Out of State Investing Checklist
James WachobBusiness Member
Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 890 votes- 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?
- - Vacancy __ %
- - Future Repairs ___% Built before 1985 8%, After 1985 5%, 2000 and newer 3%
- - Taxes (Where was this info sourced and how does the municipality calculate future increase)
- - PITI Principal, Interest, Taxes, Insurance (if you are using leverage)
- - Property Management Fees – included but tax-deductible this why some sellers may quote cash on cash before mgmt. fees.
- 4. Is the property vacant or occupied?
- 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?
- 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?
- 5. Detailed Scope of Work that shows all work being performed on the property.
- Your big-ticket items are 1. Roof, 2. Mechanicals 3. Trees 4. Flooring – hard surface flooring in high traffic areas and wet areas.
- 6. What appliances are included? & is there a Washer/Dryer Hookup?
- 7. What amount and type of crime is in this area?
- 8. Weather conditions?
- - Average snowfall, high wind or tornadic activity, costal concerns?
- 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?
- 10. Copy of a sample property management contract - what fees are charged and what commitments do I have to the PM company?
- 11. Copy of a sample lease - I want to see the lease my tenants will sign with the PM company managing my properties.
- 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.
- 13. Company Bio – Who am I dealing with? How long have they been in business?
- 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"
- - 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.
- 15. Comparable sales - I want to know how an appraiser would determine the value of this property.
- -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? - 17. What inspections will be required for this purchase?
- - 3rd party home inspection $300
- - Mold inspection $250
- - Termite inspection $125
- - Sewer scope report $250
- 18. What are my hazard insurance options?
- 19. What size is the lot? ___ x ___ = ____
- *An acre of land is 43,560 - my rule of thumb is that I do not own rental properties with more than .5 acres
- 20. Foundation: Basement? Monolithic Slab? Crawl Space? Split level?
- 21. Is this property located in a FEMA flood zone?
- 22. Exterior construction:
- Brick, Vinyl Siding, Aluminum Siding
- Roof: Age ___ material?
- Windows?
- 23. How close is this property to major employers?
- 24. What shopping is available in the area?
- 25. What parks and outdoor features do the residents have?
- 26. Are there sidewalks and streetlights?
- 27. What type of resident will be attracted to this home?
- 28. Who provides utilities, fire, police, etc.?
- 29. Public Sewer or Septic? Public Water or Well?
- 30. Is the property Attached or Detached?
- 31. What type of Storage is available for my residents? Closets, shed, utility room?
- 32. Parking: Driveway, 1-car carport, 2-car carport, 1-car garage, 2-car garage, Street parking only
- 33. Is there an HOA? If so, how much are the annual dues, and what does that cover?
- 34. What is behind the property? Another house, Commercial building, Cemetery?
- 35. Preferred lenders? List of available lenders
- 36. Square footage? Source? _______ / Appraiser, Tax Assessor, Realtor, Current owner.
- 37. Type of property: Ranch Style SFR, 2-story SFR, Duplex
- If you have checklist items please share in the comments below!
- @Stephanie Jones thank you and others for helping me with this list.
