A word to fellow investors from both coasts- too many liars and blood suckers waiting for opportunity to rip you off. If you're a working professional and haven't seen the ugly side of greed , traps, lying, betrayal etc. in the business world, Think twice before you jump in.

There's just too much risk investing out of state. The biggest is people. PM collected rent and ran away. Or placed tenant with recent eviction record into your property. Contractor grabbed money and disappeared or cut corner everywhere. Talk to other investors. I'm not the first one who bumped into these troubles, not the last either.

Even after doing business with a provider, there's no guarantee he/she's trustworthy. Maybe he's just waiting for the big feast! You can never be careful enough. And do not assume everyone on BP is a good guy.

My question.  Did you use a licensed PM?

Originally posted by @Amy Hu :

A word to fellow investors from both coasts- too many liars and blood suckers waiting for opportunity to rip you off. If you're a working professional and haven't seen the ugly side of greed , traps, lying, betrayal etc. in the business world, Think twice before you jump in.

There's just too much risk investing out of state. The biggest is people. PM collected rent and ran away. Or placed tenant with recent eviction record into your property. Contractor grabbed money and disappeared or cut corner everywhere. Talk to other investors. I'm not the first one who bumped into these troubles, not the last either.

Even after doing business with a provider, there's no guarantee he/she's trustworthy. Maybe he's just waiting for the big feast! You can never be careful enough. And do not assume everyone on BP is a good guy.

Switch to other asset class. Right here in Cleveland properties with 40x upside potential without tenants, PM, contractors.   

Originally posted by @Amy Hu :

A word to fellow investors from both coasts- too many liars and blood suckers waiting for opportunity to rip you off. If you're a working professional and haven't seen the ugly side of greed , traps, lying, betrayal etc. in the business world, Think twice before you jump in.

There's just too much risk investing out of state. The biggest is people. PM collected rent and ran away. Or placed tenant with recent eviction record into your property. Contractor grabbed money and disappeared or cut corner everywhere. Talk to other investors. I'm not the first one who bumped into these troubles, not the last either.

Even after doing business with a provider, there's no guarantee he/she's trustworthy. Maybe he's just waiting for the big feast! You can never be careful enough. And do not assume everyone on BP is a good guy.

 Was your property manager a licensed real estate brokerage? 1st thing any out of state investor should look into as these are the types of things that can / do happen all the time when investors align themselves with illegal property management companies. 

Hi @Amy Hu really sorry to hear about your experience investing out of state.  I wish you all the best moving forward.  Thanks for sharing your post.

@Amy Hu Good advice and I think its good for others to see posts like this to show the real risk of investing out of state. 

Stories like this make me think twice investing out of state, but I have no choice if I want to continue to invest in real estate (I'm in China at the moment). And I would only invest where I am extremely familiar, my hometown Cleveland, OH and Tampa Bay area. 

And your last sentence is so true. There are some big mouths on BP and I would encourage everyone to vet vet vet as much as possible before doing deals with some folks on here. I found my current PM here, a local real estate group in Shanghai, and a partner in Tampa all through BP. In regards to the PM and partner in FL, I got tons of referrals, talked to different companies, did my own research outside of BP. So far, so good, but its very easy to get ripped off. 

I wish you all the best in your current situation.

Brian

Everything comes with risk.  We have been using a PM for our out of state rental for 10+ years.

I went through literally all of this last year on my first two out of state properties.  I thought seriously about cutting my losses and giving up at one point. I'm glad I didn't because every purchase since then has been better with fewer headaches, and I've learned a lot along the way. Next month will be a milestone for me; It'll be the first month I'll have all of my Cleveland units occupied with positive cash flow.  It's really not that much work, if any, once the units are filled. 

@Amy Hu all of those things are no less likely to occur in state if you use property managers or contractors- I think due diligence just needs to be emphasized more heavily by people that are utilizing professional services to manage all aspects of their asset.

It's terrible to hear what's happened with your PM and contractor. Unfortunately those have become common in this business.  It's SO SO SO important to use multiple, self-sourced referrals to vet out professionals you're using. 

With every property purchased, a 3rd party inspection and appraisal should be required. Out of state investors, especially inexperienced ones, should not buy a property that requires rehab or is not already rented at near market value. If a property appraises, it doesn't matter what a seller has profited on it. 

When out of state buyers choose a provider, they should choose one that does not paint a rosy picture of everything, & sets realistic expectations. I do not recommend using a provider that will also manage the property. Use a property management company who's financial interests are not comingled with the seller's. Using independent parties for all professional services decreases your likelihood of being cheated.

