Long Distance Investing

79 Replies

Hello Bigger Pockets world!  My wife and I are new to investing, and we are looking to invest long distance in Baltimore, MD.  We are looking for advice for long distance investing from experienced investors, any guidance would be appreciated.

Thank you in advance!

Greg Barthelmy

@Stephanie Barthelemy

We live in Phoenix and invest in Ohio.  Make sure you have solid boots on the ground, a good realtor and network with local investors.  We actually self manage the majority of our portfolio from 2300 miles away.  I can collect a check and call the plumber just as well as a PM.  The boots on the ground fill in the pieces where I can't perform remotely such as unlock a door or collect a lock box.

Make sure you understand the good and bad areas. While I have never long distance invested personally, I've heard many say that they visit areas multiple times before pulling the trigger on a pocket area

PLEASE PLEASE PLEASE do your research on the neighborhoods and blocks you are investing on. The numbers in Baltimore sound incredible, and often times they are, but they come with the risks associated with being in C/D class neighborhoods that are harder to manage from afar. 

Originally posted by @Stone Jin :

@Stephanie Barthelemy

We live in Phoenix and invest in Ohio.  Make sure you have solid boots on the ground, a good realtor and network with local investors.  We actually self manage the majority of our portfolio from 2300 miles away.  I can collect a check and call the plumber just as well as a PM.  The boots on the ground fill in the pieces where I can't perform remotely such as unlock a door or collect a lock box.

 How do you find deals? Are you invedting in Cleveland? 

Originally posted by @Stone Jin :

@Ari Hadar.

I can still find distressed homes on mls. The niche we buy in there are no wholesalers that I've come across. We buy in Toledo.

Do you do long distance rehab? What's the cap rate, coc and what loans do you use?

@Ari Hadar almost all of our purchases require some level of rehab, generally between 15-30K (new floors, new paint, new appliances).  

We use a variety of financing from Brrr to conventional, the return vary by project by nothing under 10% CoC.

If you inherit a tenant with your purchase make sure you determine if they are paying there rent. There are a lot of renters that took advantage of the eviction moratorium. Currently there is a 4 month backlog in evictions so if you file today you won't get your first court date until March. 

Originally posted by @Stephen Kehoe :

If you inherit a tenant with your purchase make sure you determine if they are paying there rent. There are a lot of renters that took advantage of the eviction moratorium. Currently there is a 4 month backlog in evictions so if you file today you won't get your first court date until March. 

Thank you Stephen! We are definitely looking out for that.

 

Originally posted by @Joe Norman :

PLEASE PLEASE PLEASE do your research on the neighborhoods and blocks you are investing on. The numbers in Baltimore sound incredible, and often times they are, but they come with the risks associated with being in C/D class neighborhoods that are harder to manage from afar. 

This is great advice. Thank you! Are there any apps out there you are currently using to get ratings on neighborhoods? I have been using Niche, but the ratings on Baltimore are years old and I would like something more up to date. 

I would say find an agent who is also an investor and who is willing to help you with the whole process. Pay for his/her time, obviously check his work, his team, his prices etc...

@Stephanie Barthelemy 1) Without being paranoid, instinctively discount and thoroughly verify rent projections. Can't tell you enough how many inaccurate (always high side) current rent estimates and unrealistic rent growth rate projections I've heard/read and suffered from. 2) Have mental and $ reserves - you have to accept that "stuff" will happen. Known to many investors that sold after a minor setback or a series of objectively minor challenges. 3) Never let "Bragging Bob" get you down - you will invariable meet this person socially, at work or god forbid in your family. "Bragging Bob" got a lower rate, has a better cap rate, choose a fast growing city, etc. and he/she is just so excited to let you and everyone know. Smile, be polite, and don't waste a second on their one-upper b.s. The goal is what's good for your pockets and your situation. keep your ego in check and do you. 4) contractors that finish on time and under budget are like unicorns that fart rainbow-colored glitter. Not saying it doesn't happen (perfect results with contractors), but your financial modeling needs to account for an oh crap scenario that includes higher costs and delays (lost rent).

