Long Distance Land Lording

Buying & Selling Real Estate
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Long Distance Land Lording

Trevor Lohman
Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes

Hi Everyone,

I am fully prepared to take some heat for asking this question, and recognize many of the problems with long distance income property ownership and investing in a "network" but wanted to ask anyway.

I'm 24 and spend probably about 50-60 hours a week working. I'm making what I consider good money (roughly 150 thousand a year pre tax). While I don't necessarily love my job, I don't see myself having the courage to quit and jump into real estate at any major capacity in the next five years. I'm at a time in my life when I'm saving for all kinds of things (wedding, new car, investing) and feel much more comfortable with what is a reasonably steady income (I know no job is guaranteed) I am not a huge fan of leverage, or debt of any kind, which is why I'm putting away money like crazy. I think within this year I would have the money to buy a lower end house in a few other parts of the country that seem to make a lot of sense to me. I do not however see myself having a tremendous amount of time to manage these properties though.

I am wondering if anyone has heard much about or invested in Jason Hartman's platinum properties network. I have listened to his podcast for quite a while, and his investing principles seem to strike me as being inline with bigger pockets philosophy, and my own philosophy. His network does not strike me as guru-ie (is that a word?) but at the same time it is an investment network managed by someone else, which I know many investors would likely call a suckers bet.

Does anyone have any experience with Platinum Properties? Or does anyone want to tell me how crazy I am for considering it lol? At this point it is either get involved in something like this, get some skin in the game, and learn from my experience, or just save my money away for the next five years until I'm at a point where I feel more comfortable ratcheting back from work, and try to become a part time buy and hold investor on my own.

Either way I plan on getting involved in managing my own real estate down the road, but thought this may be a viable way to get started and learn in the mean time.

What do you guys think? Thanks for the help!

Trevor

1Reply
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Riley F.
New York City, NY · Member since 2013 · 136 posts · 76 votes
12y

I have done a lot of browsing turnkey property sites, and I have to say that the markup takes a lot of the gristle off of the transactions, not in all cases, but in many.

My advice to you, based on what I am doing and have found useful so far, is to choose 1 market, contact 10 buyers agents, and interview them. You can get some basic interview questions off of this site, and they will go a long way toward picking 1 - 3 to work with (each in different areas). Ask each what markets they specialize in, because each area that you're looking will have areas that very dramatically, even within 5-10 miles of one another. Then call 5 or so property managers and tell them that you are an out of state buyer, pre-approved for a mortgage, are shopping for properties and are going to need a property manager. Ask them what neighborhoods the like to rent in, what home features they like in their rental properties to keep vacancy down, and what you can expect as far as cap rate. After the conversation ask if they mind if you bounce ideas off of them OCCASIONALLY, take their name and email, and followup with a thank you note, handwritten to their office. You should ask the same of the buyers agents.

Once you have a handle on the market, ask the buyers agents to set you up with automated MLS emails with the criteria that you've set based on the above. I would recommend focusing on REOs and HUD homes, but it's your call, you can certainly find deals on the MLS outside of those bounds. Then start to comb these emails, run comps (use Zillow recently sold, Zilpy, Padmapper, Hotpads, and Rentometer) to run sales and rental comps. You'll start to get an idea of what things are priced at in each area. Keep track of the properties that you think are worthwhile in a spreadsheet for a few months while you are getting a handle. You can use the realtors and property managers that you've contacted to verify the properties that pass your prescreen before you actually make offers.

I wish that someone gave me the above before I embarked, because it would have saved me 3 months of trial and error. While I haven't bought a home, I've made many offers, and plan to continue to do so. This should get you started. "Building a team" sound daunting, but it's really just about relationships.

I hope that this helps.

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  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y
    Originally posted by @Trevor Lohman:
    I think within this year I would have the money to buy a lower end house in a few other parts of the country that seem to make a lot of sense to me. I do not however see myself having a tremendous amount of time to manage these properties though.

