Buying remotely and tolerance for repairs

11 Replies

Hi, I have a question for investors who invest remotely and buy sight unseen with an inspector's report doing the heavy lifting in terms of property condition assessment. Do you focus on properties with little to no repairs? That is what I am thinking is most viable, but the tradeoff is less of an equity cushion when you buy since its turnkey or close to it. Thanks for any thoughts.

Gary,

Sight unseen? i would never purchase a property sight unseen. i would want to see the actual condition and the area that's it is in, do my due diligence. example: my Daughter and her Fiance just closed on a property ( Dec 30th ) but before that we went looking at many properties, pictures you see for the houses in no way represent what they are actually like and the area they are in. although home inspectors are usually pretty good at what they do and finding things with the house, your own eyes are a lot better, it would be worth the car trip or flight. i would rather spend the couple hundred dollars to view a potential property and lose that if i decide not to buy then buy a house site unseen only to possibly end up dumping thousands into it.

Patrick Liska, Contractor

Hey Gary! I've actually bought sight unseen quite a few times. To clarify that though, I've only done that when I've been buying through turnkey providers that I either strongly trust or have seen their work before. I would never buy sight unseen from an MLS or Zillow or something listing. The only reason being is that I've found- what I thought to be- awesome properties, and I thought I knew their location- only to go and the neighborhood is super sketch and the property doesn't look half as good as the pictures. At the end of the day, assuming an inspector has told you everything to expect repairs-wise, it's all about what tenants you can attract (IF you can attract tenants). That's where more of the mystery comes in.

The reason I tend to trust turnkey properties, from providers I'm familiar with, is because their stuff tends to be very standardized and they have a particular buying criteria right out of the gate so I know they won't be in certain areas and may be more focused on other areas, etc. Then at that point, the inspection and appraisal confirms I'm not buying an outlier to their normally-good property quality.

Yes, there is a trade-off for buying turnkey or turnkey-quality. But it's all on a scale... most typically, the more money you save (equity cushion), the higher the risk factors. Saving money on the purchase won't do you any favors if you buy a lemon in a bad area. There's- pay the most for the least amount of risk, pay the least with the most amount of risk, and every combination in between. So always consider your own risk tolerance, your ultimate goals (do you want to put work into a long-distance property?), etc.

There are some turnkey options out there now that do it BRRRR style, so you get the forced appreciation you would get if you did the work yourself, but the turnkey company does the work. There are risks, so I only work with specific companies to do this, but it is certainly an option if you want the best of both worlds.

Originally posted by @Gary Clisele :

Hi, I have a question for investors who invest remotely and buy sight unseen with an inspector's report doing the heavy lifting in terms of property condition assessment. Do you focus on properties with little to no repairs? That is what I am thinking is most viable, but the tradeoff is less of an equity cushion when you buy since its turnkey or close to it. Thanks for any thoughts.

Many investors who go with a Trunkey purchase sight unseen. The point of a Turnkey provider is that they do everything for you, and the investment is very passive for you. Ideal for someone who does not live nearby. The provider should own, renovate, and manage the Turnkey all in-house. They should not use third parties. Hopefully, you could see their past work and compare it to the current property and get an idea of how consistent their work is. 

Try looking at:

What to Ask When Working With a Turnkey Provider

Tom Ott, Real Estate Agent in OH (#2016003865)
440-749-4043

I have purchased sight unseen but only thru an agent I trust and only in areas I know well. I would never do so under any other circumstances, turn key or not.

In competitive markets like Indianapolis and Kansas City which I am most familiar wity, demand is high and inventory is low so there generally isn't the luxury of time to go see the property before putting it under contract. Most investors rely on the inspection report. I'm not sure what an untrained individual will see in their own personal inspection that a professional property inspector won't see. Often times, they are doing it to do their due diligence on the area but you can accomplish that by making a trip  to your market before hand and getting to know the neighborhoods that fit your criteria so that when something comes available, you can pull the trigger quickly. One alternative is to put the property under contract with a contingency for a personal inspection to coincide with the home inspection. This should only be done if you've already done all of your due diligence and the sole purpose of your personal visit is to validate that what you've been told about the property and the area is in fact  accurate. For instance, you may want to confirm that it's a B class property and neighborhood like the seller or turn key company has told you and not in fact, a C class or worse. Everyone's definition of class can vary and some just plainly stretch the truth. 

Gary, I would recommend getting inspection done even when buying from turn key, there may be few minor repairs which you wanted to get fixed before getting the keys to save money down the road.

I have bought 3 properties sight unseen. In all cases, I bought the properties off of the MLS. I had real estate agents I trusted, and I paid to get a property inspection from inspectors that I chose myself. I did extensive online research into the neighborhoods, reached out to property managers for opinions, and used google maps. Once I would get a property under contract I would have my agent take a video of the property. Of course, I could always back out under the inspection contingency if I didn't like what I saw in the video or the inspection went poorly. I found I could get better deals buying off of the MLS instead of working with turnkey companies. I personally prefer buying an owner occupant property off of the MLS rather than something that was previously used as a rental, as owners often take better care of their properties.

I have bought both turnkey and homes needing rehab sight unseen. I make it a point to know the area and have built a relationship with a team I trust before I do so via a visit.  On the rehabs, it is even more important, and these still haven't always worked out the way they should have - lots of unseen risks.  I highly advocate a visit and face to face with whatever team you are working with before at least the first property with them closes.   

Larry Fried, Real Estate Agent in OR (#201211636)

@Gary Clisele depends on the team that you have in place. 

Usually I think it's most successful when you start in a market with properties that need some, but not that many repairs. You can try out some different contractors on that one and then as you identify the better ones that you trust you can take on bigger projects. 

Anthony Angotti, Real Estate Agent in PA (#RS335936)
(412) 254-3013

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