Buying Site- and City-unseen

Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes

So, my wife and I have run into an investing dilemma that we'd like to ask for some help on.

What are your thoughts on buying a house where we 1) have never seen the house and 2) have never been to the city? We would rely on the perspective of our Realtor and property manager, and do as much due diligence as possible online.a

Our local market (and any market that we are familiar with/close to) has a bad rent-to-value ratio making local investments have sluggish cashflow. However, we have a young family and are not willing to travel.

Has anyone done this? Anyone have any thoughts? Is the cash flow worth the risk?

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Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

13y

Greg Hall obviously you need to have a connection and a relationship with whomever you are working with in your target city. If there is any unease at all in the relationship, do not invest.

If you have no idea what a "good" property would look like in the target city, how would flying there help that situation? It wouldn't.

There are people that put their entire retirement savings (which can also be certainly thousands if not hundreds of thousands of dollars) in the hands of fund managers, without ever seeing them or even meeting them. However, they have trust in the company and their reputation to invest their money wisely.

The same is true with working with a partner or a team in another city. You don't necessarily need to meet them in person, but if it makes you feel better, then you do it.

I personally think it's crazy to "buy on the courthouse steps" because that's more risk than I'm willing to take. But other people do it all the time and are successful.

Everyone has different risk tolerances. Calling someone "insane" because their investment strategy is different than yours is not the answer.

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Kyle Bombare
Burlington, VT · Member since 2013 · 5 posts · 0 votes
13y
If you are buying a few things on the internet that you have never seen... go for it.

If you are looking to make a 30 year investment (or a $300,000 + investment), you might want to check it out in person.

Don't put yourself in a hole that you can never get out of!
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Shawn S.
Rental Property Investor · Kansas City MO · Member since 2013 · 147 posts · 9 votes
13y
No doubt it is better if you can view each property. But I think a solid PM will be more honest in looking at a property than some think. It is in their best interest for you to be successful. They are not getting a one time commission.
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Mehran K.
Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
13y
A solid PM is building an income stream just like you are. And they are in the business of finding good, stable income streams, and would gladly help an astute investor that asks the right questions.

With that said! It would be ideal to visit each property, and I definitely agree with Jon about visiting the area. I plan on visiting my target market in September to visit my team and just get a better feel for the city. It would have been smarter to visit first, but its not mandatory for me.
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Chris F.
Denver, CO · Member since 2009 · 131 posts · 22 votes
13y
Jon said it all for me.

foolish
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
13y
Used to be that investing out of your immediate area in terms of small real estate investments was just about impossible. Now with the internet and the amount of online information, as well as an entire service industry devoted to the passive real estate investor, it is actually doable. The question is how much more risk are you taking on, and how much return are you giving up?

So lets take an example. I invest in parts of the Phoenix, AZ area as well as the major cities in Texas. I have been investing in Texas for 35 years and Phoenix for 2. I not only study all information available on line before investing but also visit the property numerous times at various times of the day and night as well as personally inspect the interior, exterior etc.

Now lets say that you living out of state have the exact same experience, knowledge and expertise about real estate investing, in general, as I do. You decide to invest in Texas and Arizona, completely familiarize yourself with all the online info, but personally do not do the due diligence associated with inspecting the property, personally getting to know the city, neighborhood, eyeballing comparable properties etc.

What would your return be vs. my return? What would your risk be vs. my risk? My gut feel is that. eliminating luck, over a say 10 year period of time my return will be at least 20% greater than yours and my "risk" as measured by volatility in our respective portfolios will be 25% less.

