Investors are no longer limited to local properties, and investing in properties outside of a local market is not only possibly, but profitable as well
Investing in real estate over long distances was once huge risk. Travel costs to see a potential property could be upwards of hundreds or even thousands of dollars, and it used to be much easier for investors to get duped by altered images of the property or by faceless, dishonest agents who saw opportunity to take advantage of investors who lived elsewhere.
Now, however, investing in properties from afar is a much less risky proposition, and a way that many savvy investors are diversifying. Sharestates explains why long-distance real estate investing isn’t risky today.
The first reason is that access to the internet has made researching real estate easy and accessible.
“You can do practically all of your due diligence online without proprietary information from professionals involved in the transactions,” Sharestates writes.
Rent estimates are also much easier to find nowadays. Sharestates recommends simply contacting a landlord of a property and ask about the rental options. Before looking at properties, investors can email several landlords in a prospective city in order to get a good idea of rents in the area or search for aggregate reports published by brokerages that operate in the area.
Clearly understanding and confirming the conditions of a property is also easier than ever as it’s now common to deliver video walk-throughs on properties online. “Everyone in the industry is doing it,” said Sharestates.
Access to online reviews through Yelp, Google, Yahoo!, and other sites also allow investors to check property reputations and minimize the chances of working with people who are notorious for doing bad deals. The ability to post pictures to these and other online sites has made it much easier for investors to know more about the people involved in a deal and more specifics about the property or properties in question.
“If you’re trying to sell a property from a distance, you’ll need someone local to show the property to potential buyers,” Sharestates writes. Rental apps such as Zillow, Trulia, and Realtor.com also allow investors to investigate real estate agents in more detail and also find comps with ease by checking the list prices of similar properties nearby. MLS-only comps? No longer necessary.
In spite of the ease and convenience that the internet has brought to the world of property investing, Sharestates advises investors to do their due diligence while trusting the marketplace.
“Just because information can be found easily online, doesn’t mean you shouldn’t think like an investor,” Sharestates writes. “Your job is to find reasons not to invest in a property, so don’t just accept the rosy picture listings and online photos show you.”
Investors should still find a trustworthy local source in the desired area who can potentially visit and screen properties in the event that the investor can’t do so. This person is usually called a ‘bird dog’ and is someone who can meet with agents, capture original photos and provide insight and other information that’s difficult to glean from afar.
Sharestates also recommends that investors check comps at popular real estate portals which will help investors understand a particular market—but beware to not use this to determine ARV or LTV. Do the math based on real and verifiable data.
Online marketplaces vet properties, sellers, borrowers, and property sponsors for an investor. Look for platforms with solid underwriting and risk assessment procedures. This can be fun, lucrative, and potentially diversify an investment portfolio for short and long-term gains.
