Long distance real estate investing

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Long distance real estate investing

Kevin Pfeil
Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes

Hello BP nation,

So I am currently in the educational phase inching closer to the idea of buying my first property. I have listened to over a hundred bigger pocket's podcast (both the real estate one and real estate rookie), read both long distance real estate investing and the BRRRR book, and even made my own spreadsheet so I could analyze deals. I love the idea of the BRRRR strategy, however with my current job, I am never in one place for long. For instance I just came back from Japan for a 5 month work trip, and I am about to travel to San Diego for an 11 month work trip, and I currently live near Tacoma, WA (probably spend the least amount of time home between those two places). At this point I think my only option is to invest in long distance real estate if I want to join the real estate investing club. I don't want bite off more than I can chew with my first deal, so as of right now I think I should stick with just long distance real estate investing with the plan of doing some BRRRR deals down the road when I get more comfortable with owning some properties of my own.

So my question is, what were some of the things you all wish you knew, or glad you had the knowledge of, prior to doing your first long distance deal?

Bonus question, if you had around $80k to work with, how would you go about using it in this situation?

I know this was long winded, and very about me, however I do really appreciate people taking the time to read this and any responses.  

Cheers!

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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
6y

I would say the big thing is to wipe your mind clean of assumptions that you have from the market you are in. Out of state deals will likely be cheaper than anything you've seen locally, but cheap doesn't mean good. Bad areas with bad management won't cash flow. Also, vet the team you are using carefully and don't be afraid to switch.

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  • Paul Shannon
    Rental Property Investor · Fishers, IN · Member since 2016 · 337 posts · 470 votes
    6y

    With long-distance investing you are going to have to rely on a property management company to keep up with your properties and tenants.  I felt it was very beneficial for me to have managed a few rentals myself prior to making the jump to a different market.  Although I don't have experience managing hundreds of rentals and tenants, I do understand the maintenance issues that can come, how frequently they do, what they cost, how to screen a tenant, how to collect rent, etc.  I'm more confident in my ability to manage the property manager, per se.  Invaluable in my opinion.  I sleep better at night knowing that it would be very difficult for them to try to take advantage of me and its enabled me to build a trusting relationship with my PM.  

    1Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    @Kevin Pfeil Definitely take advantage of the traveling you do by buying properties to house hack (preferably a 2-4 unit or a SFR with an ADU) in the locations you stay for about a year or so and then rent it out with a good property manager when you leave. You can stretch your money a lot further that way.

    Best of luck to you!

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  • Donald E Appleberry
    Real Estate Agent · San Diego, CA · Member since 2018 · 144 posts · 145 votes
    6y

    Hey Kevin,

    Full transparency I'm an agent in San Diego. I hope that doesn't add too much of a bias to my reply. Hahaha. 

    When I was in the military stationed at Camp Pendleton in San Diego, I did 2 OOS investments back home. (Springfield, MO) They were seller financed deals and pretty much a glorified lease option. lol. I knew the area well and already had connections so it felt like the safest place to start. Especially when I was used to seeing homes priced at 80k there and was comparing them to San Diego Prices. Yikes. 

    Before I even recommend anything its 100% going to depend on what your goals for investing are. Build wealth and equity over time, add some extra income each month for your lifestyle or savings, or find a middle ground in between the two (BRRR). Usually the time to you have to invest into your strategy will dictate which one you end up preferring. In this case I listed from least amount of time to most amount of time. Having a solid team in place can reduce the amount of personal involvement in these investments, but if you're looking in multiple markets then building that team will also be an important time investment.

    For a cash flowing investment market, I'd recommend Kansas City, Mo. Not just because I'm from there and know that market as well, but because 80% of the investors I work with or talk too out here have or have had part of their portfolio there. The more established investors I meet the more this gets reinforced. It's big enough to have a great rental market and just small enough to not feel major economical impacts as bad as other large cities. Full disclosure I have 0 investments there, but this is the general concept I get from larger investors. With 80k You could leverage a couple investment properties there and have some decent cashflow coming in. Definitely vet a handful of management companies, but I'm sure that's something you planned on anyway. 

