Out of State Investing Checklist

24 Replies

  • There are a lot of moving parts when purchasing a rental property. A good real estate professional who is familiar with the area will be able to help you navigate through this list.
  •   Why did I create this list? A few years back I built a new home as a rental and afterward found out a small portion of the lot was in the flood zone. If I would have used this checklist it would have saved me a lot of time and some money. 
  • 1. Is this property in an A, B, or C neighborhood?
  • - Since everyone has their own definition this will vary. 
  • 2. What is my cashflow?
  • - How much $$ is left over after ALL expenses? (don't forget to account for vacancy, future repairs, and PM fees)
  • 3. What expenses were accounted for in the proforma?
    1. - Vacancy __ % 
    2. - Future Repairs ___% Built before 1985 8%, After 1985 5%, 2000 and newer 3%
    3. - Taxes (Where was this info sourced and how does the municipality calculate future increase)
    4. - PITI Principal, Interest, Taxes, Insurance (if you are using leverage)
    5. - Property Management Fees – included but tax-deductible this why some sellers may quote cash on cash before mgmt. fees.
    6. 4. Is the property vacant or occupied?
      1. Vacant – How many leads does the property manager have on this home, and what measures are being taken to find a quality tenant? Is the target rent achievable?
      2. Occupied – When does the lease begin and end? What can you tell me about the tenant? How much of a security deposit is being held, and how do you determine if it or a portion of it is returned?
      3. 5. Detailed Scope of Work that shows all work being performed on the property.
        1. Your big-ticket items are 1. Roof, 2. Mechanicals 3. Trees 4. Flooring – hard surface flooring in high traffic areas and wet areas.
          1. 6. What appliances are included? & is there a Washer/Dryer Hookup?
          2. 7. What amount and type of crime is in this area?
          3. 8. Weather conditions?
          4. - Average snowfall, high wind or tornadic activity, costal concerns?
          5. 9. Copy of a sample Purchase and Sales Agreement - If I'm considering any RE purchase I want to review the paperwork thoroughly during the due-diligence period and possibly have my attorney review.  What contingencies are in the agreement?
          6. 10. Copy of a sample property management contract - what fees are charged and what commitments do I have to the PM company?
          7. 11. Copy of a sample lease - I want to see the lease my tenants will sign with the PM company managing my properties. 
          8. 12. A complete step by step game plan to purchase - Any realtor or company selling homes to out of state investors should have a well-defined process of working with their clients. 
          9. 13. Company Bio – Who am I dealing with? How long have they been in business?
          10. 14. Photos, Photos, Photos - and videos. They say a picture is worth 1000 words. Ask for close up photos as well as the "glamor shots" I want photos that give me a look at the home "through the eyes of an investor" 
          11. - PRO TIP: take a photo of the sticker on the AC unit, google the serial number and you will know the year the unit was manufactured. 
          12. 15. Comparable sales - I want to know how an appraiser would determine the value of this property.
          13. -Comparable sales should be recent, within the same vicinity, same bed/bath count range, similar sqft range, and of the same or similar condition. 
            16. Comparable rents- what are similar homes in the area renting for?
          14. 17. What inspections will be required for this purchase?
          15. - 3rd party home inspection $300
            1. - Mold inspection $250
            2. - Termite inspection $125
            3. - Sewer scope report $250
            4. 18. What are my hazard insurance options?
            5. 19. What size is the lot?  ___ x ___ = ____
            6. *An acre of land is 43,560 - my rule of thumb is that I do not own rental properties with more than .5 acres
            7. 20. Foundation: Basement? Monolithic Slab? Crawl Space? Split level?
            8. 21. Is this property located in a FEMA flood zone?
            9. 22. Exterior construction:
              1. Brick, Vinyl Siding, Aluminum Siding
              2. Roof: Age ___ material?
              3. Windows?
              4. 23. How close is this property to major employers?
              5. 24. What shopping is available in the area?
              6. 25. What parks and outdoor features do the residents have?
              7. 26. Are there sidewalks and streetlights?
              8. 27. What type of resident will be attracted to this home?
              9. 28. Who provides utilities, fire, police, etc.?
              10. 29. Public Sewer or Septic? Public Water or Well?
              11. 30. Is the property Attached or Detached? 
              12. 31. What type of Storage is available for my residents? Closets, shed, utility room?
              13. 32. Parking: Driveway, 1-car carport, 2-car carport, 1-car garage, 2-car garage, Street parking only
              14. 33. Is there an HOA? If so, how much are the annual dues, and what does that cover?
              15. 34. What is behind the property? Another house, Commercial building, Cemetery? 
              16. 35. Preferred lenders? List of available lenders
              17. 36. Square footage? Source? _______ / Appraiser, Tax Assessor, Realtor, Current owner. 
              18. 37. Type of property: Ranch Style SFR, 2-story SFR, Duplex
              19. If you have checklist items please share in the comments below!
              20. @Stephanie Jones thank you and others for helping me with this list. 

              Thanks for sharing. This should come in handy for a lot of members, if they take the time to search and find it.

              This is fantastic! I also encourage people to do street view of the block/area to get a "feel" for the neighborhood. Are there abandoned cars in yards, boarded up windows or do you see flower beds and painted shutters? Also, zoom out far enough to make sure the home doesn't back up to something "undesirable." 

              Also I think it's important to research the school system the home is located in. In my area, there are some parts of town with decent homes and TERRIBLE public school options. It's worth knowing whether you are buying in a 1/10 district or a 9/10 district. Greatschools.com is a good source for this.

              @James Wachob This has been an incredibly useful tool when working with both new and seasoned investors. It's easy to forget the right questions to ask when you are making the choice between multiple properties. If anyone would like a pdf copy of this checklist, please feel free to reach out to me. My contact information is below. 

              @James Wachob This is a good list for agents as well. Particularly those who are not accustomed to working with investors. Here in Cleveland there are so many who simply have no idea how to add value for buyers who don’t plan to live in the home. I could tell some stories about agents working with investors and skipping over some of these points...but I won’t lol!

              @Erin Dorsey Robinson I hear ya! As a Broker, I've seen the same thing. I get calls weekly from OOS investors who "need some help" with the situation they are in. Hopefully, this list will help some people avoid some of the many pitfalls that exist.

              Originally posted by @Darson Grantham :

              Whoa, this checklist is huge and could be used for any rental decision, again as long as someone takes the time to complete it.  

              Thanks for sharing!  

              Darson, You are 100% correct. If you are paying anyone a commission or if they are making a profit when purchasing a property, I'd suggest giving them the list and have them assist in the DD.

               

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