How to build trusting investment relationships out of state?

39 Replies

Hey all! 

My husband and I are priced out of the Northern Virginia market and want to invest in flips out of state. We have been looking in Baltimore and Chicago.

My question for everyone is, how have you built trusting partnerships with other investors who are out of state?  I ask as there there is a lot at stake when you don't necessarily have direct control over your investment all the time.

Thanks in advance for any and all responses!

This is difficult but can be done. I have never done it but I know it is difficult when you are local. Doing it out of state has got to be tough. Flips will make it even more difficult. I would suggest going with a turnkey company. Either way you would probably visit the city several times to start building relationships.

Hi @Sidney S.

I understand your dilemma.  Northern Virginia is too expensive for me too.  Even if it wasn't, there are few deals that would cash flow.  I've looked.

I do invest out of state.  I reached out to several people on BP and talked with them.  Most didn't turn into investing relationships, but I did meet my current RE agent and PM that way.  She helped me find a general contractor. (I interviewed several) I've been out looking around my target city several times.  Make sure you meet with the person you will rely on, in person, for more than 5 minutes.  That person becomes your eyes and ears on the ground.   You'll need to make decisions based on their phone call, email or text when you can't get there in person.  

Good luck!

I've got a couple of clients in the same boat. It's hard to get started farther out from where you live. If it helps, I have NOVA clients that shop in areas closer that are MUCH cheaper. Lots of stuff in PG county is great, as well as Southern Maryland. If your'e interested in learning more about it and how this works, I'd be happy to talk to you sometime!  


Liz

I am a conservative investor and don't like to take risks but like you, I live in the DC/MD area, and realized that in order to make some money, I'd have to look at other states, hence take some risks. I will just share my experiences to date.

I always meet up with the people I am planning on doing business with, because you get a good idea of how they run their business, look at their inventory, meet their staff, if any. You also get a feel of the area you will be investing in, sometimes it sounds a lot better on paper than when you are there in person. I rely a lot on my gut instinct as well, it has always served me well. For example, if a person claims they have so many deals but is unable to show you a single property when you make the trip there, there should be a red flag waving in your head. 

I spent close to $10K in just traveling and paying fees for property tours (run out of Australia) I have traveled to North Dakota, Montana (saw the crazy rush with the oil boom and people sleeping in their cars) Michigan, Georgia, and Chicago. This was all over a period of 4 years. Hopefully you won't have to spend so much as I did, I was inexperienced back then. Still am, but now I hope I know a bit better!

Most of my contacts were from LinkedIn and various Australian Property Investment Magazines. This was before I knew about Bigger Pockets. Out of the many people I have met, and the many trips I took, I finally felt comfortable to go into a JV partnership with some one from Bigger Pockets. Don't feel pressured going into a relationship just because you made the trip out there.

It has been a learning experience for me because obviously, people have different working styles. Communication is key in building trust especially for the first few transactions. I suppose once you know the person well enough, you will not need that level of communication anymore.

The other thing that I looked for was how to exit a partnership if things don't work out. I do expect some repercussion but to what extent and is it reasonable?

Hope that was helpful, sorry if it was a bit long.

I'm in a similar boat!  Sold a propertty in Colorado;  the crazy hot market there made the sale of mine nice, but now I've got to do a 1031 exchange somewhere else; prices are too high there!  

I believe turnkey is the way to go, and some of the midwest has astounding cash flow!  Still, I wouldn't be comfortable without going there and meeting them.  Did that in Kansas City:  flew in, went to look at properties that I found on a turnkey website... mostly terrible, "C" properties and worse.  I knew there were better out there!

I was reminded on BP that the Property manager comes first.  They are your ace in the hole... if you feel you can trust them, it means everything.  Get references from happy owners.  if you cannot find a good PM, better find a new town.  When I met the PM in Kansas City that the Turnkey Company recommended, they were kind of ridiculous... really cocky and unprofessional, late to my meeting and smelling like beer!!  I am by no means a prude, but those guys seemed like TENANTS YOU WOULDN'T WANT!!  

I called the turnkey company, and they had just begun working with another rehabber;  I met him later that day, and he turnedd out great, and had a pocket listing of three decent 4plexes, that cash flow pretty well.   Plus, he recommended a different property management company who seem really good.  I doubt anyone will be as good as I want, but I think they'll be fine!

