Long Distance RE process flow

24 Replies

I'm looking to see how people on BP go about looking for property and conducting their due diligence before and after making an offer. I've purchased and read @David Greene 's Long Distance Real Estate Investing (great book that helped me pull the trigger and set up my trial system) and listened to many podcast's but there are always more to learn when going through the actual process.

My current process is:

1) Analyze deals on paper and narrow down to a few to focus on. Do what ever online research I can do on the property to help with the assessment.

2) Have my agent take pictures/video of the property

3) Have a contractor take a look to estimate rehab (I pay for his time so he is willing to continue helping me)

4) Tweak numbers and obtain funds or preapproval

5) Make an offer

6) Inspections and secure funding

7) Property manager inspection

8) Close

So far this seems to work but I'm finding the process can become expensive and time consuming  if there are enough properties that don't close, especially when looking at properties that need work. Is this just the price you pay for long distance investing or are there more efficient ways to work through purchasing a property? Interested to hear what you guys do!

too many steps for out of state imo. though it depends on the market. For me, I have to have a solid bid in before 36 hours. I pay a bit of a premium to go fast, but still very profitable.

find a property sent to me that I think numbers will work

bid

contractor inspects if I'm doing delayed financing, if not, 100% blind

close

paying cash or equivalent helps a TON to move quickly. Trying to line up financing after the fact creates delays and seller weariness. I offer to close inside of 10 days and this helps.

@Alexander Felice I wish I had the guts to do that. What market are you in and what type of properties are you looking at.

I’m looking in Pittsburgh where there are lots of old houses. If I did that on the property I’m currently in escrow for I would’ve purchased a house with major structural problems that would’ve decimated my numbers. Now after having a structural engineer inspected it the seller may agree to fix it and things will be all good. Or things don’t work out, I’m about $1K in the hole from inspections, but dodge a big bullet.

@Ken D. I have to agree with @Alexander Felice . You have to streamline your process and get these offers in quicker. It will take time to build your local team and until you do that its best to be cautious like you are being now. Local investors place offers a lot and since they know the market and here they have a distinct advantage over an out of state investor. Keep doing what you are doing. Learning the market and building a good team

Originally posted by @Ken D. :

Alexander Felice I wish I had the guts to do that. What market are you in and what type of properties are you looking at.

I’m looking in Pittsburgh where there are lots of old houses. If I did that on the property I’m currently in escrow for I would’ve purchased a house with major structural problems that would’ve decimated my numbers. Now after having a structural engineer inspected it the seller may agree to fix it and things will be all good. Or things don’t work out, I’m about $1K in the hole from inspections, but dodge a big bullet.

 The first few I went slow because I was unsure of myself, really no other reason. My numbers haven't changed, the market hasn't changed, I just got more confident.

Your time and ability to execute is more valuable than the pennies you drop from running ;) Move fast, you'll pay a premium sometimes, but it's better to have a couple costly mistakes on the way to building a portfolio than it is to obsess over profitability on one deal.

You asked what you can do to become faster, you just gotta go faster ;) be fearless!

@Ian Hoover @Alexander Felice I did ask for what other people do. Although it makes me uneasy now, I like what I hear. With experience I'm sure I'll be able to pick up speed and assess/mitigate risk faster. Thanks for your feedback!

@Ken D. you are quite welcome and best of luck to you. Pittsburgh is a great RE market and a place to live and has a lot to offer.

@Ken D.

The one thing I would mention is if you are not paying all cash then have funding in place as @Alexander Felice mentioned this slows things down. As you go you will see what works and what doesn't. I have been researching for the last 3 years and have attempted wholesaling at first. I now have the funds and am actively seeking to purchase duplexes in Milwaukee for the last 2 weeks now. This much I have found out since I work a full time job- if using an agent to bring you deals make sure they have some experience and are investors themselves as they will know the market and know what makes a good deal for an investor. The new agent who just got started with investors or as a real estate agent can make you waste a lot of time going through listings that don't even match your criteria. 

All the best to you...

Jorge

@Jorge Ruiz  Both good comments. I've spun my wheels with a couple agents already in more than one market. Fortunately the lender I've been working with has pretty good turn around, but I'll probably start doing some cash buys with delayed financing.

@Ken D.

She just brought 2 more to my attention this afternoon. Doing a walk-through on both on Monday to see what offer I can put in. I have to pull off delayed financing as well. There's another strategy that I actually want to implement. Send me a colleague request and I'll give you my contact info and we can talk about it. 

Another thing I did was go to Milwaukee. I was just there the first week of April. It really helped to see what is really there and I feel it helped me solidify relationships and start new ones. 

Jorge

We have 7 properties, 9 doors in Milwaukee now.  If anyone wants input on any of your deals feel free to reach out.

@Ken D.  here are a few ideas to streamline your process, this is how we run our MKE offers.

1)  find an agent / PM that know the market and that you trust.

2) Get a daily list of deals- verify rents on rentometer. For Milwaukee we look for rents on SFR north on $900 a month. Too, check the Trulia crime map, no ware zones allowed.

3)  Have your agent do a walk through and provide pictures and feedback, unless it is s total gut job they should be able to give you a rough number for rent ready.