    What type of price points are you looking at? Do you truly mean "low end house" or just "low priced house"? If you don't have time to manage it that just means you'll be more passive than active. Lots of real estate investors do that.

    I'm not sure about the person you're referring to. Are they some type of guru?

    Podcast Guest on Show #29
    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y

    Hi Dawn,

    Not necessarily low priced, actually from the properties listed on the site they seem relatively median priced. I've looked at some comps and the properties listed on jasonhartman.com seem fair for their respective areas. Um, I dunno, like I said his podcasts don't seem guru-ie, although he does sell educational products which does seem guru-ie. I'm more interested in the network they have though. Basically they list properties that meet their various criteria (rent to value ratio, etc) and only work in areas with certain criteria as well (job groth, pop. growth, low crime rate) and then set you up with a property manager (you can select your own or theirs).

    I'm not even sure if they make any money off of you buying their listed properties. I think they make their money off their educational products which I wasn't planning on buying. So really, I don't see any glaring issues, which is why I was hoping maybe someone had worked with their network in the past.

    I want to be a passive investor like you mentioned, just not in my area, which is why this network seemed appealing to me.

    Trevor

    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y

    @Dawn Anastasi

    Oops sorry didn't answer all of your question. A house that is fairly priced for the area at roughly 50,000 dollars is what I am most interested in. That's a bit of an arbitrary number based primarily on what I expect to be able to save this year.

    0Reply
  • Al Williamson
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    12y
    Trevor, hey, take a good long look a notes before signing on. If you want to be hands off, then notes may be the place to start.
    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y

    @Al Williamson

    Thanks for the advice Al!

    Any pointers on a good place to start learning about investing in notes? I feel like theres been a surge in the popularity of note investing, which always makes me nervous... Almost reminds me of the surge in lien investing. Is that all in my head?

    I'm hitting the BP note investing posts now!

    Thanks,

    Trevor

    0Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    @Trevor Lohman excellent idea to save while the money is good. While very few rule of thumb guidelines apply everywhere it has been my experience that the high quality more expensive properties in nicer neighborhoods cash flow less but are easier to manage and appreciate in value better. My 2 cents is if your are looking to try to turnkey at your stage in life with the least participation on your part, go to the fast growing high appreciation areas with lower returns, and not the high cash flow high maintenance ones. Example Texas especially the Dallas/Houston type areas tend to have much higher prices, higher taxes, and much lower rent to cost ratios, but they rent very fast and appreciate well. The midwest, say Chicago, KansasCity, Indianapolis, tend to have lower prices, good rent to purchase ratios, but very little appreciation, and high maintenance. There are hundreds and hundreds of foreclosures going on yet rental demand is high.

    That being said there are very nice up and coming areas in nearly all large cities if you know where to find them.

    I have recently made my first offers on out of state properties but I am looking for cash flow. I have been in the rental business a long time, but was very bad at it when I started. I hopefully have the experience and network to try landlording from a long distance. Good luck

    2Reply
  • Al Williamson
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    12y

    I follow Dave Van Horn. I haven't done a deal yet - still watching them cross my plate.

    I'll be 50 in a few years. That's when I'd like to move into a hands off position.

    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y

    @Al Williamson @Jerry W.

    Thanks for the advice guys. The areas I'm looking into are Memphis, Houston, Atlanta, kansas city Missouri, Indianapolis, and a few others. I have friends in Tennessee, so I'm leaning towards memphis. These are all areas that this Platinum Properties network works in as well. Anyone heard of it? Or does anyone have advice on a different way to do long distance land lording without making it more than a 15 hour a week job?