I'm still looking in multiple markets;  haven't closed on those properties yet, trying to find the best combination of cash flow and SOME kind of growth in a market.   Ohio seems to have some pretty good cash flowing properties too, and Memphis sounds very solid, though the cash flows don't seem as strong.

Good luck!


@Adam Bartomeo You've totally hit the nail on the head. It would be easier to buy turnkey but we really are pursuing the flip option since we have a trusted GC and a PM on board in Chicago as welll as a GC in the Baltimore area.

@Joseph Barbaretta Thanks for your input! If you don't mind my asking, how far out is your target city?

@Elizabeth Nourse I have been considering PG County and am not really familiar with the area so it would be fantastic to speak with you. 

@Grace Ng What types of investments have you been a part of in that 4 year period?

@Alan BrownDenver is insane right now! Good thing you were able to take advantage of it. Was your property in Denver a flip? Are you just looking at turnkeys now because you're working on a deadline?

@Mark Ainley Thank you. I will have to touch base with you for sure since I know Chicago is such a block by block market.

@Sidney S.  Its Indianapolis.  I factor travel costs into my pricing for a rehab.  My PM and GC accommodate me showing up on Saturdays and I always drive the neighborhoods while I'm out there and try to look at what is on the market.

@Alan Brown @Sidney S. The PM is such an integral part. I lined up a team in Indy that I trust before I looked even considered buying my first property there. I have a great PM, real estate agent, insurance people and a turnkey as well as flip operation I am planning on using as soon as they get the right property. I tried to buy from them but someone called just prior to me and got an amazing deal. 

I built my own team which made my experience pretty much turnkey. If you want any referrals I'm happy to share and no I don't get paid anything. 

Originally posted by @Alan Brown:

I'm in a similar boat!  Sold a propertty in Colorado;  the crazy hot market there made the sale of mine nice, but now I've got to do a 1031 exchange somewhere else; prices are too high there!  

I believe turnkey is the way to go, and some of the midwest has astounding cash flow!  Still, I wouldn't be comfortable without going there and meeting them.  Did that in Kansas City:  flew in, went to look at properties that I found on a turnkey website... mostly terrible, "C" properties and worse.  I knew there were better out there!

I was reminded on BP that the Property manager comes first.  They are your ace in the hole... if you feel you can trust them, it means everything.  Get references from happy owners.  if you cannot find a good PM, better find a new town.  When I met the PM in Kansas City that the Turnkey Company recommended, they were kind of ridiculous... really cocky and unprofessional, late to my meeting and smelling like beer!!  I am by no means a prude, but those guys seemed like TENANTS YOU WOULDN'T WANT!!  

I called the turnkey company, and they had just begun working with another rehabber;  I met him later that day, and he turnedd out great, and had a pocket listing of three decent 4plexes, that cash flow pretty well.   Plus, he recommended a different property management company who seem really good.  I doubt anyone will be as good as I want, but I think they'll be fine!

I'm still looking in multiple markets;  haven't closed on those properties yet, trying to find the best combination of cash flow and SOME kind of growth in a market.   Ohio seems to have some pretty good cash flowing properties too, and Memphis sounds very solid, though the cash flows don't seem as strong.

Good luck!

That was a great share Alan!  I wouldn't waste 3 minutes with a company that showed up late and smelled like beer (not sure if they had an office or not, but without one that would be another strike in my opinion).  Hard to believe there are companies out there that call themselves turnkey or property management companies that portray themselves as professional and still act like this.

Best of luck with the properties you invested in.   

@Sidney S.  when you say you have been priced out of the fix and flip retail market in your area .. your talking about fixing and selling to homeowners correct ? or are you talking about fixing and flipping to those looking for rentals. ( IE a boutique turn key provider).

there is a huge difference in the mid west or cash flow markets when it comes to fix and flip retail... if your priced out and think your going to move west to find those cheap properties that are usually rentals and then fix and flip them.. that in most instances won't happen.. the amount of properties that sell to homeowners these days below 100k is pretty small.. the vast majority of these are bought by investors for rental purposes.

Of course there is exceptions. but generally what I see and fund are fix and flip retail at the 120 to 200k end price... and much higher  like Texas we focus on buys in the 150 to 200k range and exits at 300 to 500  same with charleston SC and Portland were I am pretty active... 

rehabbing from afar as a civilian  IE someone who is not really versed at it is one of the riskier things you can do.. there is so much that can go wrong. even with the best intentions.   

