Tips For Flipping Real Estate Remotely
by Mike Humphrey, Senior Tax Lien & Real Estate Adviser
Do you wish you could invest in other real estate markets, but every time you want to move forward fear causes you to walk away? You aren’t alone, most real estate investors know there are better markets to capitalize on but can never get past their questions regarding how they will effectively manage their investments.
Although there are many valid questions and concerns, they can be mitigated and managed just like anything else in life. My first investment property was 723 miles from my home. It was a tad bit far for me to go run by each week and see how things were progressing! It drove me absolutely insane and scared the heck out of me at first, but now I absolutely LOVE investing long distance so much that I have never invested in my local market.
So what changed and how can you learn to love long distance investing too?
- Find an amazing realtor
It starts with 1 team member. For most of us that begins with a realtor. Not just any realtor, an amazing realtor. I spend a lot of time when moving into a new market finding a realtor that is going to fit my needs. On average I would say I reach out to 25-30 realtors before I find the right one. Once you find a realtor that has experience working with out of state clients, things get much easier. Inspectors, contractors, property management, title companies, all have come from my realtor. A good realtor knows that if I am successful then they will be successful too, so it is in their best interest to provide me with the best people in their local area. The more houses I flip, the better I do, the more commissions they make.
- Manage your contractor
This does not mean MICRO-manage your contractor. There are things that you need to do though to protect yourself and manage expectations. The number one thing you can do is to have all pertinent info in writing. I can’t remember half of what I said a week ago so why should I be surprised when my contractor can’t remember a conversation we had 30 days ago at the start of a project? You likely are not the only job they have going at the same time and memory get blurry over time. I have a lot of telephone conversations discussing what type of rehab I expect and materials used, and I always follow it up with an email (or modified quote he/she provides). For example, I will send an email that says, “per our conversation today, you are going to include a stainless steel dishwasher at no additional cost.” This way if the contractor forgets there is something in writing that can confirm that was part of the rehab.
- Don’t let the small things discourage you, learn from them and get better over time
One of the biggest frustrations I had on my first project was getting the water hooked up. The contractor didn’t need water while he was there and I didn’t think anything of it. After the rehab was complete I called the local water company only to find out they provide a 2 business day window (8am – 5pm) for hookup and an adult 18 or older has to be present when they arrive. Since the rehab was complete I had no way to start the water service without paying someone to be there for 2 days straight waiting for them to show up. After that painful experience ALL utility hookups are scheduled within the first week of the rehab so I know it will be completed while workers are present. In addition, it just makes good business sense. If there is a small leak they can correct it during the rehab instead of after completion.
- Find ways to review the progress without having to be there
Initially I started out hiring a local to take photos and videos of the progress every couple of weeks and send them so I could review the progress. It was much cheaper than a plane ticket and less time consuming too. I also had the contractor send me photos regularly as well. On my next project that is starting in a week I will have internet service installed at the property which will allow me to use cameras to stay informed. I will setup both internal and external cameras that will provide real time video feeds and alerts when motion is detected straight to my phone. This will not only allow me to see progress but also provide additional security for my investment.
Long distance investing has proven to be an amazing wealth builder that any investor can incorporate into their investment portfolios. Best of all, it will allow you to spend more time with family, your hobbies, and other revenue streams (such as your day job). Flipping real estate remotely is totally possible, but it is crucial to remember the importance of due diligence in this process.