Posted by Ed on August 02, 2003 at 09:51:01:
Some quick thoughts - It wasn’t clear from your post whether you’re talking about smaller bldgs or bigger, commercial bldgs. You posted in the Commercial forum, but you said you’re a first-time investor. So I’m going to assume you’re interested in smaller, residential properties.
I could give you some thoughts about the smaller bldgs. I own out of state properties, but mine are all small - under 4 units, not larger ones.
I assume your first properties will be residential, vs. commercial properties. So if you haven’t already, put this post on the ‘general’ forum.
You raise a good question, and with improvements in Internet capabilities, this question will continue to come up more and more. Particularly from folks in areas like yours.
When starting out, consider not going too far away from home if possible. For example most buy-and-hold gurus say buy half an hour away from home. Are there any areas say 1-3 hours from you that you could look into? That way you can get your feet wet with long distance deals but at the same time still travel to the properties and property mgrs when you have to.
I bought in a smaller town in central California 5-6 years ago and was able to do well away from the real big cities. Thay may have changed now, not sure.
Also look in areas where you already have some contacts, such as relatives or friends, who could do some limited bird-dogging for you, or act as a local agent to inspect something for you if needed.
The Internet can be used in a lot to ways look at some areas, properties, etc. and learn a lot about certain areas. Also other ‘minor’ equipment you probably already have if you’ve done any REI will become vital, such as a fax machine.
I’m also assuming from your post that you intend to hire on property mgmt, rather than try to manage them yourself long distance. Again I’m assuming you’re looking at small bldgs, not big ones.
My impression is a property mgr is like a spouse in one way - a good one beats not not having one at all, which beats a bad one.
Therefore your property mgmt will make you or break you. On this website (in the general forum) do an archive search under 'Property Mgmt" and you’ll get postings about it. One post ( I forget where) had an extremely long, exhaustive list of questions to ask prospective property mgrs when you interview them (and do that in person, regardless of how far you have to travel). Also ensure you have references from them, and diligently contact those references - you will likely find someone like yourself who is geographically far away from the properties. You can ask those owners how responsive the manager is to someone out of state.
Also if you get serious about long-distance buying, have a backup plan for property mgmt. One day a property mgr across the country frm where I lived - best one I’d ever had - rolled over and nearly died of a heart attack. Besides almost losing a great friend, that could have been a major financial mess for me. If you buy-and-hold and own more than a couple properties in one area, always interview with the idea of having a backup mgr that you you’d feel comfortable with hiring on on short notice.
As far as REI long-distance in general, I think it was Bill Gates who said the one thing that is fulfilling Adam Smith’s vision of the perfect free market more than any other invention is the Internet, and that applies to Real Estate too. I’m convinced people will more and more overcome geography to look at properties much farther away from home (especially those from California). Good luck.