    For building wealth over time I think you're headed to the best place to do so. San Diego, CA. (Here's the Bias part I was talking about). San Diego is an incredible city that's easy to fall in love with. Its the reason I stayed out here after I got out of the military. There's something for everyone which is a reason it's good for a long term investment. People want to live here. Developments are going up everywhere and having multiple military bases in the area make it great for rental properties as well. If you went this route with 80k, I would say use part of it to get a property you can enjoy during you time here and rent it out when you leave. You'll likely have a good enough equity position to cashflow or AT LEAST break even when you leave and rent it out. Time will make this a great investment. I don't know if its for you, but renting out a room or two while you're here could also allow you to live for free or maybe add a cashflow factor. Super common in this market, but it's not for everyone as I mentioned. You could also look into adding an ADU onto the property if the property allows. That value add strategy can make this a cash-flowing asset relatively easily.

    Hopefully this helps you in some way. When you get to San Diego be sure to hit up Serrano's in downtown. 100% the best taco's around. Haha. Feel free to hit me up if you have any questions or want info on the local market. I also hold meet ups at my office in downtown that I post on here. Once this COVID situation passes I'll be resuming them. Be sure to swing by!
     

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    6y

    I would say the big thing is to wipe your mind clean of assumptions that you have from the market you are in. Out of state deals will likely be cheaper than anything you've seen locally, but cheap doesn't mean good. Bad areas with bad management won't cash flow. Also, vet the team you are using carefully and don't be afraid to switch.

    Podcast Guest on Show #121
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  • Mike Vann
    Specialist · Springfield, MO · Member since 2016 · 104 posts · 54 votes
    6y

    With the amount of moving around you do, you might look into buying into an apartment syndication.  You can typically get double digit, tax advantaged returns and be completely passive.  This model allows you to enjoy the benefits of real estate investing w/o all the work that goes into it.  Make sure you educate yourself on the questions you need to ask the deal sponsor to make sure the numbers in the pro-forma they are giving you are realistic.  Good luck and let me know if I can help.   

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  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y
    Originally posted by @Andrew Syrios:

    I would say the big thing is to wipe your mind clean of assumptions that you have from the market you are in. Out of state deals will likely be cheaper than anything you've seen locally, but cheap doesn't mean good. Bad areas with bad management won't cash flow. Also, vet the team you are using carefully and don't be afraid to switch.

    I immediately thought about when I was on a call with an investor that was in maybe NY and I was overviewing prices in OKC and he says that he literally can not believe the price points. We weren't even talking about high-risk areas! The cash flow markets are so drastically different from what many new investors have experienced. 

    1Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Paul Shannon Yeah before I invest in a market I will need to do some research on specific property management companies in the area. It seems like if you can find a good one, it is worth the money you invest into them and so much more. Smart move managing a couple properties first! What other markets do you invest in?

    1Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Twana Rasoul Thanks for the advice! I do love the idea of house hacking, and eventually would love to do it myself one day. Unfortunately right now, for the housing I live in while I am on travel, the money can't go into a property I own. So its great since my housing expense is pretty much nothing (other than what I pay for self storage back in Washington), however I am not building any equity in the places I am staying at. 

    1Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Donald E Appleberry Thanks for all that info man, truly appreciated. As for now my goal with real estate, it is to go for cash flow, but long term getting into appreciating markets seem like the way to go. Whatever place I do end up getting, I plan to hold onto for a while. The cash I get from the rentals I would like the reinvest into other properties and slowly build up a handful of rental properties.

    I totally understand why you fell in love with San Diego, there is something for everyone there. Also I do agree that San Diego is a growing market, so many people moving there, and you sure can do well with the amount of military that rent in the area. Kansas City, MO is one of the couple cities I've been watching/interested in (along with Fort Wayne and Evansville, IN). All those places seem like great cash flow markets. I think have a great team to work with in any market is crucial to your success, so I couldn't agree more with you there. 

