Investing In Real Estate Remotely Part II
Last week we talked about remote real estate investing and some of its pros and cons. I decided to follow up on that article this week with a deeper look at HOW to invest in real estate remotely and share some tips I’ve learned from my experiences over the past several years. If you haven’t already read Part 1, I’d suggest doing so before we go any further. (https://www.irongallinvestments.com/post/investing-in-real-estate-remotely)
And now without further ado let’s get into the specifics of remote real estate investing.
The first step in investing remotely is selecting a market. I outlined some of my standard criteria for selecting a market in my blog post on "How To Select A Market"
(https://www.irongallinvestments.com/post/how-to-select-a-market) but I’ll summarize briefly here. Look for markets with population growth and job growth. If you’re just starting out I would recommend focusing on one, or maybe two markets at most. You don’t want to overwhelm yourself - evaluating one market is hard enough. I should mention as well, one of the elements of research is going to be reading up on applicable laws in your investment area as they may be different from your local area. If you’re not sure which laws are applicable or where to look, find a local real estate lawyer and pay for an hour of their time to go over local laws.
When you’ve identified your market and done some preliminary research, it’s time to look at what asset type you’re going to focus on. When investing remotely, you can purchase all of the same kinds of properties as you could in your local market. This can include brand new single family homes, single family flip properties, multifamily, commercial, retail, industrial, vacation property, and many other types. Whatever your decision is, the most important ingredient for success is going to be your team. If you’re going to build a team from scratch (as opposed to investing with an established team), you’re going to need at minimum a
Property Manager - Your property manager will be handling the day to day operations for you. Choose wisely as a poor property manager can lead to increased turnover, high repair bills, and a lack of prompt communication about your investments.
Contractor or Handyman - Your contractor or handyman is going to be in charge of handling the repairs that come up at your properties. Often property managers can recommend workers but I always prefer to source my own handymen to prevent conflicts of interest
Agent, Broker, Wholesaler, or other source of leads - You are going to need a source for property leads but be sure when selecting someone, especially an agent or broker, that they work with investors and not residential end buyers. You are looking for an investment, not a dream home and therefore will have different criteria to follow and strict numbers you will need to hit.
Lender - You’re going to need a lender that knows your market. Big banks like Chase or Wells Fargo lend nationwide but I’ve found you can get much better deals from local or regional banks that work within a smaller geographic region. They’re often happy to have your business and can be more flexible as far as helping you get deals done. They may even know other local investors who you can connect with.
As I stated in last weeks article, your team can make or break you so be sure to spend the time up front to select the right people for your team. Thoroughly vet everyone on your team and be prepared to speak with several people before finding the right fit. Always remember, real estate is a people business so don’t be afraid to network and put yourself out there. Us investors are a pretty friendly bunch and usually happy to refer people when needed.
Once you have your team in place you won't need to visit your properties or market very often as nearly everything can be handled remotely. Although this may sound pretty hands off, remember that you still need to follow up with your team regularly. These days it’s pretty easy to monitor your team and verify that work has been completed by using photos and video conferencing. With email and scanners you can have financial statements and receipts sent to you instantly for you to review and document properly and tools like docusign allow you to sign contracts and work orders remotely.
I’ll give you a real life example of how this can work. The first two properties I purchased in Kansas City were done 100% remotely. The leads were sent to me by wholesalers. I reviewed the photos and pulled comps in the area. When I was sure the properties were a good price, I had the paperwork sent to a local title company and signed remotely to put the property under contract. My contractor walked the property and gave me a list of needed repairs. Once the property closed, my contractor performed the work needed to bring the property to a rentable condition (I made a judgement call that the giant aquarium of dead fish left in the living room of one house was not going to be a great selling point…) and sent me photos to confirm the work. Once the properties were all fixed up I began to market them online through various listing platforms and soon found tenants. I was able to screen them remotely and decide who I wanted to rent to. I made the choice to find and screen tenants myself and my property manager only handled getting them set up in the houses. From then on my property manager handled everything and sent me monthly updates while I devoted my time to finding new properties. When I sold those two properties two years later, I handled the entire process remotely and even sold one with the tenants still in place.
I’ve followed this same process of building teams and purchasing properties with multiple asset types including single family homes, multifamily, mobile home parks, and new development projects and you can too.
As always, if you have any questions or want to talk further about investing remotely feel free to reach out to us here at IronGall Investments. Happy Investing!