Have you seen that commercial for Red’s Apple Ale where the person is trying to decide which drink they would like when the red apple comes flying in, hits them in the head, and gives them the idea they need to ask for the Red’s Apple Ale? Well, I just had an apple moment, and I feel a little silly it took me this long to realize it.
As I was reading a new, cool article written by Sterling White on the BP blog, I realized that for many people, this article would appear eye opening, risky, bold, and dangerous.
This was the moment when the apple hit me square in the head.
You see, I buy properties sight unseen, too. In fact, the vast majority of what I buy is sight unseen. These days, it’s very rare if I ever see them. If I were to look back at the last time I saw a property before I bought it, it would have to have been over 5 years ago. And I’m not talking about turnkey properties. I’m talking about often nasty, ugly, gross, outcast, funky, needs-a-complete-rehab-from-head-to-toe type properties.
I’ve done it so often I don’t even really think about it anymore. That’s why this article struck me so soundly. I had quietly assumed everybody does this and it’s not a very big deal. Fact is, it’s no big deal to me, but that doesn’t mean everybody else feels the same.
When I tell people I do this, I pretty much universally encounter the same response:
“I have no idea how you do that! I don’t know, I just need to see the property with my own eyes. I need to drive by it and know it’s there. That’s just me.”
I can’t tell you exactly why this is so important to so many people, just that it is.
I’ve bought so many properties sight unseen that it has become the norm for me, and I am now writing a book for BP where I detail just how I do it. It’s never been a problem for me, and it appears I’ve taken for granted other people may not see it the same way.
I’d like to share a little insight behind the details of the book and introduce you to the idea that you may have been looking at real estate all wrong for a long time.
Opportunity presents itself when the paradigm shifts.
If I may, I’d like to share some reasons why there is very little value, if any, in seeing a property “with your own eyes.” I’d also like to share why I don’t need to, as well as why you may already be practicing this principle in a thousand other areas of your life without realizing about it. What sounds crazy at first quickly begins to sound silly when you look deep into it.
I’m pretty confident after this article some of your irrational fears and pre-conceived investing notions may get rocked a bit. 😉
And now, 7 reasons why you don’t need to see a house before you buy it.
1. Most of us aren’t appraisers or inspectors anyway.
This one is obvious, but for some reason people have a really hard time admitting it. Fact check, people. When the vast majority of us walk through a house, we don’t really know what we’re looking at. Not much, at least.
Now, of course some of us are more skilled or experienced than others. And most of us can spot mold, loose carpeting, bad tile work, a leaky faucet, etc. However, let me ask you — if you can see it, don’t you think the expert can see it just as easily? In fact, do you really think you are MORE likely to see it than the home inspector? And if you aren’t getting your home inspected, what the heck are you thinking in the first place!?
Hey, I know it is second nature to lift up the hood of the car and look at the engine when you’re buying one. We all do it. Especially if a girl is watching. But really, do you know what you’re looking at when you do? I sure don’t. And if you do, do you know enough to look at the deck or roof or bathroom and estimate the rehab costs in your head? And if so, do you really need to be there looking at it yourself to do that? I can do it just from looking at pictures, and I’m not afraid to admit it.
The truth is, there are so many checks and balances to a real estate transaction that you are going to get more information than you’re realistically going to look at. How many people do you think read Natural Hazard Disclosures from front to back? How many even know they are getting one?
Walking through a home to “check it out” is pretty much a useless practice and primarily done for emotional purposes. Your agent can walk the home for you. So can your propery manager or contractor. You wanting to do it serves very little realistic benefit to your business.
2. Homes don’t get sucked up and carried away by aliens.
But, David, it just makes me feel better to see the it and know the house is really there!
I know. It does. It’s a little weird committing this much money to something you haven’t even seen. But so what? What in real estate investing doesn’t feel scary when you first do it? Not knowing if your tenants will pay rent, not knowing if you’ll ever find a tenant, not knowing if a hurricane will suck your house up or if it will be used as a meth lab are all really scary thoughts at first.
But you get over them pretty quick when none of that happens, right? Soon enough, you realize there is a reason people are buying houses all over the country, renting them out, and the world keeps spinning anyway.
Of all the things I’m worried about when investing out of state, or investing in general, the house not actually existing is not one of them. Let me tell you why.
The lender sends an appraiser who has to find the actual house in order to appraise it.
If I’m not using a lender, an inspector still has to go by to find the actual house to inspect it. What’s more, he/she takes pictures of said house and includes them in the report. That would be tough to fake.
The title company does a lot of research to actually verify the house is indeed there, amongst other things.
