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

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

    @Riley F. I agree with most of your advice, especially about getting advice from a property manager from the start. The one thing you don't mention is finding and working with a contractor. Most properties on the MLS, especially REO's need rehab. Even the best of contactors can be hard to work with and you have to stay on top of them constantly which isn't easy if you're not there. Turn key companies have long term relationships with the same teams and will get more favorable prices and attention than someone a contractor doesn't know. The construction part is the trickiest and if it was as easy as some people make it to be, everyone would be doing it.

    Mike

    0Reply
  • Riley F.
    New York City, NY · Member since 2013 · 136 posts · 76 votes
    12y

    Certainly economies of scale are of value, but I have to say that, even with a 40 markup on construction cost estimate and the project taking 2 extra months, the numbers work. I will figure out how to manage my contractors when I get there, but in the meantime, it's all about relationships and systems.

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

    " While I haven't bought a home, I've made many offers, and plan to continue to do so." @Riley F. With all do respect, you might want to get some experience under your belt and actually do a deal before advising others that it is easy. Believe me, I work with a lot of investors that have been burned trying to do it themselves. Can it be done? Of course. Is it as easy as you say? No way. Most people make costly mistakes when they first start out and get turned off to real estate investment. That's where a good turn key company can take a lot of the risk out of it. In low cost markets, the turn key company might only be making $10K-$12K in profit. If you don't think that mistakes can cost you more than that, you might be in for a surprise. Your comment "I'll figure out how to manage my contractors when I get there" is a huge indication that you are underestimating the challenges.

    It may work for you and I hope it does, but doing it yourself is not for everyone and you need to be careful of the advice you offer without a track record.

    Best of luck to you,

    Mike

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

    Didn't mean to start a passing contest. I am just speaking to my experience so far, and may ed up failing.

    $10k on a $80k home is a 12.5% margin of error. I think there is value in learning how to do it for yourself, and if you can't do it with a 12.5% margin of error plus your calculated 8-10% return, hang up the spurs and look the S&P500.

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

    I think one of the major questions about whether to go with a turnkey company is how serious you plan to get with real estate? If your thinking along the lines of "I want to diversify my investing and get a rental unit, maybe another in a year or two", then turnkey would make since. If you're thinking "Real estate is my game and I'm going to make my stand in market X. I'm going to grow this portfolio to 20, 30, maybe more", then you need to learn that market and set up the team. It would be worth the time investment to learn and network and maybe make mistakes right from the start.

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

    @Brant Richardson you've hit the nail on the head. If you're going to make real estate investment your business, then you need to treat it like a business and learn how to do this, but if it's part of an overall investment portfolio or a source of some extra income, most people are too busy with their lives, careers, families etc to devote the time it takes to do it right.

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

    @Jeff Greenberg Can you tell me what an HML is? Also I have heard of Syndications but just assumed that was out of my league. Thank you for that advice I will look into those investment vehicles tonight!

    @Riley F. That is great advice as well, thank you. I think I'll start with studying some markets first and then possibly narrow down and implement your plan.

    Thanks everyone, this is great!

    0Reply
  • Jeff Greenberg
    Real Estate Consultant · Camarillo, CA · Member since 2010 · 2k+ posts · 1k+ votes
    12y

    An HML is a hard money lender. HML are usually used for a short period of time less than two years. There are usually point 3-5% up front and 8-15% interest. Your deal needs to be strong with a quick turn to make the numbers work.

    A syndication is basically the pooling of investor funds for some type of business endeavor, where the success or failure of the business is solely dependent on the sponsor. The way we form a syndication(private placement) is to set up an LLC and sell shares of the LLC to investors. The LLC then purchases a property. The manager of the LLC(sponsor) manages all of the business of the LLC and property while the investors get their share of the returns, but no responsibilities or liabilities beyond their investment. We find that people in a similar situation as you, like the idea and the returns from RE, but really don't have the time that it takes to be successful. High earners, usually don't want their hard earned money sitting on the sidelines, but don't really want another job. I brought up syndications as one option as to how you can be a passive investor and grow your funds until you are ready to be a more active investor.

