All Forum Posts by: Jack Medford

Start with David Greene's book "Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties." That will give you a good sense of what it takes to setup a long-distance portfolio. 

As others have said, take some time to research markets before jumping in. There is some "conventional wisdom" as to what to look for in a market, but honestly, it comes down to preference. I currently invest in Milwaukee and Rock County Wisconsin because the rent to cost ratio is pretty hard to beat. I've found PM and contractors in each location to allow me to invest while rarely visiting the markets. There are other markets (primarily in the Midwest) that will show similar numbers to these. 

I consider the team even more important than the market. You could pick the best market, but have a horrible team, and find yourself losing money. Conversely, you can have a horrible market (by conventional standards) but an amazing team that knows how to rock that market. The team is what is going to make you either uneasy or comforted. 

@Yaniv Kehat If you are looking for buy and holds, try connecting with @Matt Maurice. He runs a PM company in Milwaukee that also helping investors find properties and then handles the rehabs. I've used them for a coupe of properties now. Mainly for the managing side, but also for rehab and maintenance work. 

@Matthew Meunier is another agent I've spoken with a number of times who also works within a PM scope. I do not know his capability for rehab, but he could be a good resource for you. 

I've used U.S. Bank for my loans recently, and they do not jack up the rates based on the lower loan amount. I cannot say whether this is a company wide policy, or if I've just been lucky with my local branch. For reference, I just closed on a property Friday that was purchased for $110k. US Bank only required 20% down and financed it at 5.5%. This is for a 5 year term amortized over 25 years. 

A great is one that I feel is honest and trustworthy. I see tons of wholesalers try and polish up their numbers and make the property look like a better buy than it is. I know that this is not unique to wholesalers, but to anybody selling anything. However, strictly speaking about wholesaling, I'll avoid any deal from a wholesaler that I've found to be using unrealistic numbers to analyze a deal. Whether it is from ignorance or they are purely trying to deceive an unwitting buyer doesn't really matter. I've found inaccurately listed properties to be a huge waste of time. 

I'm particularly sensitive to this because I live 1.5 hours from the market I invest. This means I have to dedicate at least half a day to driving down and verifying the condition of the property. If I show up and find out within 1 minute that the numbers are way off and the deal is actually a stinker, I wont be particularly happy with that seller (wholesaler, regular agent, or even FSBO for that matter).

@Niels Bjørn Toppenberg The big lesson was: Don't ignore the red flags just because there are a couple green ones. The signs were there early on that this deal was not going to work, but we focused on all the reasons why it could be great for us. We were pressing a little bit, trying to find deals where they didn't exist. 

The other big lesson was to restructure my goals. My first property was bought while doing the 90 day challenge Brandon put out there (buy 1 property in 90 days). I took a similar approach after that. My goals were structured: Buy X number of properties in X amount of time. This lead me to try to force the numbers to work so I could hit my purchase target. 

I've since changed my goals to analyze a certain number of properties. Right now, I am analyzing at least 1 deal a day (usually more, but that is the minimum). On top of that, I'm commenting on BP at least once a day. Doing these things wont guarantee me a property by a certain date. However, they also wont push me into a deal that doesn't look right. I'm hoping the consistency pays off in the long run. 

Congrats on stepping away from a deal that wasn't right for you. In the grand scheme of things, $1,000 is not a big hit. Still, some people would be caught up in the sunk cost fallacy and would still pursue the deal. 

For my story... My partner and I were looking to scale up and found two 4-plexes right next to each other for sale by the same owner. Looked like a good value add opportunity on the surface. We put in an offer and got an inspection, but that is when everything  unravels. We find a lot more deferred maintenance than expected, making the initial offer look pretty unfavorable.  

More troubling than that was that every single tenant was a member of the Laotian community (as was the owner). Most did not speak a word of English. We realized as we went through each unit that we'd likely be unable to communicate with these tenants, which would make management a nightmare. We also thought it might be a possibility that the tenants would all leave if new ownership took over (especially if ownership was a couple white guys trying to raise rent). 

Overall, we spent about $650 on inspection fees and then didn't even bother countering at a lower price. 

I'll diverge slightly from the majority opinion here and suggest investing outside of your local market is not necessarily a terrible idea when starting out. That's how I got my start, and I've been happy so far. I live in Madison, but my first investment was in Racine, which is a 2 hour drive. Every investment since then has been in Milwaukee, a 1.5 hour drive. 

These are not close enough to home for me to manage, so I've treated them very much like an out of state rental. The big difference being that i can take a day to go to these markets if I choose, which would not be the case for you if you invested outside of driving distance. 

Going outside of your market is scary due to the added risk. The farther you go, the more risk. Maybe consider looking at markets that are outside of Chicago, but still close enough for you to visit on a day trip, or even weekend getaway? Milwaukee, for instance, has great rent to price ratios. Janesville and Beloit are two other markets that have been catching my eye lately. I know of other investors who love the Quad cities. Plenty of places close enough for you to get comfortable with "long-distance" investing, while still providing the security of knowing you can drive there in a few hours if you absolutely had to. 

I purchased two properties without an LLC. One was within a partnership and the other was on my own. Both were paid for in cash. I then sold the second one to the LLC I formed with a new partner, and have since acquired two more.

All three of these properties in the LLC have commercial debt in place.

@Scott Mac That was my general impression as well, but wanted to get other opinions. Thanks for the input!

I live about 1.5 away from my primary investment market, so I tend to treat it as if I'm investing out of state (out of market or whatever you want to call it.) 

When I was getting started, I had very little clue what I was doing. I started by looking for deals and then trying to put the other pieces together as I went. It worked ok, but definitely could have been more efficient. Since then, I've found Property Managers to be the best source of information and education about the market. 

That said, I'm interested to hear who others think is the first person you should reach out to when getting started in an unknown market. Or whether or not it should be more of a shotgun approach and talk to everyone up front?

David Greene lists the core four as:

• The Deal Finder
• The Property Manager
• The Contractor
• The Lender

Who would you consider the most important person to reach out to first? Or would you reach out to someone else entirely?