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    @Trevor Lohman one of the most common mistakes people mistake is investing in a market because they have family or friends that live there. I equate that with buying a stock because you know someone that works for the company. Unless those friends are experienced, professional property managers, they're not going to be of a lot of value to you as far as your investment. More importantly though, you want to invest in the markets that give you the best chance of achieving your investment whatever you determine that to be. Don't make the mistake of sub optimizing your investment from the start just because you know someone that lives in the city. Choose the best market first and then hire the best property manager money can buy. I have 2 reports that you might find helpful. "How to Choose and Investment Market and Minimize Your Risk" and "How to Invest in the Best Real Estate Markets and Live Where You Choose". I'll be happy to send them to you if you want.

    Mike

    1Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 824 posts · 470 votes
    12y

    Hey Trevor. I checked out Hartman's website. Overall compared to most turnkey sites I've looked at, he does a good job accounting for all the costs one should calculate so you can get a realistic idea of cash flow, although he did leave out cap ex (I would allot 5%), and I would use a 10% prop mgmt fee, since that is more the norm, and a 5% maintenance allowance.

    You said $50K was median to you. The median home price in the U.S. is $211K, so $50K is a steal. I notice he doesn't have any properties available in Houston any more, and the ones he has listed must be pretty dated cause those prices are long gone.

    I've been a long-distance investor in Indy since 2007, and I can agree with Jerry above that while the cash flow is decent and the homes are easy to keep occupied, appreciation has been basically non-existent since I bought there. I'm moving to Houston soon and have been studying that market diligently, and I think it's a nice hybrid of cash flow and appreciation, but I only buy for the former and consider the latter a bonus.

    Lastly, I can assure you Hartman is making money on these deals. There's got to be a spread between what he buys them at and what he sells them at. And if they are acting as an in-house lender, there's money being made there too in either loan origination fees or the closing costs somewhere. I hope someone on BP will chime in with any experience they've had with him so you know if they are a good choice.

    Keep us posted with your progress and what you decide to do.

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    I agree with what @Sharon Tzib says but have to disagree that appreciation has been non existent. Indy does not historically have a high appreciation rate however, in the last year, appreciation has been around 7% on average. Homes that are currently selling for low to mid $50k range were mid $40k range. @Sharon Tzib , your properties there may be worth more than you think this year.

    0Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 824 posts · 470 votes
    12y

    Well, @Mike D'Arrigo I wish in my case that was true. I just had my properties comped by my realtor - still short of my original investment. Hopefully soon though :) I was simply stating "since I bought" I haven't experienced any appreciation, however, not saying Indy never appreciates.

    It's not really of great concern to me though since I'm holding for quite a while longer. I'm certain Indy will start seeing better results as most other areas of the country are as well.

    0Reply
  • Sam B.
    Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    12y

    Trevor,

    What do you have against investing a few bucks in making a couple of trips to cash flow friendly cities, viewing neighborhoods, homes, meeting with agents, investors, property managers, other landlords, contractors, etc…and setting up your own team.

    I assure you Hartman's profiting off whatever "service" he is providing. You've made it into your mid-20s in one piece, through grad school and into a high paying career (top 2% earner in the US) - I think you're more than qualified to make a couple of trips and setup teams of your own in cities where you can make a solid ROI and build relatively passive income.

    My two cents! Best of luck.

    1Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y

    Wow lots of good advice. As far as having friends in the area...

    My choice (at least in this question that I am proposing) is between not investing... for now, and investing in some type of network. Memphis is one of the areas in this Platinum Properties network, and it seems like the area I prefer of those listed in the network. The friends in the area is just a bonus, albeit a small one.

    As far as him making money off the deals, I mean it would make sense that he does, it is just that I was under the impression that these are MLS listings that I could go out and buy myself for the same price, perhaps that's not the case.

    Asking this question on this forum is just part of my initial due diligence. So I hope I haven't sounded too naive so far. I wasn't planning on throwing any money at anything tomorrow. That's why I really appreciate all of this feedback.

    I'm not married to anything at this point. Just shopping for advice, so thank you!

