Is it too risky to invest in rental units far from your city of resident?
Hello
I am from Vancouver BC but the market here is extremely over priced and chances of finding rental properties with decent cash flow are not that high.
Recently I have been thinking of exploring other cities far from here. Possibly fourplex or something and then hiring a property manager to take care of my rental units.
Is that too risky? Does anyone have experience doing this?
I think if you have a trusted foot on the ground ppl, its doable.
I lived in my out of state investment areas. One has in house ppl (it's more expensive) but it's nice.
Also PRICE everything into it... where if you were local, you can manage on your own.
Price in the management issues as your monthly expense.
I am also a realtor, my out of state buyers will FLY OVER. since I myself is a long distance investor, I setup an area tour so when we talk about areas my clients have a visual.
Meeting in person, meeting all your vendors is a must to build a relationship.
In your case, not only will your be managing properties but you will be managing people ;p
Nope, it works fine for me! I don't have MFRs but I do have long-distance SFRs and it works fine if you have the right manager. It's all about the team you are working with and where you buy. The US is the most likely to cash flow for you over Canada, so if you go that route it's great but just be sure you are set up entity and bank-wise or you'll hit major tax killers. But with the right setup, it's super easy.
Thank you for your knowledge but have you lived in the cities you have invested that are far away from before or you just found great deals there and flew all the way? Have you ever needed to commute there for any. Problem. If yes can you please share your experience with me. I am really not sure if I can take this risk but the vancouver market is so over priced that i feel stuck in the middle.
One one way I really do want to invest in cities that the real estate do generate cash flow but also I am scared a bit from investing somewhere further.
@Soroush Mir Seraji You can definitely do it with the right team. It also depends a lot of what type of investing you want to do. For rentals I wouldn't buy anything without seeing it in person, otherwise you don't really know what you're buying.
On the other hand, if you're doing wholesale or lease option assignments then you don't even need to visit the city. For wholesale it's all about the numbers. And for lease options the only person that needs to physically view the property is the person who's going to be living there.
Originally posted by @Soroush Mir Seraji:
Hello
I am from Vancouver BC but the market here is extremely over priced and chances of finding rental properties with decent cash flow are not that high.
Recently I have been thinking of exploring other cities far from here. Possibly fourplex or something and then hiring a property manager to take care of my rental units.
Is that too risky? Does anyone have experience doing this?
Stick to your multi family idea. With normal vacancy the property is never totally empty.
Hi Soroush.
I have exactly the same challenge here in Ottawa. High property values make cash flow difficult. Values in many US markets are still attractive and investing there is possible with the right team in place. Having boots on the ground is the key. Feel free to PM me and I'll be glad to share my experience.
Stephen
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plenty of good opportunites in WA and OR you can drive to any of them in 2 to 5 hours max... or 30 minute flight. Also check out Kelowna and Vernon along with Kamloops those might give you a better go at it than Vancouver...
Risk is a relative term. What could be considered too risky for you would be normal for others.
I agree with the people above me saying that your risk factor is directly dependent on the team on the ground.
A few of ways to mitigate that risk are:
1) do serious research on the area you plan to invest. Don't buy off pictures, don't take anyone words for anything, trust but verify. Reach out to local RE clubs and ask for opinions about the neighborhood, the type of deals, expected cap etc. remember that there are local challenges you might jot be aware of such as flood insurance requirement or foundation issues (anyone said Texas?) etc.
I'd say even get on the road and get there. Nothing is better than your eyes.
2) vet the team. If you go with a realtor, verify he/she are the top agents in the market.
If you choose a property manager, ask for owner references etc.
3) build in extra padding. Plan for some serious issues that would need your time, maybe a flight down once a year to inspect the condition of the property yourself.
One last advice, trust your gut. If all the numbers add up and it looks great on paper but your gut tells you it's "something is off" walk away from the deal!
Good luck!
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to play devils advocate... I agree with everything you said.
