Calling All OOS Investors! Help Me Learn From Your Mistakes!
Member since 2022 · 20 posts · 14 votes
Calling All OOS Investors! Help Me Learn From Your Mistakes!
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Member since 2022 · 13 posts · 5 votes
4yMy husband and I invest in Wichita KS and Kansas City KS with great results. We live in the DFW area but have built our portfolio largely in the Wichita area because of excellent PM team. Cedar Mills Property Management in ICT. They are small and have great service and communication. I agree with everyone here saying that the OOS key is PM. No doubt. We had an awful experience to start out with in KC. PM me and I can give you the managers info--to avoid! They left one of our houses vacant for 9 months then a new one vacant for 4 months. I had to physically go see them in KC to get answers and pulled the trigger on changing PM. Best decision.
I'd say interview at least 3-5 companies before making a decision. Ask how many homes they manage, how many times a year they are physically in the house, can they visit more frequently if you ask, do the have in-house contractors or sub it out, how do they handle vacancy, and how do they handle evictions? Also, just ask why they think you should choose them, totally fair.
Once you've chosen one, I'd say to make sure you stay engaged. Watch your statements, call, ask questions, just stay on the radar. I let our properties in KC go too long without attention and it was terrible. If you stay close to them, they pay closer attention to your property. Best of luck!
27 Replies
- Investor · Spokane, WA · Member since 2015 · 238 posts · 133 votes4y
The wild card is property management. If you get a bad one life will become stressful and to boot you'll be losing money . Figure out how get a reliable PM; if you can't do that then I'd skip OOS and bury your money in jars in the desert or something. Just my personal experience.
@Manco Snead Haha I appreciate the insight. Finding the right PM is definitely my number priority. What are some occasional missed red flags? What should I be paying attention to? I am having conversations with PMs and trying to vet them - but what questions can I ask to best make an objective decision rather than a subjective one?
- Investor · Spokane, WA · Member since 2015 · 238 posts · 133 votes4y
@Matt C. I'm a novice, but there may be some experts who have a system that actually is functional in guaranteeing your property is managed well. Even if the PMs answer the questions how you want them too, they may still be unreliable, unresponsive, etc. There are PM interview questions you can find on BP; I'd go off of these. I would find someone that has alot of OOS properties and has been doing this for a long time and figure out how they ensure a prospective PM will be a good one.
- 4yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
@Matt Corso where are you located? Can you buy in a market you can drive to? A lot easier than a market thousands of miles away.
- 4yPatrick DruryBusiness MemberReal Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
@Matt Corso
Have you pinned down a market you are interested in yet? Once you pin down a market work on creating your core four as David Green calls it. One of the first people you will want to meet is a realtor specializing in working with investors, but out-of-state ones at that. You can easily find that agent here on Biggerpcokets. If the agent is good at what they do they will be able to give you referrals and recommendations for the others with potential feedback they have gotten from past clients. Your agent should introduce you to a lender that fits what you are looking for and is local. Local lenders are going to be able to execute far better than out-of-state lenders. Once you get the pre-approval your agent should be sending deals your way and you guys should be writing offers. Once you get one accepted that would be the time to interview a PM or pick the right one. If you try and interview without being in contract I know some will not talk to you because they physically do not have time to be talking to someone who has any interest in a property. Just imagine if every client hopped on a 20 min phone call with the PM and talked about every property they were interested in. They would have no time to manage your property. Be respectful of their time they are not a sales agent like realtors who have to be available all the time which I think some people forget. As for contractors, your agent should be able to supply some contractors to help facilitate the process and as for maintenance items, your PM will handle that. A great questions to ask agents would be do you have referrals for (lenders, PM, and contractors). - 4yMatthew Irish-JonesBusiness MemberReal Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
@Matt Corso find a company that specializes in working with our of state investors. The people and team you pick are more important than the market in my opinion.
The company should have investor focused agents, a PM division and the ability to handle maintenance and turnovers.
They should have transparency built into their systems. Such as before and after pics on maintenance, owner approval on large expenses, disclosed mark ups on vendors if needed… and they should be easy to get a hold of.