    Unfortunately I can't put my lodging allowance to a personally owned property, or else I would totally do a house hack. That always seems like the smartest way to go. I actually have never tried out Serrano's, but I do love all the tacos in San Diego and I will be living just a few blocks away from there (on Cortez hill), so I will definitely give it a try! Let me know when you are having those meets up again, I would love to check it out. 

    2Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Andrew Syrios That's some great advice! I do think it's easy to run the numbers and have a property that looks great on paper, but a bad tenant, or team running the property seems like it can devastate things quickly.  If you don't mind me asking, what are some of the things you look for in a team when you invest?

    1Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Mike Vann thanks for the advice Mike! I do find Syndication very enticing, however I would need to do more research before I get involved in that field. For right now I am leaning towards just owning SFH, get a solid background, and down the road I do think syndication is something I can see myself getting into.

    0Reply
  • Kevin Pfeil
    OP
    Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
    6y

    @Kiera Underwood I haven't done much research in OKC, but comparing the Midwest markets to some of the markets I am use to (Seattle area, and San Diego) it is unreal how different prices and rents are! I am sure there are plenty of great deals in OKC!

    1Reply
  • Donald E Appleberry
    Real Estate Agent · San Diego, CA · Member since 2018 · 144 posts · 145 votes
    6y

    For sure man. I live in downtown, so when you get out here hit me up and we'll grab a brew or something. 

    1Reply
  • Lee RipmaPro Member
    Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes
    6y

    @Kevin Pfeil

    I think you’re in a great position-you’re not biased in choosing your market. I would suggest you really figure out what you want-more cash flow or more appreciation and the kind of price points you’re looking at. My standard advice is to buy an out of state duplex in a B/C area that costs 150-175k, meets the 1% rule, and has upside in rents with a basic cosmetic remodel. With 80k you could get 2 of these with 25% down. That’s just my standard advice and you should do whatever meets your goals!

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  • David Kuhlke
    Rental Property Investor · Portland, OR · Member since 2018 · 73 posts · 24 votes
    6y

    @Kevin Pfeil

    Hi Kevin, I recommend researching 2-3 cities where you are considering investing. Narrow down to 1. Then find a great real estate agent in that city to start sending you deals. As David Greene says “rockstars know rockstars”. Chances are that real estate agent knows a good PM, Contractor etc. but always research on your own as well. You can do quite a lot with $80K

    Best of luck

    0Reply
  • Alyssa Dyer
    Rental Property Investor · Oklahoma City, OK · Member since 2017 · 1k+ posts · 694 votes
    6y
    Originally posted by @Lee Ripma:

    @Kevin Pfeil

    I think you’re in a great position-you’re not biased in choosing your market. I would suggest you really figure out what you want-more cash flow or more appreciation and the kind of price points you’re looking at. My standard advice is to buy an out of state duplex in a B/C area that costs 150-175k, meets the 1% rule, and has upside in rents with a basic cosmetic remodel. With 80k you could get 2 of these with 25% down. That’s just my standard advice and you should do whatever meets your goals!

    I like Lee's advice! That's a perfect property. In our market, you sometimes have to settle for lower price point and single-family (it's just a super single-family dominated market) but hitting 1% with a basic cosmetic remodel is ideal. Also, taking a higher return/even lower purchase price so you can do a light cosmetic remodel yourself is an option as well. 

    2Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    6y

    @Kevin Pfeil I lived in Seattle 2009-2018 and pretty much the whole WA state is a primary market where you are going to put in a lot of sweat equity to be able to cashflow. If you make under 100k at your day job then that is what you are going to have to do.

    But if you were like me and time was more important I would look to invest remotely in the South or South East. Let me know if I can help with any specific questions.

