OOS Team Building Specifics? Info/Advice/Warnings?

16 Replies

I'm new to BP and have been absorbing a lot since. One of the things I keep hearing about regarding out-of-state investing is making sure you build a team you can trust. With respect to the Core-4, as I heard a podcast call it (Lender, Agent, Property Manager, Vendors), representing the 4 groups of people you need to have on your team in whatever market you are operating in. What I haven't heard is specifically about how to go about determining if you can trust any one of these given people. If I'm in Los Angeles and let's say I'm looking at starting my OOS investing in, say, Kansas City, I call an agent first, I suppose, to get a conversation started about properties and areas, who might then lead me then to a lender, and then perhaps a property manager, then vendors, etc. But, being new to OOS, all I have to go on is basically phone conversations and gut feel.

Does anybody have a list of specific questions that should be asked of any one (or all) of my core-4. And more specifically, are there any specific answers or things that are red flags when talking to one (or all) of them? Because clearly any one of these people is generally going to tell me what I want to hear at least until they get their money out of me.

This is all in the interest of not getting completely screwed my first go-round.

Thx in advance for any thoughts/experience.

@Matt Hish - Honestly, those key people are important rather you are local or not.  My biggest suggestions are:

1) Get recommendations from investors and others in the area you want to own.

2) Visit early and often (location and your properties)

3) Go to local REIA meetings to network and learn.

 Anyone can answer your questions "correctly" but having a proven track record (or not) speaks volumes.

BP is also a great source of info once you need specific recommendations.  There are also many fantastic forum posts about the pros/cons of OOS.

Hope this helps! :)

Relationships take time build, don't give anyone the keys to the castle right away. Small tasks are good way to scale up trust and verify that the person you're working with shares the same standards as you do.... and if they don't you can learn what it is you didn't like about it. Lastly, good people know good people. What I mean by that is if an investor is doing well.... they likely have a solid team in place. The same with a good PM or a good realtor/lender. 

Those that can close deals surround themselves with like minded people.

@Matt Hish It depends on how you are planning to buy. If you're going to buy something that needs work then you also need a good contractor which is a key part of your team. If you don't want to buy a fixer, you might want to consider going the turn key route. Turn key is good for OOS investors that are busy with jobs and families and want to be more passive. One advantage of working with a turn key company is that you only have to get the turn key company right as opposed to finding the right realtor, contractor, property manager etc. You get any one of those components wrong and it can make or break your investment.

@Matt Hish To add to what Mike & others have said, I would  say even if you go the turnkey route, you want to do thorough due diligence of the team on the ground.  That includes a visit before you close on the first deal to get a face to face, to evaluate the quality of their rehabs, their operations, their property management and get a sense of who these people are.  If you move ahead with that team, build trust over time, and get as much input from those who have worked with them as you can.

I think It all depends on your ability to transact.. and to have realistic expectations.

when your talking mid west or out of state most of the time your talking 120k and under properties

so the dollars being earned by your power team are not high to begin with.. so if you have the ability to scale quickly and can prove to your power team that you do.. your ability to attract good talent will be easier.

if your going to buy one home and your just starting.. and need a ton of hand holding.. its going to be a little more difficult as all those vendors only have one thing to sell and that is their time.

its one reason turn key works so well in todays market. you can be a buyer of one home and get very good service from most turn key companies. And you can spend your time and due diligence money on home inspections and physical inspection.

as for lenders there are certain lenders that specialize in these assets.. and do volume 20 to 50 loans a month. those are the guys you want.. Its their niche..

@Matt Hish lots of good advice on this thread already.

I’ve listened to the podcast you’re referring to and it can certainly be done but one thing he doesn’t mention really is the rehab portion. Rehabbing from a distance is going to be hard (find a good contractor is difficult) and it’ll make your investing extremely riskier.

Most turnkey companies are only making 10-20k on sale so do you want to risk all your cash and time on a rehab Incase something goes wrong?

I’ve built teams in two different cities (Cleveland and Memphis) using a combination of turnkey companies and local realtors and PMs. I visited both places and bought shortly after that. It can be done but I haven’t gone the way of finding or using a contractor yet long distance. I just think a lot can go wrong in that situation.

Best of luck

@Matt Hish to add one more thought to what I said earlier. I think the best way to vet the person or company you want to work with is to get referrals, either from them or ideally other people.

I’ve done this and so far it’s worked out well. Some people will tell you you can’t appease everyone and that sometimes good companies will have bad things happen. In my experience this isn’t necessarily true, meaning not enrytbing is perfect but a good company will try to make it right and that most of the time you’ll be hard pressed to find bad reviews about companies who go out of their way to make clients happy.

Originally posted by @Matt Hish :

I'm new to BP and have been absorbing a lot since. One of the things I keep hearing about regarding out-of-state investing is making sure you build a team you can trust. With respect to the Core-4, as I heard a podcast call it (Lender, Agent, Property Manager, Vendors), representing the 4 groups of people you need to have on your team in whatever market you are operating in. What I haven't heard is specifically about how to go about determining if you can trust any one of these given people. If I'm in Los Angeles and let's say I'm looking at starting my OOS investing in, say, Kansas City, I call an agent first, I suppose, to get a conversation started about properties and areas, who might then lead me then to a lender, and then perhaps a property manager, then vendors, etc. But, being new to OOS, all I have to go on is basically phone conversations and gut feel.

