I did not go out to Birmingham, Atlanta, Indianapolis, from living in Seattle until I have a few properties. The key is finding the right people to work with which might not be turn key providers but property managers first. Let me know if you have other questions.
Hey Jason, welcome to Biggerpockets!
I'm personally an out of country investor, from Calgary Alberta Canada. How we go about reviewing properties that we cannot personally walk, is done with our teams we have setup in the market we invest in. Between wholesalers to find us properties, general contractors to give SOW, property management companies to review neighborhood location and ARV, as well as projected rents, and home inspectors to review the property for us.
Our first steps (Assuming we have teams already established) is to review the subject property with our property management company. If they like the neighborhood, and can confirm the rent quote given to us by our wholesaler, we place an offer to get it under contract. This step is also very important, as you can really see true colors of the wholesaler you're working with and if they are providing you with accurate information. If we find repetitive errors, they are red flags telling you not to work with that wholesaler.
Once we are getting it under contract, we ensure we can opt out of the property by placing a contingency on the inspection report and SOW that will be pulled by our contractor and home inspector. This allows us to walk from the deal if our findings does not come back the way we want it to.
Now that it's under contract, we get our home inspector to go in immediately (Giving him warning that you may have a home needing inspection before hand is great) as well as getting our contractor to walk the property and draw up a SOW.
*Pro tip - if you are able to walk the property before getting it under contract, line up and meet your property management company and general contractor at the home with you, to review and walk the property - this gives you a better idea of the home, and rough numbers, as well as giving your management company a better idea for the quality of rehab and better communication in general to further help with qualifying rents..etc.
After you have all the information, purchase price + rehab, compared to monthly rent minus expenses, you can see where you stand realistically. At this point in time, i always assume that these numbers are best case scenarios, and i will most likely be just under the returns i've just calculated +/- 10-15%. After considering everything, if the deal still looks great, and i know the ARV for refinancing possibilities, than i close the deal and begin rehabbing.
My actual process is very similar to this, depending on the situation. Personally, we work with a large personal network of investors and connect them to our teams we use in the markets we invest in. By doing so, we increase the volume of work for our teams, and straighten our relationships with the companies we use - further increasing our personal security through great contacts, and pass the benefit onto our investors. Through this, we have been able to scale into multiple markets including Dayton, Memphis, Montgomery, Toledo - and expanding to Indianapolis, Cincinnati, Chicago, and Cleveland.
Feel free to personally reach out to me and continue the conversation! I love networking, and talking anything real estate related.
Best of luck!
@Jason Lam recent photos are key. You don't want to only see photos that were taken when the property was marketed to be rented. Often a teammate is going to have trouble entering a property if it's leased, but at the very least you should be able to get new photos when the inspections happen. Really all you're doing with these photos are making sure there's not tons of damage. I'd ask the team mate to take a decent amount and to especially document any areas of damage. A decent amount of damage is nothing to be afraid of.. after all if it's a good deal and hasn't been flipped, doing a solid make ready when tenants move out is to be expected.. but you just want to make sure the property isn't at a point that exceeds what you'd expect to do to make it "make ready" if you've got excessively damaged floors, holes in walls, doors off the hinges, broken windows.. that doesn't mean it's not a deal, but it does mean you might want to negotiate the seller taking care of those cosmetic items when normally you'd only ask for mechanical. Or, if fixing those items still makes the property a deal, at least you know what's in store instead of it being a surprise!
The real thing you'll want to look at is the inspection report. I'd ALWAYS suggest scoping the lines especially if there is no tenant to tell you if they've been backing up or not. HVAC and hot water tank you can replace with 3k and they'll last you 15 years.. a broken line can cost 10K and is a reason to walk from a property or demand the repair before close.
Hey @Jason Lam Welcome to BP. Your question was one of my biggest fears when deciding to buy out of state! I mean at first it sounds crazy, why am I buying a house that I have never seen and don't plan on visiting anytime soon? My parents kept giving me these weird looks!
I eventually bought an investment property in Memphis. As my first investment property, I decided to go with a turn key provider for the reasons that @Charles Carillo mentioned - the entire system, including property manager was in place. This helped calm my fears about out of state investing. I was willing to trade some return on investment for convenience and peace of mind.
What convinced me to go forward was doing due diligence on my turn key provider. If you go with a turn key provider it's almost like you have to trust (and verify) them more than the home you're buying. The turn key provider I used sent a detailed home inspection report with photos, so I could know what I was getting.
You could also try companies like We Go Look for an independent look. Good luck!
@Tim Harwick thanks for the info. How did you do due diligence on the turnkey provider? What questions did you ask? Did you get references for other investors?
If you are concerned primarily with the quality of the home, then first thing you should do is make sure you are working with a reputable turnkey company. Get a 3rd party inspector. Any big issues that come back, you can always negotiate with the seller. Also, get a 3rd party appraisal to make sure you aren't over-paying. I bought turnkeys sight unseen as well and they have been great investments so far. Technology has made doing DD much easier nowadays.
@Jonathan Oh thanks. My biggest fear is I’m relatively new to this so I have no idea what I’m doing when it comes to psychical inspections and all the things to look out for. I can run numbers to find potential deals but after that when it comes to inspection it’s out of my realm.
You just have to look for transparency. Disclaimer: We're a very successful TK company in Indy. We actually do TWO 3rd party inspections... the first one is when we acquire the property... we want our rehab teams to see that, and make sure that they are addressing all of the issues. The second one is when the rehab is done... we want to make sure we didn't miss anything (we put a warranty on the product), and more importantly, we want the investor to know the exact condition of the property they're buying. We show all contracts up front, research all the taxes, get an actual insurance quote, show scope of repairs, before/after pics, etc, etc. Essentially, we make it pretty easy for someone who can't come see us to have all of the information they need to make an intelligent decision. As such, we have plenty of overseas investors.
Be very careful of “Deals” that people are trying to sell you.
The challenge with you being non-local to an area is you are 2 dimensional and only as good as your team on the ground.
I recommend before you buy anything make sure you know what your end goals are for the reason you are investing once you know what your end goal is then you create a strategy to achieve that goal.
Once you know the strategy then you find the properties that fit.
Once you know what a “deal” is to you and you know your business plan... then you find the team that aligns with you and your business model.
We work with a lot of investors, of the 1,000 properties we manage 50-60% are out of state / out of country investors. The key to making this work in my opinion and why we are so successful is we make sure the investor’s goals and strategy are aligned with our’s.
Once we know what your goal and strategy are then we can easily identify what deals match.
Make sure you do this, ask for a strategy session before you do anything is my belief... good luck
@Steve Rozenberg can you point me toward any resource to help build a strategy? I think I have a one but I could be completely wrong and it may not be realistic.
End goal: live a lean lifestyle solely on passive income and continue to use my active earned income to grow passive income.
Path to get there: buy 1-2 properties a year for the next 5 years. One that is complete I’ll reevaluate where I’m at and decide on the next steps but overall it’s going to be grow passive income.
I am not looking for an active income stream so house flipping is not on the road map. I’m looking for turnkey to begin with then maybe get into light rehabbing to turn the rentals into a higher cash flow property.