Google Earth is now a thing. Tough to fool Google Earth.
My real estate agent goes and takes a video of the house and sends it to me. He/she isn’t smart enough to Photoshop the entire thing just to get a commission out of me when they could easily sell me some other house that actually exists for much less work.
My contractor would have to be a part of this elaborate ruse to sell me a home that doesn’t exist and it would be tough for him to make money charging me to fix drywall when no drywall exits. It would also be foolish of him to lose my next 10 deals to try and fool me on one.
Zillow, Trulia, and Realtor.com are now also things and can also verify that the house wasn’t sucked into an alien spaceship and disappeared before you closed!
3. Emotional investing is bad investing.
When you’re looking to buy the perfect house to raise your family, you want to see it yourself. One hundred percent for sure. The floor plan, the way the neighbors look, the color of the walls, where the TV will go. You want to make sure the house will work for your very specific, very unique, very custom needs. You want to feel in love with your house. I’m an agent. I help people do this all the time.
When you are buying a rental property, it’s different. The very last thing you want is to fall in love with it. Trust me.
Emotions make people do some weird, often dumb things. They can skew our decision-making and lead us in ways we know we shouldn’t have gone. When I talk to people about investments that went sideways and how it happened, I can inevitably tie it to an emotional connection they felt with the property. That connection served to connect them to the anchor that took them down to the bottom of the sea. Their mind could tell them to cut ties, but their heart just couldn’t bring them to use the knife. It’s not a positive thing to have an emotional connection to a rental property.
When I go look at a house, the odds of me really liking or really disliking it increase. They increase a lot. I may hate a specific floor plan because it reminds me of the house of an old friend whose mom was always mean to me. Or I may love a certain floor plan because it reminds me of Christmas at my grandparents’. Whatever my emotional response is, it’s likely not going to be objective and therefore not likely to be helpful.
I don’t want to feel an emotional connection to a rental property. I want to sell that sucker ASAP if I feel things going bad, and I want to keep it and ride that wave all the way to the top if I think prices are going to keep rising. I don’t want my own emotional bias to influence my business decisions. I know myself well enough to know that my emotions don’t often serve me well in business, and I respect that.
By NOT seeing a house and instead relying on the opinions of others, I decrease my odds of forming an unhealthy relationship to my business interests.
My real estate agent knows what floor plans tenants/buyers like. Her opinion matters much more to me than my own would.
My contractor knows what walls should come down, what the kitchen should look like, and how much money I need to redo the backyard and stay on budget. He knows the color of paint people like and the style of showers that make sense. His opinion matters more to me than designing a bathroom the same way the one in my own house looks because, of course, that’s the best.
My handyman knows what he can fix cheaply and what isn’t worth the time. My own preference shouldn’t influence this business decision.
My property manager knows if a second garage space would be worth more than converting it into a fourth bedroom. They know the area better than me. Whether or not I think two car garages are more valuable really doesn’t matter compared to what my PM thinks.
See what I’m getting at? Forming an emotional connection is unhealthy, foolish, and potentially dangerous. You need to know your numbers. You don’t need to know what kind of drapes the master bedroom has.
4. You should be working on your business, not in your business.
My, oh my. We as investors make this mistake. All. The. Time. While it can be fun to go change doorknobs, cut grass, or relight pilot lights, is it really the best use of your time?
Many people manage their own properties because they have no other option. I commend them for that.
Many people manage their own properties because they paid too much and have no choice. I sympathize with them over that.
Many people manage their own properties because they are too emotionally weak to let go and let someone else trust them. I am perplexed with them over that.
I invest in real estate to build wealth and make money. Not to give myself something to do, not to feel “needed” because my phone rings and I am so important I have to go save the day so my tenants don’t suffer, and certainly not to learn how to swing a hammer better. I do it because it’s an awesome wealth building vehicle. You know what else is an awesome wealth building vehicle? My job! Collecting rent is cool. Collecting rent while you also collect a paycheck is cooler.
Don’t forget why you’re doing this in the first place.
I seriously doubt the very best use of your time is putting the sliding glass door back on the rails when the tenant knocks it off. If it is, why not learn a way to make money yourself and hire a handyman for these things? Handymen need work, too! Think of the poor handyman and stop taking all his work. Go send some more direct mail letters, network some more, get a job, get a better job, or reread some of my blog posts. But don’t keep stealing a handyman’s work as if you’re doing something noble. Handymen all over the world are nodding in approval as they read this.
Work on your business, from above. See the big picture and do what only you can do. Don’t work in your business from below. There are other people better suited for that.