    Trevor

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    @Sharon Tzib I didn't pay attention to when you bought in Indy. Yeah, you bought at the peak so you wouldn't have made up the loss in value yet, but it is coming back. That's the nice thing about long term buy and hold. The income still rolls in no matter what your asset value is doing unlike people who had to put off retirement when their 401K's and IRA's took a beating in 2008.

    1Reply
  • Naga A.
    Investor · Atlanta, GA · Member since 2010 · 186 posts · 14 votes
    12y

    @Trevor Lohman send me a personal message. I have some insight on Jason Hermann's turn key properties.

    0Reply
  • Ciprian L.
    Real Estate Agent · Burbank, CA · Member since 2012 · 271 posts · 79 votes
    12y

    @Trevor Lohman I bought properties from Jason. If you have questions, you can send me a PM .

    0Reply
  • Gerald K.
    Real Estate Investor · Kirkland, WA · Member since 2012 · 480 posts · 116 votes
    12y

    There's a thread here on BP concerning this topic:

    http://www.biggerpockets.com/forums/92/topics/16114-have-any-experience-with-jason-hartman-platinum-properties

    0Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 824 posts · 470 votes
    12y

    I'm really close @Mike D'Arrigo - like $5k, so there is light at the end of the tunnel :)

    But you are right on - at least this whole time I have not lost any sleep over it because I know it won't be a question of if the house will appreciate, just when.

    0Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 824 posts · 470 votes
    12y

    @Gerald K. thanks for the link to that thread.

    @Trevor Lohman I always get very suspicious when I see people singing the praises of a vendor that only have 1 or 2 posts with BP. Some companies (I'm not pointing fingers, just saying) have keyword alerts set up and when they see their company being discussed, they will create a profile on said forum just to leave a positive review.

    I would feel much better about reviews if I saw one from someone who actively participates on BP. My 2 cents...

    3Reply
  • Riley F.
    New York City, NY · Member since 2013 · 136 posts · 76 votes
    12y

    I have done a lot of browsing turnkey property sites, and I have to say that the markup takes a lot of the gristle off of the transactions, not in all cases, but in many.

    My advice to you, based on what I am doing and have found useful so far, is to choose 1 market, contact 10 buyers agents, and interview them. You can get some basic interview questions off of this site, and they will go a long way toward picking 1 - 3 to work with (each in different areas). Ask each what markets they specialize in, because each area that you're looking will have areas that very dramatically, even within 5-10 miles of one another. Then call 5 or so property managers and tell them that you are an out of state buyer, pre-approved for a mortgage, are shopping for properties and are going to need a property manager. Ask them what neighborhoods the like to rent in, what home features they like in their rental properties to keep vacancy down, and what you can expect as far as cap rate. After the conversation ask if they mind if you bounce ideas off of them OCCASIONALLY, take their name and email, and followup with a thank you note, handwritten to their office. You should ask the same of the buyers agents.

    Once you have a handle on the market, ask the buyers agents to set you up with automated MLS emails with the criteria that you've set based on the above. I would recommend focusing on REOs and HUD homes, but it's your call, you can certainly find deals on the MLS outside of those bounds. Then start to comb these emails, run comps (use Zillow recently sold, Zilpy, Padmapper, Hotpads, and Rentometer) to run sales and rental comps. You'll start to get an idea of what things are priced at in each area. Keep track of the properties that you think are worthwhile in a spreadsheet for a few months while you are getting a handle. You can use the realtors and property managers that you've contacted to verify the properties that pass your prescreen before you actually make offers.

    I wish that someone gave me the above before I embarked, because it would have saved me 3 months of trial and error. While I haven't bought a home, I've made many offers, and plan to continue to do so. This should get you started. "Building a team" sound daunting, but it's really just about relationships.

    I hope that this helps.

    5Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    12y

    @Riley F. thank you for your post. I have turn key set up as alert phrase and I have read literally thousands of posts on it. Your approach is very good and grounded in logic. I myself have been looking for over a year into buying a house in another market. I slowly developed networks in several areas and began souring Zillow and other listing sites. Upon making inquiries into several properties I got hit with many sales pitches. I ran the offers through some of my networks and was impressed at the quality of the feedback.

