Long Distance REI Starting Out

20 Replies

My wife and I are very curious about REI and we're starting to educate ourselves on the business by reading, and investing more time into BP resources. We are currently stationed in Clovis, NM with the Air Force but are wanting to invest long term in our hometown of Louisville, KY.

Is long distance investing to start out your portfolio something others have had experience with and/or would recommend?  Is it a stretch to make that a goal starting out?

Hey Curtis,

I too am curious as to other's answers on this topic. I believe that anyone can invest out of state, it just depends on how much you are willing to communicate and build relationships with the people who will be your "boots on the ground". I don't have much experience with investing yet but I imagine one of the main differences with investing out of state is you have to stay on top of people a little bit more and make sure they are doing what they are supposed to do. I would still recommend doing a physical walk through for any property you plan on purchasing (maybe during the inspection) just so you can double check what has been told to you and what you've seen in photos/videos. Good luck on your journey Curtis!

Welcome! I run a turnkey business- not in KY, but I have plenty of experience on the other side of this coin. 

My two cents- plug in to someone there who is trustworthy and already has their team set up. You hear a lot on BP about the 'Core Four." That's a real thing, and it's essential in order to be successful, locally or at a distance. This is one of the places in REI that you can take a short cut of sorts- plug in to another investor or company there that has already built those relationships and leverage them so that you can get the ball rolling and sleep well at night.

Happy investing!

I think it depends on whether you want to go turnkey or whether you want to BRRRR. If you want to turnkey, no problem. If you want to BRRRR, you're going to need to be 100% sure that the rehab work is being done and is being done correctly. You kinda need to be able to babysit the contractor and make a visit at least once every other week. Photos and videos don't always show what's going on and things can be hidden.

Here's a couple of threads to check out and a podcast was even made on this very topic:

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

Originally posted by @Curtis Lipsey :

My wife and I are very curious about REI and we're starting to educate ourselves on the business by reading, and investing more time into BP resources. We are currently stationed in Clovis, NM with the Air Force but are wanting to invest long term in our hometown of Louisville, KY.

Is long distance investing to start out your portfolio something others have had experience with and/or would recommend?  Is it a stretch to make that a goal starting out?

I'm in the Louisville market. David Greene is a big proponent of investing in Louisville. Happy to jump on a call. 

@Curtis Lipsey @Sarah Lindberg   If you know what you're doing and approach virtual real estate deals using a safe strategy, you can work deals as easily as if you were working them in your own neighborhoods.  For over a decade I've used cooperative assignments, which is a type of lease option strategy which can mitigate risk and allows you to flip properties without the need for being on site or having a team of people on site.  Smart way to break into doing deals at a distance.

In my market in the Jacksonville area it's sort of "good news bad news".  The good news is I had found good mortgage and PM support to team up with me and provide 3 of core 4 competencies of a Core 4 practice.  And Jax has a LOT of rehab deals that the owner occupier market and institutional investors have passed up.  The bad news is I had yet to find a GC that will even answer my emails and calls or won't floor it in his truck when I try to physically track him down.  It seems to be an extremely undersupplied profession in this area, which would explain why all those rehab deals are being passed up.  If an investor could somehow move his own rehab team into the area he could be like a kid in a candy store, for deals.  A friend of mine is a GC in Northern California and I wasn't able to talk him into a move out here even for all the beer he could drink (and that's a lot of beer).

@Curtis Lipsey I can't speak to investing from out of state to Louisville, but I can speak to investing out of state to Oklahoma City. I've overseen almost 500 transactions with out-of-state investors coming into this market. I help in a way where investors can follow my lead and a lot of the heavy lifting is done for them, but if you're working with a typical real estate agent I'd become proficient in what to factor as far as maintenance, vacancy, taxes and insurance. That way on every property you can plug those things into your calculator quickly, just add purchase price and likely rent rate to get a quick answer as far as return. Is Louisville a long-term buy-and-hold cash-flowing market or more of an appreciation play?

Is your current market too expensive to invest in? Or are you hesitant to invest given you're military and might be relocated? To dovetail off what @Kiera Underwood said, Oklahoma City has military (Tinker AFB)  base in a neighboring suburb and many of my out of state clients like investing in that area. Some like to rent and work with fellow military folk. 

@Curtis Lipsey Long distance investing is definitely possible and you should seriously consider it as your strategy. I've been to Clovis and I don't blame you for wanting to invest elsewhere... 

Louisville is probably a great option for you because you're already familiar with the area and it will be easier to make real estate connections there. 

I recommend two must-read books for anyone considering that strategy:

"Long-Distance Real estate investing" by David Greene

"The BRRRR Book" by David Greene.

David has mastered long distance investing and shares an enormous amount of knowledge in these books. 

You absolutely CAN do it and you should take action immediately to get the ball rolling. I also recommend joining a mastermind group to surround yourself with people who have already done what you want to do. I joined a real estate mastermind group for military members and veterans last year, and it was the single best decision I made last year for my real estate and business growth. 

Best of luck and keep us updated on your journey.

Long-distance investing is possible. I would recommend educating yourself on the area you are trying to invest in. Then, make sure you find a realtor that works with investors, as they will be able to guide you through the process.

@Curtis Lipsey

I'm far from an expert and can't answer your question directly... however my limited experience might be useful to help you think from a slightly different perspective... alternately you might get inspired.

I retired from the AF a couple years ago... and purchased a house at every stateside assignment. Becoming a long distance landlord four times over.

