Rehabing from a distance? - Posted by John08

import · April 22, 2006, 1:34am

Posted by John Corey on April 22, 2006 at 19:02:45:

John,

I am a believer in long distance investing. It has to be said it is not the same as investing locally. Both positives and negatives. Distance definitely does restrict or otherwise change how you invest.

It is unclear what your other time commitments are. Spending the time traveling is not that productive unless you want some extended tape/CD time in the truck.

Will the numbers work with a local partner?
Will you be able to go down one day and stay over until the next. Reducing the amount of travel time per visit while increasing the amount of time on-site.
If the market is slow compared to the local market make sure that it is only because of the difference in the number of investors hunting deals. I know some areas have too many investors chasing junk. In other areas there are deals to be had. It could also be true that the place with more deals has a problem in that people do not want to live there. Know the difference.
If you really want to invest at a distance find a way to do so without picking projects that are time consuming. I own property at a distance. I do not do rehab projects at a distance unless i have a local partner that I know well. I would rather have a new build unit in London England with a property manager as it is very turn key compared to a SFR where I need to chase the contractor to make sure the work is being done.

Now, if you are thinking of grabbing 10 at once and can afford to do so then maybe you can build a team, put in some extended visits for a period and then have 10 units that are more or less hands off (using a local property manager). Once the units are up and running an occasional check or maybe two property managers (5 each) where you can dump one if they mess up is a model to shoot for. Be prepared that if you have 10 units and the property manager changes hands or changes staff you might be looking at 10 problems. Be prepared to be back on the road or have the cash to take a short term hit.

John Corey

import · April 22, 2006, 1:34am

Rehabing from a distance? - Posted by John08

Posted by John08 on April 22, 2006 at 01:34:35:

The area where I live I can find places to rehab and sell for a profit. However, I am doing a lot of marketing and not exactly finding them coming out of the woodwork. While I plan to continue what I am doing in my area, it is not the volume I would like. An area around 2- 2.5 hrs a away has houses that are fixers that sit on the market forever. Here they sell immediately for fmv - repairs + a little (so I have to find ones here using marketing). But the ones 2.5 hrs away do not sell. So in that area it would be easy to buy them at a bigger discount (since the market is not so ridiculous), fix them and sell them. I am aware that the distance thing will be a bigger pain as far as making sure the contactors are doing their job. But I will not have to spend nearly as much time locating those deals as I do in my area, because they are plentiful. Anyone had any success or problems with a similar plan? And I do also plan to buy some rentals in that area as well. Very, very little appreciation, but some cashflow.

Thanks.

import · April 24, 2006, 9:36am

My advice… DON’T - Posted by Sean

Posted by Sean on April 24, 2006 at 09:36:57:

I see folks get clobbered with this approach, particularly newbies… even an experience investor can get killed witht his approach.

Now 2.5 hours driving time is close enough to physically get to the property occassionally, but its not close enough to where you are going to be able to effectively manage the job.

Let me explain how “out of town” investors get clobbered routinely where I live… they go onto EBAY, or a Foreclosure site and see a house selling for 20 or 30k… and can’t believe their eyes… a 4 or 5 bedroom brick victorian for only 30k?? And it only needs about 20-30k in work? What a freakin steal…after all in their market the house would be worth 300k… alas in this market, in the neighborhood its situated in, it might MIGHT be worth 40-50k TOPS assuming you can find a buyer.

Now, they go and try to find a contractor who is going to fix it up for them… now, since the great contractors are all booked solid with local folks who give them repeat business, they start calling names out of the yellow pages, and hire someone… They will never get the names or numbers of the really good guys, because those guys are all word of mouth, and frankly aren’t going to get involved in an obvious stinker project, because the likelyhood of them getting paid is dubious and they know it.

Now, they aren’t there to oversee the project, so when Mr. Contractor, even if you luck out and get a reliable one, gets a call from a job who’s going to pay him more… poof he’s gone and your project takes a back seat… that is of course assuming he just doesn’t go on a bender with the $$ you gave him to begin with…

Now you can’t get ahold of the contractor, have no idea that the house ISN’T being done, because you can’t see it, and then suddenly in the middle of all this reality strikes and it comes home to roost that they overpaid, they are being eaten alive in carrying costs, the works not being done, and even if it did get done they are going to lose money on this deal…

That’s when they call up the local investors clubs and try to pawn these dogs off on folks who actually live and work here and know the market hoping beyond hope that they can get out… And either take a complete bath selling it to someone local for a few thousand… or eventually lose the house to either the local government for back taxes, or to the bank they borrowed from to buy it.

Even if they buy right, they still often wind up being eaten alive by the contractor. Rehabbing requires hands on… you MUST ABSOLUTELY HAVE SOMEONE REPRESENTING YOU IN THE AREA WATCHING THE PROJECT! Without this, the odds of you being successful IMHO are next to nill…

It is very very difficult, to luck yourself into a contractor who is going to do what they say they are going to do in the time they say they are going to do it, for the cost they say they are going to do it, out of the box even if you live next door, let alone trying it from 100-200 or 1000 miles away.

Finding the deals in bad/slow markets is of course easy… but what good is a deal on something you can’t sell and are going to have to manage like hell when you rent it? Yea, it will cashflow, but you better be there on the first to hand collect your rent or it won’t be there on the 2nd… No, I’m not kidding. Deals are more readily available, but the overwhelming majority of them are in areas that even buy and holding is going to be management intensive… Do you know the area well enough to know a solid area vs a declining one? Can you spend the time effort and energy going to and from the property? for management and maintenance issues? Can you trust a local management company to do the job for you?

I am not opposed to going where the deals are, but just understand that what you perceive as a deal sitting at your desk hours away, may not be the deal you think it is.

Unless it was commercial grade project, I would not personally be investing in single family fix ups out of area, unless I had an established and reliable local beachhead in that area with folks working for me full time to look out for my interests. If I was debating single family out of area, I would be doing pretty properties that did not need fix ups, and could cashflow enough to justify a management companies expense… and then keep my eye on that company like a hawk.

import · April 22, 2006, 7:56am

John, think about this… - Posted by Clint

Posted by Clint on April 22, 2006 at 07:56:51:

You said, the ones 2.5 hours away don’t sell. If they don’t sell, what good does it do you to pour time + money into what you say already is not a winning proposition? Very little appreciation and SOME cash flow?

Perhaps you aren’t target marketing in your own city, quite correctly:

Mail to: Out of State/town owners
drive for dollars: Where is the ‘up and coming area’ in your town?
Look for: Urban Crawl…expansion; look at local trends.
Focus on: One thing, and do it VERY WELL.

You sound like a motivated buyer. Look twice before leaping; else caveat emptor.

Best of Luck,

Clint

import · April 22, 2006, 10:33am

Re: John, think about this… - Posted by John08

Posted by John08 on April 22, 2006 at 10:33:02:

What I meant to say is that the fixers do not sell very fast. There are not a lot of investors over there the way their is where I live. The fixed up homes do sell. My thinking was also to just go over there and snatch up around 10 houses very quickly and turn them into rentals. Hold them until they are paid off and it would be like a retirement income. Plus maybe do a few rehabs and retail those.
Though I do like your advice about mailing (I have been just doing lazy marketing, signs, ads, etc) and drive for dolloars.