    0Reply
  • Eric Black
    Rental Property Investor · Where we are parked · Member since 2013 · 584 posts · 178 votes
    12y
    Trevor Lohman I listen to Jason's show and while I haven't purchased a property through his company directly I have bought properties using the teams he has in some areas. PM me and I'd be happy to give you my input. And no, I don't have any other affiliation with him or his company.
    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y
    Jeff Greenberg Yes syndication seems like it is something that I want to look into. Actually it sounds perfect. Thank you for taking the time to explain it to me. Do you need to be an accredited investor to participate? I know they may be changing the requirements soon but as of now I don't believe I qualify. I'm in danger of straying from the original topic of this thread but does anyone have any recommendations on how to locate real estate syndicates? I imagine it must be more than a series of google searches...
    0Reply
  • Jeff Pollack
    Real Estate Investor · Redwood City, CA · Member since 2012 · 272 posts · 399 votes
    12y

    Hey Trevor,

    Kudos to you for looking to invest in real estate and doing your due diligence. I have not bought from Jason, but have met and spoken with him about a year ago when he talked at a local REIA I attend. Knows his stuff and seemed like a good guy, but that's all I can really say.

    I do know something about turn key properties and long distance investing. I live in the SF Bay Area and bought my first two properties in Dallas Fort-Worth from a local turn key provider about 2 1/2 years ago. After that I started building my own teams and doing it myself and have bought about 20 more properties in DFW and the Atlanta Metro, selling some as turn key investments to buyers in my area. Buying out of state can be great for someone working a day job who lacks the time or interest to do the heavy lifting. Just make sure to heavily vet whoever you are considering buying from. Not just the turn key provider but also and especially the management company. That is where the rubber meets the road. Your numbers can look great, but if you have lousy management you'll never hit those numbers and have nothing but headaches. Ask to speak with references for the turnkey provider (ones who have owned a property longer than a few months) and ask the turn key provider to let you talk directly to the property manager. There is a laundry list of questions you need to ask the PM and can find good lists just by Google. Then ask the property manager for at least 3 references for other out of state investors who have worked with them for at least a year and each have multiple properties. You do not want an accidental investor (e.g. person who could not sell their primary residence and decided to rent it) as a reference. They don't have enough experience to be all that useful to you.

    As others have mentioned you really want to try to buy in good areas with good schools. And "good" can be defined as academically good, or it can be a school with a great sports program that everyone wants their kid in. Good schools with help limit your turnover and nothing kills your cash flow like turnover. The cash flow may not be as great on paper in these better areas, but you'll come out ahead with less turnover, lower maintenance, and better appreciation.

    Happy Hunting!

    2Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    I agree with @Jeff Pollack

    @Jeff Pollack

    0Reply
  • Trevor Lohman
    OP
    Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
    12y
    Jeff Pollack Wow Jeff that sounds like some great advice, thank you. I hope you don't mind me using that post as an instruction manual! Thanks again, Trevor
    0Reply
  • Jeremy Roll
    Real Estate Investor · Los Angeles, CA · Member since 2013 · 24 posts · 31 votes
    12y

    Trevor,

    First of all, it's great that you're focusing on investing at a young age, as nothing beats time and compounding for future wealth building. So, no matter what you decide makes sense for you, you're already ahead of the curve from my perspective. I started when I was 28 and if I could do it all over again then I would go down the exact same path but at a younger age (not that I'm complaining, as I realize 28 isn't too bad).

    I have been a passive investor (Accredited) in syndications since 2002. Once I realize that I wanted to go down the cash flow path, I rotated all of my money out of stocks and bonds into cash flow (mostly real estate but other things as well) and the cash flow eventually got me out of the corporate world in 2007 and I haven't looked back. Now all I care about is continuing my passive cash flow stream so I can stay out of the corporate world forever.

    I think many people here have been smart to point out that deciding whether you ultimately want to be "active" vs "passive" will essentially dictate which path(s) might make sense for you. When I say "active" I mean someone who will buy SFRs or other properties, take direct title to the properties, and maintain full control over them, similar to what most people who are on BP do as active investors. When I say "Passive" I mean someone who invests in managed opportunities (ie. syndications, joint ventures, etc) and gives someone else control over the day-to-day management and decision making. I chose to down down the "Passive" path originally because I was too busy at work to do anything on the side and almost 13 years later it's still proving to be the right path for me.