This is of course just my gut feel, in no way a scientific finding. However, this may still yield a greater return to you than investing in your own backyard. If you can truly get a feel for the "best" place to invest - nowhere near as easy as it seems, and no the answer is not simply where you can obtain the highest current cap rate (which btw would be downtown Detroit) than you would easily make up for the disadvantages of investing outside your immediate area.
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Gary Parker
Real Estate Professional · Salt Lake City, UT · Member since 2010 · 608 posts · 163 votes
13y
I started to do some limited marketing 1 County over am finding it difficult. For me Im just looking for very motivated or partnering with someone in the area. I know other people are successful at it, but that is a whole new learning curve.
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Jak Dadi
Real Estate Investor · Saratoga, CA · Member since 2010 · 100 posts · 14 votes
13y
Unfortunately, I would never buy unseen or trust a PM unless I have the ability to visit my properties at least once a quarter or let the PM's think that I may just do that. Maybe I have gotten jaded with recent experiences with long distance investing but this is not an avenue that I will ever explore alone or recommend to anyone. Living in the Bay Area, it is almost impossible to find any good rent to value opportunities anymore, and it is extremely hard to sit on the sidelines and so it is tempting to look at distant properties, and remind myself of all the challenges faced with the last attempt, so I am in the process of educating myself to discover other avenues.
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Jeremiah B.
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Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
13y
Jak Dadi Thank you! I'm interested to hear about your previous experience, and what went wrong. Are you willing to share?

Don Konipol That 20-25% ROI/Volatility shift sounds about right, and is a helpful way to look at this! With that said, a 30% ROI less than a well-informed person in the same market may still be a good investment for me.

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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
Originally posted by Jak Dadi:
Unfortunately, I would never buy unseen or trust a PM unless I have the ability to visit my properties at least once a quarter or let the PM's think that I may just do that. Maybe I have gotten jaded with recent experiences with long distance investing but this is not an avenue that I will ever explore alone or recommend to anyone. Living in the Bay Area, it is almost impossible to find any good rent to value opportunities anymore, and it is extremely hard to sit on the sidelines and so it is tempting to look at distant properties, and remind myself of all the challenges faced with the last attempt, so I am in the process of educating myself to discover other avenues.

Jak, I would also like to know what your experience has been with long distance investing. I think it would prove useful to others on what NOT to do.

And yes, if you have a bad experience with something, it can ruin your taste for it in the future. Just as if the first time you tried eating a steak, it was one that someone burned to a crisp, you're going to think all steak isn't worth eating.
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Dan D.
Investor · Shakopee, MN · Member since 2014 · 219 posts · 88 votes
12y
I think it's a risk, but have been considering doing this myself in various locations.
With any thing, there is risk, but I'm not talking about $300,000 properties, but instead properties in the under $50,000 range that cash flow.
You're minimizing your cost to get in which minimizes your risk.
Additional expenses would be rehab costs and on-going tax cost along with. Those costs aren't going to spike out of control too often.
Could have a couple property inspectors take a look at it to help verify that you're getting good information. Talk with the inspectors ahead of time and ask them about specific concerns you want to verify as part of the inspection.
Have a local realtor to the area who will help you identify troubled areas. They are vested in your success if they are good at what they do.
Of course, a $300 round trip ticket to verify the area certainly helps, but the area won't look too much different than the last google or bing maps show. There's always room for changes but have a local inspector take some pictures of the street for you and verify the rest yourself.
Not to mention, work with others on bigger pockets who are local to the area. Ask them if they would buy or want to live there. Ask a couple people and if there answers aren't the same, do more investigation.
You can even higher people local to the area to just take video and photos of the neighborhood google-style if you need to.
There are definitely ways to do it if you want to which can minimize your risks.
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Ryan Mullin
Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
12y
I've dealt with a lot of out of state investors and I think its best for me the operator and you the investor if you take a trip out to the market you want invest in. Find a couple neighborhoods that you like, and personally pick out the first few houses that you want. Build a good relationship with the operator and then you can start buying site unseen. Even then I would still stick to the same neighborhoods that you are familiar with. Regardless you will need to do a lot of due diligence on your own... i.e. make sure you see good comps, tons of photos, etc... Realtors, contractors and property managers are all going to have a different agenda for your money. Be careful. @Jeremiah B.
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