You Do not want a company that is not fully staffed or has an agent telling you he can be a property manager for cheap. Letting someone use you as a Guinea pig while they try to start a business will be at your cost.
Irish Jones Realty4.947 Reviews - 4yJordan MoorheadBusiness MemberReal Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
Build a good team and don't buy just one. You need scale.
The Moorhead Team5140 Reviews - 4yJoshua JanusBusiness MemberRealtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
Quote from @Matt Corso:
Hello!
I am looking to purchase my first OOS investment prop within the next 2-6 months. What are some of the biggest lessons you learned along the way? What do you wish you knew when you started?A big question I have is - How am I going to build the best team? What questions should I be asking, that I may overlook?
All insight appreciated!
I would advise finding an investor friendly realtor. You really want someone that invests in their market themselves and understands the numbers. They should be able to determine the COC, annualized return, estimated ARV of a BRRRR, accurate rent comps and more. The valuation and market value of a multi family property differs from a single family and you want someone that understands the distinctions if you go that route. If they just represent first time single family home buyers and aren't constantly finding off market properties and reviewing deals, you'll find a better investment through someone else.
- 4yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
We think the Midwest is a GREAT place for OOS investors to consider!
YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...
Your biggest question shouldn't be WHERE to invest, but HOW you will invest!
Many OOS investors set themselves up for failure because they don't truly take the time to understand:
1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.
2) The Class of the PROPERTY they are buying - which is relative to the overall area.
3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.
4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.
5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.
6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.
7) That OOS property Class rankings are often different than the Class ranking of the local market they live.
8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.
9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.
10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.
11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?
Good luck with whatever you decide😊
Logical Property Management4.9460 Reviews - 4yJoe HammelBusiness MemberReal Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
Metro Detroit
(my rental portfolio is here)
Purchase: $80k-$130k
Rent: $1200-$1500
ROI: Double Digit
Cash flow: couple hundred/month
Appreciation: Double digit (for past 10 years, will gladly send data)
Location: C, B- (suburbs and certain markets)
We have over a dozen Fortune 500 companies just in Metro Detroit with huge Healthcare and Auto industries.
The bad reputation comes from OOS investors wanting $20k D market properties.
Investors can retire (FIRE) in a few years with these.
We/clients love them.
FIRE Realty Team - Keller Williams5379 Reviews - Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes4y
Go in with a 50% expense ratio... the difficult part of being OOS is that PM firms (worse if you are going with TK company PM firm) is that they know you are helpless and captive to their high repairs. It happens so get used to it.
- Due diligence! I wish I had known how to better do due diligence on properties (and markets and rents and property managers). I now have a way better feel for it, partially due to the mistakes I made in overlooking things.
How to build a team--one of the best ways to start is to ask other investors for referrals. Once you meet one really good person, they tend to know other people (managers, contractors, etc.) and that can get you a solid team pretty quickly.
What kind of OOS investment property are you wanting to get? Rental, needs work, turnkey/rent-ready, flips, SFR vs. MFR, etc? - Member since 2022 · 20 posts · 14 votes4y
@Ali BooneAppreciate your reply.
We are looking for turnkey or cosmetic rehab. We have narrowed down our markets to Indi, KC, Columbus and Detroit Suburbs. Because of the small spread in median home price, we are open to SFR or MFR. - 4yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Matt Corso:
@Ali BooneAppreciate your reply.
We are looking for turnkey or cosmetic rehab. We have narrowed down our markets to Indi, KC, Columbus and Detroit Suburbs. Because of the small spread in median home price, we are open to SFR or MFR.Columbus, Ohio is a great market for rentals
- Member since 2022 · 13 posts · 5 votes4y
My husband and I invest in Wichita KS and Kansas City KS with great results. We live in the DFW area but have built our portfolio largely in the Wichita area because of excellent PM team. Cedar Mills Property Management in ICT. They are small and have great service and communication. I agree with everyone here saying that the OOS key is PM. No doubt. We had an awful experience to start out with in KC. PM me and I can give you the managers info--to avoid! They left one of our houses vacant for 9 months then a new one vacant for 4 months. I had to physically go see them in KC to get answers and pulled the trigger on changing PM. Best decision.
