Think about the purchases you make—big or small. We don’t often like to buy anything without seeing it first! Whether it’s a new car or a bunch of bananas, there’s a certain level of inspection we like to give anything and everything.
So for real estate investors, the notion that we would buy an investment property without seeing it first seems insane and off-putting. How can you possibly buy something that big and important without seeing it for yourself!?
Believe it or not, plenty of real estate investors do just that, and it works out fine for them. This divide usually crops up between the investors who remain in their local real estate markets and those who expand their reach into out-of-state markets.
It’s not really feasible for an investor to fly out every time he finds a new property that he might want to make an offer on! For out-of-state investing, buying sight unseen is pretty much unavoidable. But it can also cause some stress and anxiety.
Investors may be worried about getting scammed, ending up with a property that’s not as-advertised, or just generally being on unsteady ground. But does it really have to be that way? If you’re an investor concerned about buying a rental property without seeing it first, these steps should put your mind at ease!
5 Keys to Buying an Investment Property Sight Unseen
Focus on the Real Numbers
One of the best things you can do for any real estate investment, regardless of location or whether or not you can see it in person, is to focus on the real numbers. The numbers, ultimately, are what can best guide your success. Not what a property looks like. Not even what condition it’s in. It all comes down to the numbers.
Think about who you are reviewing properties with. What is their reputation? How long have they been in business? Does the story they tell you about their company and how they provide their services, match your expectations from the numbers on the property.
There are plenty of companies that talk a great talk today about running turnkey operations and offering great investment properties. When you look at the number and listen to the story it sounds like a great deal. When you did into the company and plug in real numbers, you start to take the shine off that property. You start to see that their numbers are not real. They have not been in business long enough to accurately tell you what capex, vacancy and maintenance are going to be or they do not have a team big enough to provide the great service they love to talk about.
You don’t need to see a property in person to know that a property will not perform as good as the rosy numbers companies provide.
Find Close Contacts
If it’s not enough for you to focus on number-crunching, find people on the ground that you can trust! For most of our readers, those are going to be long-operating passive investment companies. They will know the sources for properties, the contractors, inspectors, appraisers, agents...people that can be your eyes and ears on the ground in the markets that you want to be in. They will already have the teams in place and the years of experience working in a market.
If you trust your network, they can put your mind at ease about the investment opportunities. They can also help you learn about the markets you want to be in, which is ultimately going to help you feel more at ease buying properties in out-of-state markets in the first place.
After having been in business for going on 14 years, Memphis Invest has researched dozens of investment markets and built incredible teams in three great cities. Memphis is where the company started and we continue to be the foremost experts on how to make properties actually perform in this market. The three Clothier sons were all born in Texas, where Kent Clothier Sr. first entered the entrepreneurial world. So naturally, Dallas and Houston became our next two markets and we are actively looking in Texas for our next investment city.
We are busy building the teams that you need to feel comfortable and as an investor, you get to take advantage of our scale. We are actively rehabbing over 200 properties and are buying between 15 and 17 new properties each week. That gives you a tremendous advantage as an investor. This is the type of team you are looking for when you go to out of state markets.
Lean on Market Experience
Speaking of market experience, it is one of the most beneficial ways for real estate investors to buy rental properties. If you know the market: where it’s heading, how properties are appreciating, what neighborhoods are up-and-coming, what the demographics are like, how the population is growing…it all adds up to a big advantage!
When you know these things, you can make more comfortable predictions (based on your real numbers!) about the properties you want to buy. Market experience is a great asset. Don’t squander it.
These are the types of numbers that great investment companies are going to be intimately familiar with and will be able to share. It is not enough for a company to say "we've been in business for a few years and do great work". They have to be able to demonstrate it and properties under management is a great number to look at. No matter the story you are told, if they have not been in business for over 10 years and managing over 2,000 properties, they are going to have a tough time giving you an accurate, historical perspective on your next investment.
Forget Emotional Impulses
Emotional investing is such a stumbling block!
Maybe you’re charmed by the potential in a particular piece of property and you just have to have it. Maybe it reminds you of your childhood home. Maybe it was the incredible sales pitch. Or better yet, they are offering a Black Friday special or a "2 for1" sale!
Whatever the reason, emotional investing can cause investors to buy dud properties that just drag down their investing careers. Great sales persons know how to capitalize on the fear of losing and convince you that a highly questionable investment property wrapped in a pretty bow and priced to move fast is a better investment simply because it is cheap. That is the most dangerous investment you can make.
Emotional investing makes you attached to the emotional feeling or the physical building rather than the earning potential—and that can be dangerous!
The only emotion an investor should pay attention to is the emotion of comfort. That feeling you get when you know that your investment is in a great location, has been renovated to the highest level and is managed by an experienced company. That is not an emotion that is sold. That is an emotion that settles in when an investor has done their homework and asked all the questions they need to ask through due diligence and come away knowing their investment is in secure hands. Anything other than that and you need to keep looking!
Turnkey Company Partners
For real estate investors looking to invest out-of-state, one of your greatest assets for finding, acquiring, and managing rental properties is a turnkey real estate company. Not the fake turnkey companies that use the word to market to investors. Not the companies that say they will hook you up with great partners, but in fact have no real connection to the properties.
No, you are looking for a truly passive company where they purchase the properties for themselves first. They fund the entire rehab themselves. They hold the properties in their portfolio while the renovation is taking place and they offer a property management experience because they own the management company themselves!
Any other version is not a true turnkey opportunity and you need to keep looking if you want a high level of comfort in your passive investment. Companies like the one i described, if they have been in business for a long enough period of time, have already curated cash flow positive properties ripe for the picking and built all of the teams and services that you need!
The majority of Memphis Invest' investors are out-of-state—and are trusting our expert teams with their properties! When you have a trusted turnkey partner, buying sight unseen isn’t an issue. You can rest easy knowing that your investments are not only real, but that they are well taken care of after they are yours.
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