I have to think within a hour drive you can buy fix and flips in the 100 to 200k range which is really were you need to be anyway if your going to be successful.. 

just another thought to think about. 

@Sidney S. You don't mention whether you have any experience doing fix and flips. If not, this will be very difficult and risky. You should plan to spend a considerable amount of time in the market and learning it well. Then choose an area that you know and are comfortable. If you're doing a retail flip, you will want to know everything you can about prices, inventory and days on market in the area you've selected. The biggest challenge you will have is overseeing your contractor. Even good contractors need hands on management. How are you going to ensure that they're actually showing up every day and devoting their time and attention to your job rather than other jobs where they have to be more accountable? How are you going to oversee the quality of the construction?

@Sidney - not sure why the tag isn't working for me...anyway, in that four years, I only felt comfortable to go with one. Told you I was risk averse! :) Even then, it is a JV partnership to flip a property, so I don't have to deal with property management.

Originally posted by @Jay Hinrichs :

@Sidney Stephens  when you say you have been priced out of the fix and flip retail market in your area .. your talking about fixing and selling to homeowners correct ? or are you talking about fixing and flipping to those looking for rentals. ( IE a boutique turn key provider).

there is a huge difference in the mid west or cash flow markets when it comes to fix and flip retail... if your priced out and think your going to move west to find those cheap properties that are usually rentals and then fix and flip them.. that in most instances won't happen.. the amount of properties that sell to homeowners these days below 100k is pretty small.. the vast majority of these are bought by investors for rental purposes.

Of course there is exceptions. but generally what I see and fund are fix and flip retail at the 120 to 200k end price... and much higher  like Texas we focus on buys in the 150 to 200k range and exits at 300 to 500  same with charleston SC and Portland were I am pretty active... 

rehabbing from afar as a civilian  IE someone who is not really versed at it is one of the riskier things you can do.. there is so much that can go wrong. even with the best intentions.   

I have to think within a hour drive you can buy fix and flips in the 100 to 200k range which is really were you need to be anyway if your going to be successful.. 

just another thought to think about. 

 @Jay Hinrichs We have been interested in both retail and rental flips depending on the area. We're looking at an end price of around 120K-300K depending. 

There are a few areas out here in Virginia that may be feasible. The main reason why we keep returning to the idea of working in Chicago is because we have a GC who is also looking to invest and eyes on the ground to look at potential properties. Ideally, we would like to be more involved in the flip for sure but we would need to make more contacts in our immediate area. I am certainly going to take your advice and also investigate areas that are about an hours drive out.

Out of curiousity, how long did it take before you started investing outside of your immediate area and how do you handle the process?

Originally posted by @Mike D'Arrigo :

@Sidney Stephens You don't mention whether you have any experience doing fix and flips. If not, this will be very difficult and risky. You should plan to spend a considerable amount of time in the market and learning it well. Then choose an area that you know and are comfortable. If you're doing a retail flip, you will want to know everything you can about prices, inventory and days on market in the area you've selected. The biggest challenge you will have is overseeing your contractor. Even good contractors need hands on management. How are you going to ensure that they're actually showing up every day and devoting their time and attention to your job rather than other jobs where they have to be more accountable? How are you going to oversee the quality of the construction?

We currently own one buy/hold and haven't had to do anything major with it and are looking to make this endeavor our first flip. Thanks for the advice on analyzing the market. 

We are fortunate that a likely partner in Chicago(who is also a GC) will have a hand in the oversight. I don't think we'd even attempt an investment like this otherwise.

Originally posted by @Sidney S. :

Hey all! 

My husband and I are priced out of the Northern Virginia market and want to invest in flips out of state. We have been looking in Baltimore and Chicago.

My question for everyone is, how have you built trusting partnerships with other investors who are out of state?  I ask as there there is a lot at stake when you don't necessarily have direct control over your investment all the time.

Thanks in advance for any and all responses!

Networking networking and more networking online mostly and offline when possible. If you can visit your target housing markets a few times before purchase it helps (and its tax deductible*) yet not always required. I've done mostly short-term ventures out of state. Yet establishing a 'trusting relationship' for long-term projects must be earned and its going to take time. There's no quick remedy. My coin.