Full disclosure- I do sell properties out of state to out of state investors. Hearing this kind of thing repeatedly is a gut punch every time because the diminished ethics of other businesses make me look bad- but I'll tell you as an honest provider... I share allllll of the ugly possibilities and risks with every investor over the phone before I even start sending them property. If you, or any other buyer reading this gets on the phone with some provider OOS and they DON'T take this approach, then I would be cautious. 

Thank you for sharing all of this stuff. I don't think it's a matter of "don't do it". There's a how to do it element that comes into play to significantly reduce the risk of an out of state investor having a bad experience. 

If you can translate these risks into relatively quantifiable numbers they are easier to manage.  Biggest example being cost of trips and time needed to still be on the ground at critical milestones.    The other area that tends to bite us in the *ss is not doing real technical and legal due diligence on your PMs and GC.

Is there an easy way to see if they are a licensed realtor and property management company (besides asking them)?

Two PM I used are licensed realtor.  They both lied and cheated.

The last one I fired distributed only a portion of rent recorded in their rent ledger. When I pointed out the error, they just ignored.

I gave them a brand new SimpliSafe security system to install in a vacant house.

I also paid them 1/2 of the rehab estimate to get the work done. After many email and calls unresponded in the following 1.5 months, I found the house broken in, water tank and furnace stolen. They didn't do any work, no security alarm installed, no rehab work.

The horror story just goes on and on.

Personally I don't think it's worth the trouble if you're a software engineer/CPA etc. in CA.

As a former out of state investor (Properties gifted via my father's Estate), I can tell you that you are 100% on the money @Amy Hu . It's hard to trust someone miles and miles away to treat your money as if it was their own. It's something that kept me up at night. I cringe on the very thought on investing outside of a few hour drive for all the reasons you explained and more. 

A TLDR; to my story was, not only did 1/2 of my houses go on fire after multiple break in's, but the Local insurance company screwed me and bad. I had enough money in that account for auto-pay on taxes and insurance for 3 years (set it and forget it) but they never drew a dime, because the dumbass insurance broker (Part of StateFarm) messed up a number or two on the bank info. Not only did it cost me $100k, but StateFarm corporate people told me to get lost. PS; I never got 1 single letter or call to tell me my account was past due or about to be canceled for lack of payment due to their screw up. 

You win some and lose some. But my investments stay with a few hours drive of me now. 

Originally posted by @Amy Hu :

Two PM I used are licensed realtor.  They both lied and cheated.

The last one I fired distributed only a portion of rent recorded in their rent ledger. When I pointed out the error, they just ignored.

I gave them a brand new SimpliSafe security system to install in a vacant house.

I also paid them 1/2 of the rehab estimate to get the work done. After many email and calls unresponded in the following 1.5 months, I found the house broken in, water tank and furnace stolen. They didn't do any work, no security alarm installed, no rehab work.

The horror story just goes on and on.

Personally I don't think it's worth the trouble if you're a software engineer/CPA etc. in CA.

sounds like you tried to BRRR and in a risky neighborhood.. I just cringe when investors think they can read a book and implement this stuff in these asset class's.. we all get hit. .stuff stolen.. it sucks. but if you want hi returns your going to take these risks

Originally posted by @Jeffrey Boyce :

Is there an easy way to see if they are a licensed realtor and property management company (besides asking them)?

 Yes. You can lookup their license on the states Division of Real Estate website.

Originally posted by @Shaun J. :

As a former out of state investor (Properties gifted via my father's Estate), I can tell you that you are 100% on the money @Amy Hu . It's hard to trust someone miles and miles away to treat your money as if it was their own. It's something that kept me up at night. I cringe on the very thought on investing outside of a few hour drive for all the reasons you explained and more. 

A TLDR; to my story was, not only did 1/2 of my houses go on fire after multiple break in's, but the Local insurance company screwed me and bad. I had enough money in that account for auto-pay on taxes and insurance for 3 years (set it and forget it) but they never drew a dime, because the dumbass insurance broker (Part of StateFarm) messed up a number or two on the bank info. Not only did it cost me $100k, but StateFarm corporate people told me to get lost. PS; I never got 1 single letter or call to tell me my account was past due or about to be canceled for lack of payment due to their screw up. 

You win some and lose some. But my investments stay with a few hours drive of me now. 

 C'mon now. If this insurance issue isn't the biggest case of passing the buck I have ever seen I don't know what is. You didn't pay an insurance bill on the home you own for 3 straight years. You are an adult, take responsibility for your screw up. Don't slam StateFarm lol you don't do an audit of your books during tax season? Or is that the CPA's fault for not catching it?