4)  If it looks good place an offer (you will need to have cash or pre approval in hand)

5)  if your offer is accepted do an inspection to double check for any major issues

6)  If the inspection is good then close, rehab, rent, repeat.

With our agent in MKE we are able to review and make an offer in a few days.  Then it is just a matter of confirming the inspection and closing.

The Milwaukee market is very competitive right now and any good deals will be gone in 48 hours or less so you have to be able to move FAST and still get your DD done or know you will pay an extra 5 or 10k.

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@Account Closed  

Like I said in the 2 weeks that I have been working with different realtors (they are aware that I am doing so) the only one so far that has brought properties to my attention that are even worth looking at is the one  realtor who also invest. The others send me hundreds of properties with no info other than what the mls portal provides. This is both a waste of my time and theirs and I agree with you that I don’t want them running around for nothing. 

So by the end of this week we will have looked at 3 properties from the realtor/investor vs 0 from the others who do not invest.  This has been my experience in the first 2 weeks of my RE investing. As you can see this is why I’m a bit biased. 

Best,

Jorge 

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Originally posted by @Ian Hoover :

@Ken Domond you are quite welcome and best of luck to you. Pittsburgh is a great RE market and a place to live and has a lot to offer.

From what I've seen so far I agree. I visited in December. I liked what I saw and had a great time there despite it being below 10 def F for most of the trip (mind you I've lived in Southern CA for most my life). I think Pittsburgh has a lot to offer and still a lot of potential for further growth.

Originally posted by @Bob E. :

@Ken Domond  here are a few ideas to streamline your process, this is how we run our MKE offers.

1)  find an agent / PM that know the market and that you trust.

2) Get a daily list of deals- verify rents on rentometer. For Milwaukee we look for rents on SFR north on $900 a month. Too, check the Trulia crime map, no ware zones allowed.

3)  Have your agent do a walk through and provide pictures and feedback, unless it is s total gut job they should be able to give you a rough number for rent ready.

4)  If it looks good place an offer (you will need to have cash or pre approval in hand)

5)  if your offer is accepted do an inspection to double check for any major issues

6)  If the inspection is good then close, rehab, rent, repeat.

With our agent in MKE we are able to review and make an offer in a few days.  Then it is just a matter of confirming the inspection and closing.

The Milwaukee market is very competitive right now and any good deals will be gone in 48 hours or less so you have to be able to move FAST and still get your DD done or know you will pay an extra 5 or 10k.

How do you run your numbers to place your offer? Do you assume the property is rentable and adjust your offer based on the inspection or have your agent/contractor/PM do a walk through and provide a repair estimate before your offer is placed? This is where I get hung up and feel like I'm not being efficient. I think the other steps are pretty clear and is similar to what I've been trying to do.

@Account Closed I agree that the agent doesn't have to be an investor themselves if they understand what is important to an investor. That being said there are different strategies for investing so what is probably most important is finding an agent that is on the same wavelength as you, understands what you are trying to achieve and how you are trying to achieve it. If you and the agent are on the same page it's easy to work with them and their expertise. Otherwise I've found it can be an uphill battle to find the right property even if they provide excellent advise for one strategy, simply because it doesn't work for the strategy in place (which may or may not be a good strategy).

Regarding lowball offers and chasing cheap properties in the slums, that is all relative. Often high price properties don't cash flow well. There are many markets where this is clearly the case. I think you're only wasting the agent's time if you have no intention or ability of closing. 10x $50K properties or 1x $500K property is the same amount of commission. One arguably takes more work than the other, but this goes back to finding the right agent that's on board with what you are trying to accomplish.

So today I am breaking from my own advice. Got an REO list last night and put in an offer sight unseen. If the seller accepts we will have 5 days to do due diligence and close. Will lee everyone posted on how this goes.

@Ken D.  I check rentometer for approximate rents and confirm with our Property Manager.  Or PM is also our realtor so they do a walk through and give us a rough estimate to get the unit rent ready.  They are usually pretty accurate. 

For the most part we are buying MLS deals that not overly run down.

Originally posted by @Bob E. :

@Ken Domond  I check rentometer for approximate rents and confirm with our Property Manager.  Or PM is also our realtor so they do a walk through and give us a rough estimate to get the unit rent ready.  They are usually pretty accurate. 

For the most part we are buying MLS deals that not overly run down.

I also compare various sources for market rents. It sounds like having a realtor who is also the future PM is the key. Fortunately I just found one! Hopefully things work out.

Advise is easier to give than to follow but I appreciate all of it none-the-less. Good luck on your new deal!

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Originally posted by @Account Closed , and @Serge Shukat. This provides a great example of the different type of investments strategies and how these strategies work in different markets.

As far as understanding the world of investing, I've been listening to podcasts, reading books, speaking with other investors, am actively investing/invested in RE, learning by doing, and IS THE REASON I'M ON BP. The whole point of this post is to understand how to streamline my process to waste less people's time including all those that I need help from to close on a deal. 

To bring this thread back on topic, with your expressed experience as an agent and as an investor I'd be happy to hear your methodology on efficiently assessing and closing on properties.

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