Real Estate Investor · Ypsilanti, MI · Member since 2011 · 98 posts · 6 votes
There are alot of properties 3 bedrooms and up wholesaling for 3 to four grand, I figure put in another 15K for rehab but the problem is these houses are located hours away from where i live, is it a good investment to fix these houses up and put em out for rent knowing I would rarely drive that far to check up on these properties. Any suggestions?
Good question. As long as you have a plan to manage these properties and the same deals are not available closer, I think you should consider it. You will need to think about who will complete repairs when needed, how often you will check on the property, whether or not you are going to manage them yourself, etc.
Generally I believe it is best if you can stay local, but sometimes that is just not feasible, so if it makes investment sense and you have a plan, I think it is very doable.
Nothing wrong with owning rentals remotely, in my opinion. However, make a solid connection and build rapport with a great handyman (or contractor) in your investment area. You can always call up the local chamber of commerce, REIA club etc. for referrals.
It's a lot easier to call your good friend "Bob" (the handyman) at 3 in the morning for a plugged toilet, rather than randomly picking out a name and phone number from the internet. Who knows what kind of job Mr. Random would do for you? Let alone how much more he'd charge a stranger from out of town...
Also, if it's not a big hit on your cash flow, build rapport with a local, and trusted, property management company.
I invest about as far from where I live as is humanely possible (live in CA invest in FL) so yes it's do able. I also have family in FL which has made the initial setup easier as I've been acquiring handymen, realtor, title company ect. So like James Vermillion said with the right people in place no problem.
I've never had a good experience with property management companies. They can't exist on 7% to 10% commissions. So where do they make their money? On repairs.
The only way I invest at a long distance is if I have a personal friend in the area as a go to guy to watch over things as needed.
Stephen Moore I'm assuming that one was for me. On the couple I have in my IRA my PM takes care of everything and I haven't been to the one in 3 years and the other in 1 year. My Mom has been by both about 9 months to a year ago. For the ones in my name I'm actually going home next week and will be looking at my new acquisition from last month that is being rehabbed as well as one I'm turning over this week (showing to tenants this afternoon actually). But I last was at that one about 9 months ago now.
So I only go by when I'm home every 6-12 months and only the ones that I need to go by and visit since we're turning over ect.
Mubasher Riaz - you might consider selling them on land contract (contract for deed) if they're in MI or OH, which are friendly states for land contracts. In this arrangement, the tenant is responsible for repairs, and you sell it basically as-is. (You may need to do some basic work to make it habitable.). Tenant-buyer has emotional equity and works to improve their home. Their PITI will typically be $150-200 less than comparable rent.
There are several bulk REO companies that offer cheap properties all over the country this way (castlerockreo.com, for example). Typically you would buy for $10k and sell for $25k, for example, on a 10-12 year fully amortizing note. Look at these listings to see how it's done.
This gets you out of the landlording and maintenance business, while providing a very high return. This is the most practical way to invest in lower-end properties from a distance. You can use a local drive-by service to periodically take exterior photos and send them to you. If delinquent, the buyer can be evicted if they've not been there 5 years and don't have 20% equity.