Originally posted by @James Wise :

Originally posted by @Shaun J.:

As a former out of state investor (Properties gifted via my father's Estate), I can tell you that you are 100% on the money @Amy Hu . It's hard to trust someone miles and miles away to treat your money as if it was their own. It's something that kept me up at night. I cringe on the very thought on investing outside of a few hour drive for all the reasons you explained and more. 

A TLDR; to my story was, not only did 1/2 of my houses go on fire after multiple break in's, but the Local insurance company screwed me and bad. I had enough money in that account for auto-pay on taxes and insurance for 3 years (set it and forget it) but they never drew a dime, because the dumbass insurance broker (Part of StateFarm) messed up a number or two on the bank info. Not only did it cost me $100k, but StateFarm corporate people told me to get lost. PS; I never got 1 single letter or call to tell me my account was past due or about to be canceled for lack of payment due to their screw up. 

You win some and lose some. But my investments stay with a few hours drive of me now. 

 C'mon now. If this insurance issue isn't the biggest case of passing the buck I have ever seen I don't know what is. You didn't pay an insurance bill on the home you own for 3 straight years. You are an adult, take responsibility for your screw up. Don't slam StateFarm lol you don't do an audit of your books during tax season? Or is that the CPA's fault for not catching it?

Ultimately it was my fault at the end for not catching it. 

It's not like it was 3 years later. It was within the first year. I stated that there was enough money in that account to cover it for 3 years on auto-pay. 

Thx so much @James Wise

Hi Amy, 

Where was the property? I am a PM here in Cleveland but live in LA area mostly. We have never had such trouble with tenants and neighborhood as you describe! 

I have experienced poor and dishonest contractors though. That seems to be a trend. I have learned (the hard way) to make your contracts with them VERY VERY structured to the point you tell them what materials to use, what level of finish needs to be done to get paid and by what date. I also build into the contract a clause that says if the project is not done by X date the price is reduced by $100 (or %) everyday until it is done. 

@Amy Hu

No disrespect,...but you are not doing anyone much good if you don't tell people who the PM was so that the rest of us know who to avoid. I understand that you may not want to blast them in a public forum, which is why I direct messaged you before asking who the PM was.  All you're doing is stoking the fires but not letting us know who to avoid.

Just sayin'

It'd be naive to think my post would stay here if I name the terrible people in this forum.
Plus lots of newbie would find this warning helpful.
There's Yelp for finding good restaurants. A rating website for horrible service providers would be great.

Originally posted by @Brian Garlington :

@Amy Hu

No disrespect,...but you are not doing anyone much good if you don't tell people who the PM was so that the rest of us know who to avoid. I understand that you may not want to blast them in a public forum, which is why I direct messaged you before asking who the PM was.  All you're doing is stoking the fires but not letting us know who to avoid.

Just sayin'

@Amy Hu    I believe in my post I mentioned that I am cognizant of the fact that you don't want to name them in a public forum, which is why I direct messaged you also to know who it is. 

Good luck and best wishes in your future endeavors.

Originally posted by @Amy Hu :

It'd be naive to think my post would stay here if I name the terrible people in this forum.
Plus lots of newbie would find this warning helpful.
There's Yelp for finding good restaurants. A rating website for horrible service providers would be great.

Originally posted by @Brian Garlington:

@Amy Hu

No disrespect,...but you are not doing anyone much good if you don't tell people who the PM was so that the rest of us know who to avoid. I understand that you may not want to blast them in a public forum, which is why I direct messaged you before asking who the PM was.  All you're doing is stoking the fires but not letting us know who to avoid.

Just sayin

Amy

I am sorry it has not worked. My first buy out of state was in Birmingham over 2 years back and it didnot work as expected. The realty is that I beleived in the rosy sales pitches and was not prepared for the realty. However, for me Cleveland has worked out well. I just got into contract on my 8th home this week.

The key is to buy in the right areas. I have stuck to west side of cleveland (44111 and 44135 plus Parma) and have stable returns. Also I have built a good relationship with my PM. if the home is not in a desirable area, no PM can change the outcome. I am aware Cleveland like all areas has its share of bad PMs and contractors. I can share my contacts if you are interested. 

Sunny

i will PM you 

LA doesn't think like New York and Cleveland damn sure doesn't think like NYC or LA. It's a next meal mentality there. Systems must be in place for the work and credibility of everyone to be checked and verified. In the lower class neighborhoods, it's imperative for the landlord to never get comfortable and try to run operations on auto-pilot. That behavior is typically what prompts the beginning to the end.