1) First, I'm led to believe that "lucked out" that I only had four stateside assignments. Apparently you can't get a 5th conventional mortgage.

2) If you buy were you are stationed you might have the added benefit of being able to buy with conventional (and possibly even VA loans). If you purchase with the intent of making it a rental you can "do all the same research" for rentability with the added benefit of being local. You can develop a rolodex of craftsmen (painter, plumber, carpenter, handyman, etc) and find your property management company (if you want one) while you are still local.

Note: I've bought 4 houses and never once did this... I was always too focused on work... but if you're lucky maybe between you and your spouse you would have the available bandwidth to do it.

3) if you purchase in NM you might benefit from the benefits of a NM LLC...

4) Buying where you live (or at your next pcs) with the intent to leverage it's sale with a 1031 swap for a new investment property (potentially this time in Kentucky(?)) later.

5) If I had to to it all over again I wish I had done 1031 exchanges with each of my properties into a rental/development in Austin such that I would own 4 houses in Austin in 2021... with a single property manager etc. Hmm, maybe I should look into that NOW. Lol. I Just had that thought as i was writing this answer.

6) I ended up (currently) with 4 different property managers. Tl;dr: put as much effort as you can into choosing your management company...

A) First one was terrible, but I didn't know it until I had my first "problem tenant" after almost 15 years.

B) Second property manager was a part timer, friend of a friend, and I was trying to save money. Mistake!

C) Third property manager I put quite a bit of effort in finding. Worked out great until she retired after almost a decade. She sold her business to an associate and it's been great for a couple of years.

D) Fourth manager has been acceptable to good for the last 6 years... with no real complaints... partly because I did a lot of research and partly because I haven't yet had a problem tenant yet to test them.

E) Fifth manager is the new management for the first house... who is by the way the second replacement for that house. The first replacement I interviewed and hired to manage the property, including make the property rentable after the problem tenant "destroyed" it. After two months I ended up firing her, fixing the place myself (I mean hiring contractors etc myself) and hiring yet another management company (third for this propert). Honestly, I'm unconvinced that the current manager is much better than the first... beggers sometimes have to compromise... we shall see.

F) My last property manager is also problematic. I interviewed over 5 companies and really thought I'd done my due diligence (I've got non-trivial experience now afterall) and had a list of probably 25 questions that I asked each prospective manager... Well, in my opinion the guy is an excellent salesman (could sell ice water to an eskimo) and even an adequate businessman... however his parter/daily manager is a pampas ***. He is insulting, does what I consider to be the absolute minimum, and ... well, I'm firing them as soon as I can replace them without a significant "early termination penalty."

In our experience, the #1 mistake landlords make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, so they don't know what they don't know!

Landlords mistakenly ASSUME all PMCs offer the exact same services and operate the exact same way, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services.

This also leads them to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it.

We have a 12 page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each don’t cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

@Kiera Underwood Louisville is the market we want to invest in long term with buy and hold.  At least that's our game plan for now.

@Ben Scott At the moment we're hesitant to invest here in Clovis for a few reasons, but a big one is relocation with military and not knowing enough about Property Management here with rental properties.  But then part of me knows the base here is a hub that keeps people coming in so that pushes me closer to considering an investment here.  

@Douglas Spence Thanks for the book recommendations! I finished up The Book on Rental Property Investing a few months ago and loved it. I'll have to give David Greene's book a go. Out of curiosity, what is a mastermind group? Is it a group that's more specific in strategy/audience of REI?

Thank you everyone for sharing your thoughts on the topic.  It's incredibly helpful to my wife and not to mention I now see why Brandon is always talking about getting involved with the community in the BP forums on the podcast!

Investing in your own home town from a distance bears little resemblance to picking a spot on the map and throwing a dart (i.e. what seems to pass for a lot of "out-of-state investing").  You presumably have the knowledge and relationships (or at least opportunity to form relationships) that you will need to find successful investments without depending on people whose principal motivation is to sell you something.  I would not hesitate for a minute.  

Hello Curtis, welcome to the investing world! I started investing in my current city/area due to it being easy for me to manage my own properties. I currently have more houses in other states as well! I haven't had any issues with the PM companies in other states as I try to make it by the houses once a year. If you ever want to get into the upcoming Kansas City market feel free to reach out. I am very active here in this market. Happy Investing!

Long distance real estate investing isn't all that scary even though it seems to be. Your only issue is finding a property manager. It's pretty easy to find a good agent, a handyman, and attorney... but you absolutely need a good team set in place to manage the property for you or you're going to have issues that will make you want to stop your investing journey.

@Curtis Lipsey A mastermind is a group of like-minded individuals who help each other achieve their goals. The group I'm in is focused on real estate and is comprised of active duty military and veterans. We have monthly speakers who educate us on various topics, and we are broken down into smaller squads of 5-6 people who meet weekly to discuss goals, obstacles we're facing, and generally give advice to each other. It's a great way to network and surround yourself with people who have already achieved things you want to achieve! 

Originally posted by @Douglas Spence :

@Curtis Lipsey A mastermind is a group of like-minded individuals who help each other achieve their goals. The group I'm in is focused on real estate and is comprised of active duty military and veterans. We have monthly speakers who educate us on various topics, and we are broken down into smaller squads of 5-6 people who meet weekly to discuss goals, obstacles we're facing, and generally give advice to each other. It's a great way to network and surround yourself with people who have already achieved things you want to achieve! 

Thank you, that sounds like a really useful tool to use.