    0Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    6y

    @Kevin Pfeil

    +1 to the nature of your question. I think this is the right way to approach the problem. Even for people who travel less, if you're in a punishing investment market or you're very busy in your profession, long distance and passive is still a strong approach. That is my approach, and it has worked very well.

    Things I wish I knew back then (or better understood):

    1) Why you may want to accept lower monthly returns for higher property stability and presumed (future) sale value.
    2) The overwhelming importance of good management (and why it's worth paying for).
    3) The benefits that come with scale.

    If I had $80k:

    Find a syndicator you like and consider the minimum investment. If you're looking for a safer route to build relationships, private lending is very nice for a quicker turnaround and better protection of principal.

    It's a strange time right now (to say the least). Anyone who 'knows' what's going to happen is lying to you and themselves. It may be worthwhile to pause for a few months, regardless of your choice.

      2Reply
    1. Kevin Pfeil
      OP
      Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
      6y

      @Lee Ripma Thanks for the input! Seems like very sound advice! A couple of duplexes does sound like a nice way to start off. Those numbers you put out make perfect sense to me! 

      On a total side note, I loved your episode on the podcast and the way you picked the market you wanted to invest in. Its great to see someone with such an analytical mind just go with their gut on a location and not over think something like that.

      0Reply
    2. Kevin Pfeil
      OP
      Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
      6y

      @David Kuhlke David Greene does love that quote! I think finding a great real estate agent and PM is crucial for success.  Finding a real estate agent that invest is a nice benefit and something I don't think I would of thought of before doing some research. What are some of the things you look for when finding rock stars?

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    3. Kevin Pfeil
      OP
      Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
      6y

      @Lane Kawaoka When you say you invested in the South/South east, what specific markets did you decide on? What were some of your reasoning if you don't mind me asking.

      0Reply
    4. Kevin Pfeil
      OP
      Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
      6y

      @Trevor Ewen I really loved the 3 things you wish you knew (or had a better understanding) back when you got started! Great advice and something that isn't intuitive. Yeah to Covid definitely adds a very interesting twist to everything. I do think there can be some great potential with all these tough times, and I think if you're smart with how you move forward with your actions, you can create a lot of win win scenarios! 

      1Reply
    5. Tanvir Sattar
      Rental Property Investor · Cincinnati, OH · Member since 2020 · 380 posts · 588 votes
      6y

      @Kevin Pfeil my first property was out of town, but I had a family member nearby to help with maintenance, rent collection, etc. These were before the times of online payments so now I just Innago's software to collect rent and manage tenants. I agree with @Paul Shannon having experience locally first help. Any family members or friends that could help you?

      2Reply
    6. Kevin Pfeil
      OP
      Rental Property Investor · Madison, AL · Member since 2019 · 25 posts · 15 votes
      6y

      @Tanvir Sattar hey thanks for the advice. I actually do have an uncle that lives in the upstate NY area (around Troy/Albany), who has been flipping properties for a couple years now. As of right now I am not to interested in flipping, but I do think there is some valuable things to learn with the rehab process as a whole. I was thinking of syncing up with him and seeing his thoughts on things and the potential to partner up on a deal. Seems smart to go with someone you know first to give you some insight on things you might not think about and help smooth out a few bumps that are sure to come. 

      1Reply
    7. Andrew SyriosPro Member
      Moderator
      Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
      6y
      Originally posted by @Kevin Pfeil:

      @Andrew Syrios That's some great advice! I do think it's easy to run the numbers and have a property that looks great on paper, but a bad tenant, or team running the property seems like it can devastate things quickly.  If you don't mind me asking, what are some of the things you look for in a team when you invest?

      The big thing we're looking for is built-in equity. We do the BRRRR method, so we aim to be all in for 75% of the property's ARV. We also want to cash flow, so we look at cap rates, rent/costs and cash flow estimates, but those are tricky with houses and even small multi's. But built-in equity is the big thing we are looking for.

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