Assembling a team - Out of State

7 Replies

I am currently in San Francisco but planning to invest out of state (MFR buy/hold). My question is about which members of my team should be in-state vs out-of-state. Obviously, Property Management and Maintenance should be located where the property is, but what about some of the other team members? Attorney, lender, CPA, etc... What are the pros and cons of having some of these team members local to the property vs local to the investor?

Any help is greatly appreciated.


@Jaime Morales  

We currently invest out of state, and have a similar relationship with our home city as those in SF. The cost is high, retail sector is out of hand, so it's nice to get our money out of NY.

My CPA is in New York (it's my wife). Lawyers tend to exist where the property is, because of state-based bar requirements. If the lawyer is writing contracts for your LLCs or partnerships, then it may be smarter to have them nearby.

We had much better luck with lower closing costs on lenders outside of NY. Some NY lenders won't even work on deals under $100,000. Think of it like a retail buyer in an out of state market, no one in Memphis, Kansas City, or Indianapolis would ever call a mortgage broker in Long Island.

Just remember you have to pay these people. If they can afford to live where you live, then they are expensive... Many times you get a deal going with the local option just because of different economies. It's not an excuse to get poor or legally-questionable service. It's just fair to realize that there are good people in every city.

@Jaime Morales  attorney should be local as local laws vary, and why pay someone to get educated on local laws. Local lenders know the area better, but your lender you may have a track record with. There are always trade-offs but I try to keep things local, although I brought my investments back to town now. 

Hello Mr Morales,

I have a complete team business being built up right now. All should be local. Laws do vary & the added expense for out of area wouldn't be cost productive, especially in building a portfolio!

Hey Jaime,

I'm an out of state investor who lives in Portland and buys in Charlotte.  We own 6 out of state properties, all purchased in the last 24 hours.

First - I want to highlight that your team will be your single most valuable asset!  Even moreso than time or capital!

To answer your question:  Obviously you need boots on the ground for most things like RE agents, PM, Rehab, etc.  Although less intuitive, I would add your attorney to this list as well.  It's unlikely that you will need the attorney real often, but when you do, you want someone who can actually practice law in that state :).

Having your lender in the market will also make your life easier. Though in my experience, this is far more of a convenience than a necessity, and working with a lender outside of the market is just fine.  My lender in Charlotte (where I buy) works great with the rest of my team, and that translates into a very efficient process.  However, she is limited in what loans she can make, and I've done several loans through a bank in KC.  This has been fine, but is simply less convenient.  And if you already have a relationship with a lender who can meet your needs, using them is probably the path of least resistance.

I've actually found that having a local closing agent is a big help.  This surprised me a bit, as I had historically thought of this role as commodity.  But having a single closing agent who is local to the area, knowledgeable, and can work with different lenders has saved me a lot of gray hairs.  In fact, whenever I've used another closing agent, I've been burned to varying degrees.

Your CPA or tax person who is already doing you personal taxes should be able to do the tax filings for these investments.  As such, these should probably be local to where you live - but be sure that they are familiar with rental properties and can file in the state where you're investing.

Happy hunting!

Thanks, everyone! From what I'm hearing, it sounds like most of the team is going to be local to the properties, except for the CPA.  In terms of legal, part of what I would need would be someone that can help structure the entities (LLCs/trusts/etc). Would it be wise to have this person located close to me, and have another attorney located in the state the property is in, or does it not matter much?

I'm also assuming that you would want your insurance broker to be local to the property. Is this correct?

@Jaime Morales  If you're investing out of state I find that almost all of the team is going to be in that state. The biggest help to me so far has been reaching out and connecting to other investors (both local and out of state) investing in my area. It really helps to be able to ask for recommendations on potential team members that have a solid track records. You don't have to invent the wheel this way. There's so many little quirks of certain areas that could come up and really helps to have other investors that are doing exactly what you are that you can ask for help.  

@Laura Williams  Thanks for the advice! I am definitely looking forward to connecting with folks on BP to gain a better knowledge of those out of state markets.

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