Originally posted by @Andrew Rosenberg :

@Stephanie Barthelemy 1) Without being paranoid, instinctively discount and thoroughly verify rent projections. Can't tell you enough how many inaccurate (always high side) current rent estimates and unrealistic rent growth rate projections I've heard/read and suffered from. 2) Have mental and $ reserves - you have to accept that "stuff" will happen. Known to many investors that sold after a minor setback or a series of objectively minor challenges. 3) Never let "Bragging Bob" get you down - you will invariable meet this person socially, at work or god forbid in your family. "Bragging Bob" got a lower rate, has a better cap rate, choose a fast growing city, etc. and he/she is just so excited to let you and everyone know. Smile, be polite, and don't waste a second on their one-upper b.s. The goal is what's good for your pockets and your situation. keep your ego in check and do you. 4) contractors that finish on time and under budget are like unicorns that fart rainbow-colored glitter. Not saying it doesn't happen (perfect results with contractors), but your financial modeling needs to account for an oh crap scenario that includes higher costs and delays (lost rent).

Spot-on comment.

My biggest struggle are the value/rent /arv comps. 


Do you use and count on rentometer? 


How do you evaluate the fair market value /arv?

 

I would try your best to set things up like @Stone Jin has them set up. Otherwise the success or failure of your venture will largely fall on the shoulders of a local PM. 

Since most people who prefer real estate over stocks prefer it because they feel like they have more control, it is kind of counterintuitive to me for someone to not be involved with their rentals.

Originally posted by @Stephanie Barthelemy :
This is great advice. Thank you! Are there any apps out there you are currently using to get ratings on neighborhoods? I have been using Niche, but the ratings on Baltimore are years old and I would like something more up to date. 

No, there are no apps that I would trust or recommend for this kind of information. I suggest looking at market data (have values in the neighborhood been appreciating? If not then thats a sign that its a rougher area) and first hand experience (do YOU feel comfortable in the area? Would you feel comfortable coming to show the house to a perspective tenant?).

Good luck! 

Originally posted by @Stone Jin :

We live in Phoenix and invest in Ohio.  Make sure you have solid boots on the ground, a good realtor and network with local investors.  We actually self manage the majority of our portfolio from 2300 miles away.  I can collect a check and call the plumber just as well as a PM.  The boots on the ground fill in the pieces where I can't perform remotely such as unlock a door or collect a lock box.

I am living in Columbus,Ohio and looking to invest long distance in Phoenix actually. Is there a reason you are choosing to invest outside of phoenix? I know Ohio can have great investment opportunity, especially where I Iive, but Phoenix does as well.

 

The great part about real estate is that there is no "ONE WAY" to do things. But there are 3 key questions to ask when you want to get started and based off of how you answer these questions, you will find the strategy that works best for you.

1. What rules are you using to calculate your rental property acquisitions (50% rule, 10% rule, 2% rule)

2. How do you plan on financing the deal? (Cash, hard money loan, Home escrow loan, etc.)

3. How do you plan on finding these homes (Locally, nation wide, driving for dollars, real estate agents (hint hint), etc.)

The devil is in the details. 

Once you know that then you can get started trying to find your first deal long distance. 

Find a "Knowledgeable Investor Friendly Realtor" who knows the area very well and will actually give you good advice.  

April Munoz, Real Estate Agent in TX (#710335) and TX (#744257)

    Originally posted by @Eli Crognale :
    Originally posted by @Stone Jin:

    We live in Phoenix and invest in Ohio.  Make sure you have solid boots on the ground, a good realtor and network with local investors.  We actually self manage the majority of our portfolio from 2300 miles away.  I can collect a check and call the plumber just as well as a PM.  The boots on the ground fill in the pieces where I can't perform remotely such as unlock a door or collect a lock box.

    I am living in Columbus,Ohio and looking to invest long distance in Phoenix actually. Is there a reason you are choosing to invest outside of phoenix? I know Ohio can have great investment opportunity, especially where I Iive, but Phoenix does as well.

     

    Hi Eli, I'm curious as to why you're investing outside of Columbus?  

    Originally posted by @Stone Jin :

    @Stephanie Barthelemy

    We live in Phoenix and invest in Ohio.  Make sure you have solid boots on the ground, a good realtor and network with local investors.  We actually self manage the majority of our portfolio from 2300 miles away.  I can collect a check and call the plumber just as well as a PM.  The boots on the ground fill in the pieces where I can't perform remotely such as unlock a door or collect a lock box.

    @Stone Jin - Looking at the possibility of investing in multi-family in OH from UT, any areas I should stay away from? Been researching suburbs of Toledo, Cleveland, and Cincinnati.