Does anybody have a list of specific questions that should be asked of any one (or all) of my core-4. And more specifically, are there any specific answers or things that are red flags when talking to one (or all) of them? Because clearly any one of these people is generally going to tell me what I want to hear at least until they get their money out of me.

This is all in the interest of not getting completely screwed my first go-round.

Thx in advance for any thoughts/experience.

 Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

@James Wise   perfect advice.... I just cringe when I see people thing they can buy cheapest priced urban core and they expect them to perform in a consistent manner.. but there are those that tout those as solid investments. and for locals many make it work.. but for OOS your playing Russian roulette with your finance's.

Originally posted by @Jay Hinrichs :

@James Wise  perfect advice.... I just cringe when I see people thing they can buy cheapest priced urban core and they expect them to perform in a consistent manner.. but there are those that tout those as solid investments. and for locals many make it work.. but for OOS your playing Russian roulette with your finance's.

 But Jay.....My spreadsheet dictates that I must earn a minimum cap rate of 19.

@James Wise   6 am in in the morning here my brain wont let me top that one...

or the one I really like.. is   the property wont meet my CRITERIA  what ever that is..

:)

Originally posted by @Jay Hinrichs :

@James Wise  6 am in in the morning here my brain wont let me top that one...

or the one I really like.. is   the property wont meet my CRITERIA  what ever that is..

:)

 Yea that is a good one. Some folks have a real hard time understanding that they can only buy what's available. 

@Matt Hish There are already great tips to keep in mind while you plan OOS investing from @Jay Hinrichs and @James Wise here.

I will share you how I build the team OOS.

1. Studied turnkey companies nationwide. Interviewed them and asked them lot of questions. I used a template of questions by a fellow BP blogger. You can find them here.

http://www.cashflowdiaries.com/31-questions-to-ask...

2. I reached out to local investors via BP in the market i was interested. I got the idea about the street and neighborhood to stay away from. Cross-checked it with other investors/wholesalers.

3. Narrowed down to three markets. Visited them in person. Met turnkey companies, local RE agents, wholesalers, attended local REIAs. It became quite apparent which market I wanted to be in after the visit. I realized that I would like to take the risk of building my own team vs going turnkey.

4. Local investors/wholesalers had few RE agents recommended. Reached out to each one of them. LIked one better than rest who acted as a property manager for first couple of properties.

6. Bought two proeprties. First one through Estate sale and other one through HUD. Second one needed rehab. Got few recommendations about the contractors from Local reputed wholesalers/investors.

7. Picked one who was licensed, insured and bonded. Checked the references and his previous work. Did everything in the budget but I felt it was still expensive and I had paid more than I liked on material and labor. I guess you can only get better about those aspects with time.

8. Gradually kept buying more distressed proeprties and networked with local contractors, property managers, wholesalers. Lot of them from my market are on BP. If you are interested in kansas city, tons of people from BP here will be able to guide you.

9. Now I flip property remotely with help of trusted project manager and contractor whom I have worked on almost all of my rentals.

10. The system is not perfect but it gets better with experience. I am into my second year and see tremendous difference between how I used to do things when I got started vs now - 7 properties later.

I still use more than one property manager as I am evaluating which one fits better. Everything keeps evolving once you take a plunge. 

Good Luck!

Great inputs @James Wise and @Jay Bhatt . After investing in Seattle area, me and my partners are exploring markets to build our teams since it's getting tougher and tougher to get decent deals in our markets. Any obvious things to keep in mind while choosing one over other and how to get their references especially the ones not being used by folks on BP?

Jay Bhatt, Thx so much, you laid out more or less exactly what I'm trying to hear from people. I've read lots maxims, circumspection, and generalities around various subjects in the short time I've been on BP, so it's nice to just see simple specific 1-2-3 clarity from someone who's already done it. 

Wise, D'Arrigo, Hinrichs, Fried, Heimsoth, et al. (sorry, I haven't figured out how to @copy people to refer back to). thank you all for your points as well, I can hear the years of experience in your responses and I know my noob-ness shows.

With a family and several jobs, I'm now considering the idea of turnkey, since I probably don't have the faculties for managing multiple OOS projects (or the $ for taking flights/hotels/trips to a midwest city for days to due diligence everything), and what I'm really after is cashflow.

Originally posted by @Anup Shah :

Great inputs @James Wise and @Jay Bhatt . After investing in Seattle area, me and my partners are exploring markets to build our teams since it's getting tougher and tougher to get decent deals in our markets. Any obvious things to keep in mind while choosing one over other and how to get their references especially the ones not being used by folks on BP?

 If a company is doing a large enough volume there should be plenty of references & material on them all over the internet. Doing business across state lines with a smaller outfit can work out great but it can also be an added risk as their business has not yet been proven.

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