    My suggestion is to consider whether you want to be "Active" or "Passive" and then explore the paths that exist down whichever makes sense for you.

    And, to answer one of your questions, you do not need to be an Accredited Investor to participate in some syndications (some allow Accredited Investors only while other allow Accredited and Sophisticated Investors).

    On a final note, I would be happy to help you on the Passive side in terms of questions, etc. If that's something that makes sense then feel free to send me a message with your e-mail and we'll connect directly.

    The way I see it, you can't go wrong with any path as long as you educate yourself, take it slow, do your due diligence for each opportunity, and keep at it, as time is your most powerful wealth building tool. Slow and steady wins the race in my world!

    Good luck!

    Jeremy

    1Reply
  • Linda L.
    Monterey Park, CA · Member since 2012 · 56 posts · 3 votes
    12y

    A good story to from someone else' experience on what to watch out for..

    http://www.biggerpockets.com/forums/311/topics/113342-my-turkey-disaster?page=1

    0Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    12y

    @Trevor Lohman -

    You have a very nice little forum thread going here! Congratulations on jumping into the real estate investing game and I will say you will probably find BP one of the best resources as you learn more. I know Jason Hartman, but do not work with his group right now for no reason other than we move our investment properties very quickly and it would be unfair to have a company like Jason's list them on their site only for them to not be available. I have not heard anything negative about his company.

    I will say though, that you have gotten some really good info. on this thread about how to go about researching and deciding on a good market and even quality team. @Riley F. may not have completed a deal yet but that does not mean his advice should carry any less weight considering it was pretty damn good. Plus you have some really good people very close to you in @Mike D'Arrigo and @Al Williamson who have some experience and I'm sure they would be willing to help make sure your pointed in the right direction.

    One piece of advice though. Just make sure before you purchase a property through a promotion company that you do a good thorough screening yourself of the provider. The promotion companies have a lot going on and do not have boots on the ground in the cities with the companies they promote. Things can change quickly and you need to make sure you have a good working relationship with the provider - NOT the promoter - if you want to have a successful passive investment experience.

    I'm going to be in the San Fran/San Jose area mid February meeting with and even hosting a couple of small investor group sessions. Feel free to reach out if you'd like to meet and I'd be happy to help in any way I can to make sure you get started in the right direction.

    Chris

    Podcast Guest on Show #224
    REI Nation4.577 Reviews
    WebsiteView Page
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  • Wes Eaves
    Real Estate Broker · Brandon, FL · Member since 2008 · 283 posts · 64 votes
    12y
    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

    @Mike D'Arrigo Would you mind sending these reports to me? I'd be interested in reading them. Thanks.

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

    @Mike D'Arrigo I wouldn't (and didn't) advocate renovation projects from afar. However, purchasing rent ready homes off the MLS, with the assistance of a good agent, in solid neighborhoods (read school districts) and interviewing your own property management team (in person) is not difficult. Meeting with a few different investors and contractors while you're in town, doing your due diligence, isn't difficult either - and should be a no brainier, whether you're purchasing "turnkey" or on your own.

    @Trevor Lohman I've done (and still do) all of the above from more than 2700 miles away, working a hectic 70hrs/week without much issue. It's not mentally challenging, just takes a bit of time - but as I mentioned before, I don't think you'll have any problems doing it. You don't need to buy into some special network or pay a "turnkey" mark-up to achieve the returns you're after.

    If you come in all cash, you can even pick-up homes at a discount and make an instant (paper) return on your investment.

    I don't have an LLC, website, radio show, etc...just sharing what I do and what works for me.

    Good luck.

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

    Hello @Sam B. , and the rest.

    Trevor, thanks for starting this post. It has been interesting to follow and discussing this topic is important.

    Sam, I'm up in Kirkland. Nice to see another local investor on BP. You bring up a good point that it is possible to do this by building your own team. Not sure in the end how much you would save doing it on your own or if you would end up with a better result - it would seem to take more up front time and travel costs. Turnkey companies have relationships with teams they work with so they may be able to leverage them for better deals, and I would imagine some may even do a more thorough job prepping the property to be rent ready. That being said, that doesn't mean they would be passing on a better deal to you because they need to get paid for providing this service. In the end, whether you build your own team or go with turnkey type set up, you would still need to do your due diligence to make sure those teams in place have your best interests at heart. Maybe @Chris Clothier could comment on this, but I wonder how involved the turnkey company is after the sale? Once done, are you basically out of the picture and the buyer then works with the property manager in place, or are you still in the background to help out if the buyer runs into some problems? Does the buyer deal directly with the property manager that was put in place? Do they sometimes remove the property manager in favor of another? If so, would that mean at that point they are on their own? Just wondering what the process is and whether or not there is a standard way turnkey companies operate of if they all have their own philosophy on this.

