you can sign and notarize as needed and overnight them.
I have also closed a couple of properties since moving abroad. Same deal except you have to notarize at the US consulate which charges an arm and a leg but it is still feasible.

If you would like you can also have a lawyer sign for you. You will need a specific power of attorney document for that. The specifics vary by state and by lender, but it is also possible. The only difference I have found is that it essentially means I have to physically just sign and notarize one document (the power of attorney) as opposed to signing many pages (and notarizing about 4-5) for a typical mortgage.


bb11

  • Pencil Stache
  • ****
  • Posts: 505
Re: Purchasing Real Estate You've Never Seen
« Reply #89 on: May 15, 2015, 05:27:16 PM »
Very interesting. Can you explain what numbers specifically would get you interested in a property enough to send out your local team?

If I'm familiar with a city and neighborhood, checking out the area on Zillow, what numbers would perk up my ears? (i.e. price per sq ft is <75% of neigborhood average, projected rent is >3% of mortgage, etc. No idea if this is how the process goes, but I'd like to understand.

On a city level, what macro-indicators would indicate that a certain city has profitable SFR real-estate?

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28286
  • Age: -998
  • Location: Seattle, WA
Re: Purchasing Real Estate You've Never Seen
« Reply #90 on: May 18, 2015, 12:51:20 PM »
Very interesting. Can you explain what numbers specifically would get you interested in a property enough to send out your local team?

If I'm familiar with a city and neighborhood, checking out the area on Zillow, what numbers would perk up my ears? (i.e. price per sq ft is <75% of neigborhood average, projected rent is >3% of mortgage, etc. No idea if this is how the process goes, but I'd like to understand.

On a city level, what macro-indicators would indicate that a certain city has profitable SFR real-estate?

Good questions.

It's all very relative to the market in particular.

Let me start with (although you didn't ask, I think it will be helpful for others) identifying the market itself.  This is what I said in another thread where someone asked how I identified what markets I may want to invest in:
Quote
Good question.

I start by identifying potential markets based on comments from other real estate investors.

Then I start to investigate those markets (demographics, economy, landlord laws, etc.) to narrow them down.

Once I've identified a market I'm interested in I start talking with local investors.  Nothing beats boots on the ground.  I identify potential neighborhoods and start digging further.

Basically think of it like those stupid maps you see on bad 90s movies where the FBI or whatever has someone on the phone and is like "keep him talking" and they "trace" the location, and it shows a map of the US, and then it zooms into a state, then zooms into a city, then a block, and then they're like "he's at the payphone at 94th street!" - I start with the macro view, identify and zoom in all the way down to the neighborhood and street view, and definitely connect with those who know the market.

Hope that helps!

Once you have that, you spend some time getting to know the market itself.  Browse MLS listings daily.  Look at FSBOs.  See what has been selling, at what prices and develop theories as to why (and test them by trying to predict days before something goes under contract, and what it's final sale price will be).

You'll soon develop a feel for the market, and be able to spot (and jump on) a good deal when you see one.  Some markets have higher ratios, like what you mentioned.  But you may not be interested in that market.  That's why I mentioned the "identify the market first" idea.  Choose what you're looking for based on your goals, and then find a good deal in that particular market that meets those goals.

If that market doesn't have properties that meet them, you may have to reevaluate.  But every market will have bargains relative to itself--whatever market you choose, look for something that is better than average for that market.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.