    All of the contacts and networks I made were done here on BP. I am actually looking into 2 markets, which is spreading my options between 2 baskets, not 1, but it is harder to keep up on both. One market is just because the network of folks is so great, the other is I like the market better.

    One small piece of advice on locations is good schools. For some reason property values and quality of tenants seem to be tied in large part to good schools. I come from a town with only 1 school district, so it never occurred to me. The next advice is take a slightly smaller rate of return and go with nicer properties. Money in war zones is great, the ability to resale is not, and costs are high. If you are reasonably careful you can get a better deal from the MLS than what most turnkeys offer you, but it is more work.

    My advice is not as good as yours as I have not closed on a property yet but I do have an accepted offer and am waiting for independent property inspection before doing final closing. I need to figure out how to show my thanks to the people who helped me out, just a note is good but I would to get them a gift card to a nice supper or something like that.

    1Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    12y

    @Trevor Lohman There are many ways to more passively reap some of the benefit from RE investing. Some that come to mind are Turnkey and notes as mentioned, but also teaming up with a HML, funding a fix and flipper, Syndications and others. There are many people that have time and skills, but the lack the funds. You may want to partner up with someone with more time.

    0Reply
  • Brant Richardson
    Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes
    12y

    Great advice by Riley F.

    Definitely in agreement with Jerry W. about schools as well. Good schools is one of my main criteria in investing out of state. The overall plan is to have a very attractive property for a nice family to move in to and stay for a looooong time. A 3/2 with a 2 car garage in a quiet neighborhood with good schools is perfect.

    Turnovers are a profit killer when you work with a property manager. You may have many months of vacancy, there is the repairs needed and property managers generally charge all or most of the months rent to place a new tenant. I see avoiding vacancy as one of the absolute highest priorities and buying in nicer areas of town that doesn't have as high of a rent to purchase ratio is unfortunately necessary. I'm talking about C+/B- areas, not A's and definitely not D's. Hopefully the income becomes equal with less headaches and more chance of appreciation than the D.s.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    In response to @samjones post, DIY is definitely NOT for everyone. Not everyone has the time or even the skills to do it themselves. Making it through grad school and having a high paying job doesn't qualify someone to make a trip to a market and set up teams. That takes a lot of work to get it right and having that "high paying job" often times doesn't give you the time to devote to doing it yourself. There's an assumption that you can save a lot of money by doing it this way instead of using a turn key company, but often times, that's not the case. First, you have to consider what you're time is worth, especially with that "high paying job". Secondly, you have to consider how much rent you are giving up while the property is vacant while it is being renovated and then marketed for a tenant. This could easily be a few months or more. Now add on the lease up fee for placing a tenant. And let's not forget the construction cost overruns that frequently occur. On top of that, you can add on your holding costs while the place is vacant which include interest, taxes and utilities. And what happens when you get construction all done and find that the rent estimate was too high? My point is, there are a lot of costs that have to be considered and a lot of things can go wrong a long the way. For someone who does not know a market very well and have experience doing this, using a turn-key company can be the safer and easier way to go and in the end, sometime less expensive. Working with a turn key company, you only have to make one right decision on who you partner with. Doing it yourself you need to choose the right real estate broker, contractor, property inspector, mortgage broker, property manager etc. Your success is only as good as the weakest link in this chain. I had a caller call in to my radio show last week that has done it both ways and he highly recommended going the turn key route. If any one is interested in hearing it and hearing why, I can send you an audio link to the show.

    My point is that if you are busy with your "real" job and don't have a lot of experience, you might want to consider a turn key. Be careful though that you're not working with a company that has so much overhead that they have to overprice their properties which is a common problem.

    Best wishes,

    Mike

    0Reply
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