    0Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    12y

    @Gerald K. Great comments and questions. Toward the end of your comments you said something that is really the biggest problem for investors out there, especially on boards like this - there is no uniform definition or business set-up for turnkey companies.

    For us, our entire business cycle is built on customer experience and relationship. So we develop all of the touch points for a property and an investor in house. We find, renovate, market, lease and manage the property from beginning to end - provided that the client wants to use our management company. For us, we never want to lose touch with that client because much of our message to investors is about building a portfolio and developing a multiple property approach to your investing. A client that wants to build a multiple property portfolio is our ideal client and every service and idea we have and develop as a company is toward the goal of attracting that client.

    IMO, that is the way every TK company should be, but that is like saying every car on the road should be a ford or it can no longer be called a car. Uniformity is not going to happen. I also think that is good. It is allows investors to see differentiation between companies and that is exactly how we have grown so fast.

    Whether an investor wants to build his own team, invest in town, invest out of town, by turnkey or some variation of all these mentioned, the decision for what is best for an investor has to be made in the investors mind and not by what is available. In other words, if an investor really enjoys the process and building relationships with vendors and reviewing properties...all of the hand-on things, then they absolutely need to avoid TK because the process of no involvement will drive them nuts. Same is true for the opposite. If an investor is not a real hand-on person or have plenty of other projects to keep them occupied, they should not take a DIY approach. It will end badly too. Neither is right nor wrong per se - but both are right or wrong for different people.

    As for cost of buying TK. You will get what you pay. There is absolutely a premium paid and as an investor, make sure that the services and touches provided after the sale make that premium worth while.

    Podcast Guest on Show #224
    REI Nation4.577 Reviews
    WebsiteView Page
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  • Ken Lau
    Rental Property Investor · Oakland, CA · Member since 2012 · 28 posts · 17 votes
    12y

    I've purchased a couple of properties from Jason Hartman's network. With his company he works with local companies to find and sell property. So it really depends on which of his recommended cities you plan to buy. I've spoken to three of the vendors he uses in three different cities and definitely some are better than others. They varied quite a bit. I flew out to meet a couple of them and that helped a bit to ease my mind about who I might be buying from. So even if you are ok with Jason Hartman's company you might not be that comfortable with the local company he uses.

    Overall I have been happy with the properties I purchased. I have no clue if he makes money on my purchases, and as long as I am ok with my own evaluation of the property it really doesn't matter to me.

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

    @Sam B. that's great that it works for you. My point is that it doesn't work for everyone. Some of my best clients have extremely busy work and personal lives and travel constantly. They don't have the time to devote to doing it themselves and are happy to work with someone that can do it for them. The fact that I have an LLC, website and radio show doesn't mean that I am not more than willing to help people out on BP and offer my advice where I can. I take pride in the fact that I have probably steered more people on here away from potentially bad deals than I deals I've done here.

    Best of luck to you.

    0Reply
  • Vanessa Brown
    Residential Real Estate Broker · Washington, Washington D.C. · Member since 2014 · 44 posts · 37 votes
    12y

    This has all given me a lot to mull over. Thanks for all the input.

    0Reply
  • Brian Ortins
    Real Estate Agent · Beverly, MA · Member since 2013 · 353 posts · 93 votes
    12y

    When I began researching out of state investing, I reached out to @Adam Gerig in the Fort Wayne, IN area. He is a property manager who was very helpful in explaining the pros and cons about his market, and what to look for when working with a property management company. Disclosure: I have not invested with him or out of state at this point.

    1Reply
  • Sam B.
    Rental Property Investor · Houston, TX · Member since 2013 · 476 posts · 294 votes
    12y

    @Mike D'Arrigo Absolutely, cheers Mike.

    A lot of good info and different views in this thread, a good read.

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