5. You’re already not looking at your investments in everything else.
So you just feel like you really need to see that house before you buy it, right? Well, did you drive to Cupertino to check out the Apple HQ before buying its stock? Did you meet the CEO of Ford before buying your car? Did you drive to the lot in Nebraska to see that the truck actually existed before ordering it from the dealership?
None of us is driving to the eBay warehouse to make sure that furniture exists before we order it. You are already not seeing things before you buy them all the time. When it’s something as expensive as a house, for some reason, we get all freaked out and weird.
Let me ask you, that bank that is lending you the money — do you think they aren’t pretty dang confident a property exits before funding hundreds of thousands of dollars into escrow?
You’re kidding yourself if you think little old you is going to prevent disaster by driving by a house to see it before you buy it. Don’t worry, people are taking care of it.
You never met Josh Dorkin or Brandon Turner, yet you listen to their podcast religiously (if you don’t, you should) and trust what they say. You never met me, but you’re reading this article. You never met Michael Jackson, but you trust that he sings “Beat It.” It’s totally OK to buy a house without seeing it. You need to do your due diligence. Seeing a house with your eyes does not need to be part of that.
6. You aren’t buying a house. You’re buying an income stream.
When buying investment property, it’s not the same as buying a home. You are buying an income stream. In essence, you are buying an asset (mostly with someone else’s money — the bank’s) in order to have the right to collect the income stream that asset produces (in this instance, the rent). That income stream is produced by the house itself sure, but the house isn’t what I care about. The rent is. I’m not going to go take bricks for the chimney for my own house, so I don’t need to see what they look like. I’m not going to take wood from the deck to rebuild my shed so I don’t need to smell it myself.
I want to know that this property will produce X amount of rent. I can look into that and verify whatever I need to without actually seeing the property. I buy almost everything I own without ever having seen it once. How do I know it exists? Because that rent just keeps coming in. Because the title company sends me a deed of trust. Because I keep getting pesky property tax bills from the county. Because the insurance sales guy sends someone buy to take a picture!
I bought the property to collect the cash flow from it, period. I bought in certain areas, certain neighborhoods, certain home styles, and certain states because I thought I could get a stronger, more consistent income stream. At its core, that’s what real estate investing is. It’s that simple.
All this talk, all these blog posts, all these podcasts, and all this wisdom is really nothing more than people explaining how they found properties that work this way and what they do to not lose money while doing it. Pretty simple when you think about it.
Once you realize that’s what you’re doing with real estate, it gets much easier to not care what the house looks like as much as what it’s worth, where it’s at, and what it produces.
7. You should focus on making money, not looking at stuff.
This one is pretty straightforward. Looking at a home is not making you money! Sure, one way to do it is to go check it out. If it’s nearby, why not? But if it’s not nearby, you don’t need to see it. Other people can do that and can do it just as good or better than you.
Related: Why It’s About to Become a LOT Easier to Invest From Afar in the Next 5-10 Years
Focus on what you’re good at. Not what makes you feel more comfortable. You’ll make more money that way. You’ll grow more that way. You’ll become more productive that way. You’ll end up a happier and more well rounded person that way.
The fact is, if you get really honest with yourself about why you would like to see a house before you buy it, it’s very hard to justify how you looking at it makes any difference in whether or not the place was a good buy. As real estate investors, we have all heard the stories of people too scared to invest in real estate because they don’t want a bad tenant, don’t want to fix toilets, or know someone who lost money in it. They use this fear as an excuse not to get involved, and they prefer to hold onto this fear rather than really question if their fears are legit and warranted.
You know why? Because they don’t want to find out that they are wrong. They would have to question their assumptions and possibly look at things differently. Hmmm…
Were they to ask you how you invest knowing what could go wrong, they would likely find that all their fears have a solution that you’ve come up with and the risk is really mitigated much more than they would have thought.
Buying a house sight unseen works the same way. Don’t hold onto baseless fears without challenging their validity. Technology has grown leaps and bounds, and it now takes so much of the risk that out-of-state investing once carried right out of the equation.
I have flipped homes in different states. I have rehabbed and kept homes in other states. I have put houses in contract, looked closer, and pulled out in other states. If you understand the process and the fundamentals, it doesn’t matter where the property is. This is investing. The numbers are what matter. Just the numbers.
Everything else is just tricks and tips we’ve learned over the years to make the numbers work better.
I challenge you to ask yourself what the real reason you would be concerned to buy a house site unseen is — and if that reason is worth the weight you give it.
Do you invest sight unseen? Why or why not?
Let me know your thoughts with a comment!