Kudos,

Mary

Originally posted by @Sidney S. :

While we invested locally 1st, we started investing out of state as well.  Primarily so we wouldn't be dependent on one market.  We started investing in Chicago while living out of state; then moved to Chicago.  I was raised in Chicago so I did have a little advantage.  Our method for investing out of state:

  • Find a hungry or investor savvy realtor w/ access to MLS & off market deals.
  • Find an attorney that only does real estate- Nothing else.  Search for one that may be an investor.  They usually have a network that you can leverage.
  • Inspectors- For us the key was the independent inspector.  I don't mean the inspections completed when you purchase the property.  I mean the periodic in process renovation inspections.  Whether we paid cash or leveraged we would use the same inspectors as the large HMLs.  The inspectors provided us w/ verification of work complete before we released funds.  We included paying for inspections in our budget. The inspectors also kept the GCs on their toes.  For the good GCs inspectors were not a problem.  The bad ones would complain.  Our red flag on whether to use a GC wasn't necessarily price but whether or not they would comply w/ our process of inspecting work in progress prior to receiving payments.  
  • GCs- This is the hardest area.  Good ones are hard to find & sometimes they are good for only so long.  So we networked w/ with other investors & keep a running list of GCs. 
  • Travel- We'd pop in periodically, unannounced

Baltimore is closer than Chicago so you may want to try this in Baltimore 1st, then venture out to Chicago, unless of course you can't find deals in Baltimore.

Originally posted by @Mary B. :
Originally posted by @Sidney Stephens:

Hey all! 

My husband and I are priced out of the Northern Virginia market and want to invest in flips out of state. We have been looking in Baltimore and Chicago.

My question for everyone is, how have you built trusting partnerships with other investors who are out of state?  I ask as there there is a lot at stake when you don't necessarily have direct control over your investment all the time.

Thanks in advance for any and all responses!

Networking networking and more networking online mostly and offline when possible. If you can visit your target housing markets a few times before purchase it helps (and its tax deductible*) yet not always required. I've done mostly short-term ventures out of state. Yet establishing a 'trusting relationship' for long-term projects must be earned and its going to take time. There's no quick remedy. My coin.

Kudos,

Mary

 What types of short-term projects do you handle out of state?

Originally posted by @Crystal Smith :
Originally posted by @Sidney Stephens:

While we invested locally 1st, we started investing out of state as well.  Primarily so we wouldn't be dependent on one market.  We started investing in Chicago while living out of state; then moved to Chicago.  I was raised in Chicago so I did have a little advantage.  Our method for investing out of state:

  • Find a hungry or investor savvy realtor w/ access to MLS & off market deals.
  • Find an attorney that only does real estate- Nothing else.  Search for one that may be an investor.  They usually have a network that you can leverage.
  • Inspectors- For us the key was the independent inspector.  I don't mean the inspections completed when you purchase the property.  I mean the periodic in process renovation inspections.  Whether we paid cash or leveraged we would use the same inspectors as the large HMLs.  The inspectors provided us w/ verification of work complete before we released funds.  We included paying for inspections in our budget. The inspectors also kept the GCs on their toes.  For the good GCs inspectors were not a problem.  The bad ones would complain.  Our red flag on whether to use a GC wasn't necessarily price but whether or not they would comply w/ our process of inspecting work in progress prior to receiving payments.  
  • GCs- This is the hardest area.  Good ones are hard to find & sometimes they are good for only so long.  So we networked w/ with other investors & keep a running list of GCs. 
  • Travel- We'd pop in periodically, unannounced

Baltimore is closer than Chicago so you may want to try this in Baltimore 1st, then venture out to Chicago, unless of course you can't find deals in Baltimore.

 *Writing everything down verbatim* 

Fantastic advice. What types of investments did you start out doing in Chicago?

@Sidney S.

This site is a great place to start building relationships, and create a team.

@Jay Hinrichs Has some great advice and experience. It seems that fix and flips are a very competitive market and your exit and entry point are going to change, but investors seem to flip all over the country. We have a cheaper market here in Rochester, but the lower price homes, have very small profit margins with homes under 100k. You may want to see if you can find wholesalers and investors in your market and attend some local meet ups and get ideas from other investors in your area. If you are going to look out of state, than you would need a property management company that could oversee everything.

Account Closed and his entire team seem very knowledgeable and experienced in their local areas. They do property management and are agents. They have been posting on here for awhile and are able to provide references.