I'd say interview at least 3-5 companies before making a decision. Ask how many homes they manage, how many times a year they are physically in the house, can they visit more frequently if you ask, do the have in-house contractors or sub it out, how do they handle vacancy, and how do they handle evictions? Also, just ask why they think you should choose them, totally fair.
Once you've chosen one, I'd say to make sure you stay engaged. Watch your statements, call, ask questions, just stay on the radar. I let our properties in KC go too long without attention and it was terrible. If you stay close to them, they pay closer attention to your property. Best of luck!
- Member since 2019 · 7k+ posts · 4k+ votes4y
- really examine the neighborhood class and tenant quality
- pay attention to the city and town regulations towards rental property
- pay close attention to property history,tax,etc.Most PMs are just okay from my experience, but tenant and city could make a huge difference.
- Member since 2022 · 20 posts · 14 votes4y
@Carlos Ptriawan What is the best way to gauge tenant quality, outside of trusting a PM's thoughts?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes4y
@Matt Corso from my personal experiences, first time out-state investing, I followed the methodical approach to peg down my team, got a great GC, great Pm pegged, all was a field of roses right, until everything went sideways. I found one day PM was not getting back to anyone, and I do mean anyone, then come to find out she very literally disappeared after a domestic issue, and all associates of her's were freaking out with no clue what or how to do anything, no access into systems without passcodes, it was a nightmare.
From this I learned a lesson of what I call the "Bus-Factor" as in I ask myself, what would happen if this person were hit by a bus tomorrow? Would things keep going or would the sky fall?
I now know, always, ALWAYS have a plan B, C, D. Just because A is going great, what-if.... So I would say, never leave any aspect to a factor of 1, have a running list for every aspect, which if interviewing for getting the "A" resource, should have that list readily at hand, keep it, rate each, so if someone get's hit by a bus, your not left starting from 0 trying to figure out what to do.
As for interview questions, simply run them through answering scenarios for what will they do if, and what example can they give for a recent time having handled that. What do you do if tenants don't pay, what do you do if tenant won't move out, what do you do if they damage property, etc etc.. It's as important how quickly and readily they answer as the answer itself. You should not be able to shock them with anything, and I do mean anything. Myself, I have seen it all, good luck picking a what-if that I have not delt with, seen, sorted at some point in time over the years. It's a law of averages, over enough time, do enough properties, things happen. The greatest PM in the universe will have some evictions, it's simply impossible to bat 1000 forever. So anyone says they never have evictions, they are new or liars. What matters is how a PM solves the problems, #1 PM skill is problem solving. place enough tenants, manage enough properties, oh yeah, dead bodies, roaches, fires, property damage, evictions, drug raids, it's all gonna happen, law of averages.
- Member since 2019 · 7k+ posts · 4k+ votes4y- neighborhood class is very different between B and C.
Quote from @Matt Corso:
@Carlos Ptriawan What is the best way to gauge tenant quality, outside of trusting a PM's thoughts?
- Find out section 8 tenant vs non-section 8 tenant
- Now I prefer rental property that has no tenant rather than buying property with tenant, starting from scratch is always easier, it's no secret that rental seller sometimes is renting a place to anybody without much screening prior to selling. Let the new PM find a good tenant. - Member since 2022 · 20 posts · 14 votes4y
@James Hamling Thanks so much for this. Super informative and helpful
- 4yLuther Wilson IIIPro MemberReal Estate Broker · Kansas City, MO · Member since 2017 · 537 posts · 292 votes
Good stuff, @Matt Corso
The fact that you've taken this step to reach out, ask questions, and do your own homework is cool. That alone says a lot. FYI, my perspective is coming from a realtor, project manager and PM whose clients are mostly OOS investors. Many a time have I had to try and pick up the pieces after a poor service provider dropped the ball...
One thing I want to clarify: There are some differences between building a team and hiring good people. The ladder usually precedes the former - and so on. Let's not put the cart before the horse here...