What I want to point out is most folks look at proforma's and ONE very lacking item.. is the cost of travel to vette a property... Compared to buying a property were you can drive to in in an hour or two... and then if you need annual trips... same thing.
it cost 1k at least to make a trip from Vancouver to TX or any other state across the US.. and whole day there and back.. so that is one month cash flow eaten on the front end and if you make annual trips its one month each year.. so your fixed expenses just went up and your cash flow just went down.. If you factor that in ,,, instead of what most people do and do not factor it in.. your return is significantly less.
Now you could buy a property were your trip is also a holiday... So Vegas.. Orlando , Phoenix, LA SF... Miami,, Charleston , Hawaii those type of places you can just do your snowbird trip and check on your property while you taking your annual vacation. But if you buying in place's that have no real redeeming tourist value then its purely a business trip.
That's one point of view.
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your probably going to need to more your post over to the market place. Mods don't like self promotion on the open forum... Just and FYI
Yes,
Being overly excited and not reading all the posting guidelines first (men and instruction disease), I apologize. I will do what I can to editor remove my post. Thanks!!
I think all investing is risky, but great investors do everything they can to account for and lower the risk. That's why you hear a lot of discussion in BP about LLCs for legal risk, multifamilies to reduce vacancy risk, positive cash flow for paying the bills, fixed rate loans vs ARMs, due diligence about the neighborhood you are investing in, your rehab crew, your property manager, etc. At the end of the day, if you do your homework you can make a ton of money in real estate, but never completely without risk.
How are you getting a home turnkey to an end investor for $50k that rents in the $1,200 - $1,400 range? I am guessing that they are duplex's in the hood that you picked up for $5k-$10k. Also just my personal opinion but why make it so that in order to look at your properties on your site you force people to give you their info first? Let people window shop and if they want to be contacted they will contact you.
Hi Curt.
Well, anyone should be able to figure out the properties I mentioned are not overlooking the ocean in Santa Monica. These are single family homes in the NE in a market that has a very healthy rental market and we were able to pick up many of them all at one time and at a very good price. They are not in warzone areas, but they are in areas that are providing very generous ROI to those who invest.
As far as needing some basic information to look at our listings, we have not really had a problem with serious cash buyers willing to get on our mailing list and providing an email address. If they feel it is not for them, they can just opt out. In my next meeting with our CEO & marketing dept, I will mention your concern and let them decide if they would prefer to make them viewable without an email address.
Thanks for your input.
Not sure if this forum is still active. I'm also located in the Lower Mainland (Surrey) and I totally agree that the area is very difficult to make money. It's do-able (we own a rental house in Surrey) but you have to be very creative or have deep pockets. We own a fourplex in Windsor ON and a couple of properties in New Brunswick. It's worked out pretty well (not perfectly). I've found that having a totally trustworthy property management company or person is essential to remote buying, and in fact they may know of inside deals that are far better than the MLS. I've stuck to Canada because I don't know US real estate well enough.
The real estate opportunity is booming in more places than one! Definitely get yourself placed in the right communities and you will be just fine!
Personally, I have worked with investors that enjoy traveling to Kansas City and spending the day with my team and my market. This is a great way to see for yourself! I'm sure others would be available for doing this as well.
@Soroush Mir Seraji the key to successful long term rental investing in any market, whether local or out of state, is good property management in place. Poor management will annihilate the best property in the best market in the best circumstances. A poor manager can drive any investment into the ground in a short period of time.
Many other investors have chimed in on this thread and indicated you need a good local team or boots on the ground. They are correct. You need good management in place if you are going to invest outside your own market. While property managers are usually plentiful, good property managers are hard to come by in most areas. If/when you decide on a market to invest in, do your due diligence and perhaps ask other investors (here on BP too) about good management referrals where you are looking to invest. Aside from the numbers on the investment itself, good management is key.
Just my 2 cents. Best wishes in all your investing endeavors!
After you get a few referrals what are some other things you look for when finding a 'good management team'? I've found that reviews online don't help much since the only people that take the time to go on are the unsatisfied customers..