Your experience and the amount of capital you have to deploy will determine how you can operate. It's gonna take time to build out a team. It's very difficult doing it in your own town let alone OOS. Even if you have capital and a boat load of experience - you're gonna get smoked at least once! Whether it's with the realtor, the contractor, the lender or the property manager. At some point you're gonna faceplant. What you do from there is up to you...
It's gonna take not only time, but lots of energy, persistence and of course, capital, in order to build your best team. I believe getting your mindset up comes first. Then you pick your investment strategy and market. From there finding folks in that market who specialize in what you're wanting to do. Then there's actually doing a deal in that market... Then you gotta get from A - Z on that first deal! Then you repeat the process.
Along the way you'll find what works for you and what doesn't. You're building a business so it's important to treat it as such. If you want good talent you're gonna have to pay them well. Partnerships have been gold for us... Paying your boots on the ground or key players in equity might be a gem. ;)
Quote from @Matt Corso:
@Ali BooneAppreciate your reply.
We are looking for turnkey or cosmetic rehab. We have narrowed down our markets to Indi, KC, Columbus and Detroit Suburbs. Because of the small spread in median home price, we are open to SFR or MFR.
Indy is pretty tough these days, inventory is sparse and the returns aren't what they used to be. Still possible, just a lot tougher. KC is still a great market, and there are SFRs and MFRs both. I work with a turnkey provider there who also does 'turnkey lites', which gives some value-add opportunity without the requirement for it. I've been looking around Columbus, hoping to find turnkey-style properties there but nothing solid yet. And a turnkey provider I know today just asked me if I thought people would be interested in Detroit suburbs. An example being East Pointe. All of that to say- definitely some options on those cities!- Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes4y
@Matt Corso Location is most important. A good location is much more forgiving than a bad one. What markets are you looking into? Every market is unique.
- 4yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
@Matt Corso - A big lesson I learned the hard way is to make whomever you take advice from, do business with, or hire for a service, earn your trust. Don't just give it away. Be patient and spend time asking your questions even if they seem basic. There are people on this site who will spend as much time as you need answering your questions and helping point you in the right direction. Also, there are people on here like @Ali Boone who already commented that are actual passive out of state investors. Make sure you take advice from people who are actually doing and have been doing what you want to do. There are a lot of salespeople on the site who don't actually do what you do and have never invested out of state. So, there is a difference in the advice you get.
As for being patient and making others earn your trust, I was a couple of years into building my portfolio and thought I had experience. I was super naive, but didn't know it, and way too cocky. My portfolio was doing well and then I drove a stake right through it that almost crippled me when the housing crash really took hold in 2009. I bought 11 properties site unseen in one day from an investor who went to church with a friend of mine. I let the church reference cloud my judgement and went forward with a deal with was only so-so on paper and I trusted all of the investors' spread sheets that he shared with me. I ended up owning 11 properties that all went vacant almost immediately and had thousands of dollars in deferred maintenance that I no idea about. Here are the mistakes I identified that you have to avoid:I gave my trust away too easily.
I didn't ask enough questions.
I didn't have a third party do any inspections or give me an opinion.
I was well capitalized so I didn't respect the fact that my money was super valuable to me and I needed to guard it.
I thought the real estate market would always be going up so I never calculated how these properties would perform in a down market (they were in a very challenged part of Memphis and even though I lived in Denver, I knew they were in a rough area and that part of town saw a lot of job losses in the economic crisis).
Best of luck to you as you move forward. Be patient and I promise you can meet your investment expectations. What are some of the biggest lessons you learned along the way? What do you wish you knew when you started?
I read the Long Distance Real Estate Investing book and thought that this is the easiest thing ever if I could just draft a few emails and get connected with some realtors and I will be buying cash flowing properties right away. I was so wrong with it. But the one thing I have learnt over the past 5 years of my investing is that you just have to take a step and not spend time with too much analysis. Real estate is very forgiving.
How am I going to build the best team? What questions should I be asking, that I may overlook?
The hack that I found was to work with a turnkey company out of state so I can tap into their existing team at a premium but then I can build my portfolio once I have relationships with them. I worked with Martel Turnkey but I am also hearing really good things about Rent to Retirement and REI nation.
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