It’s the dream, isn’t it? Having a long distance real estate investing business…
To build a thriving real estate investing business, one that easily supports you and your family, one that you can manage from anywhere in the world.
You could be in the Bahamas with a laptop, phone, and WiFi, building your business, or you could be sitting on the couch at home…
That is the freedom of building a long distance real estate investing business.
But… is it really possible to build something like that?
Yes it is — plenty of investors have done it — and I’m going to show you the high-level steps for building your own long distance real estate investing business.
But first, let’s take a quick look at the primary pros and cons.
Pros & Cons of Owning a Long Distance Real Estate Investing Business
- You have access to the best real estate markets in the U.S. — When you’re building a long-distance real estate investing business, you have your pick of any market in the U.S. You’re not limited to the market in your own backyard, which may or may not be a fit for what you’re wanting to do. Since you have access to any market that you want to operate in, you can choose the best market in the country for what you’re wanting to do, which is certainly an advantage over local-only investors.
- You have the freedom to work wherever you want — This is the best part about long distance real estate investing. If you’re like most ambitious entrepreneurs, you don’t just want to build a business for the sake of building a business, you want freedom. And long distance real estate investing often provides more freedom upfront than local real estate investing, if for no other reason than your business is built to operate largely without you and you can manage it from anywhere in the world if you have a laptop and WiFi.
- You’ll have to heavily rely on others — If you like to have your hands in every detail of your business, then long distance real estate investing might be difficult for you. The only way to build a long distance investing business is to rely almost entirely on market experts, contractors, freelancers, and a property management company to manage your business for you. You’ll still be coordinating a lot of things, to be sure, but you won’t have boots on the ground. Still, most entrepreneur micro-managing tendencies can be mitigated by vetting and hiring trustworthy people.
- You’ll need to do more market research — Since you’ll be operating in a market that you probably know very little about right now, you’re going to have to do more research than you would for your local real estate market. You’ll have to call other investors and agents in the area to pick their brain and find pertinent statistics to ensure the market is a good place for your real estate investing business.
Now that you know the main pros and cons of building a long distance real estate investing business, let’s jump into the high-level steps.
Step #1: Choose a Market
The problem with choosing a market for your long distance real estate investing business is… there are tens of thousands of real estate markets in the U.S.! Each one has its own culture, housing metrics, good and bad neighborhoods, school systems, and attractions.
Your job is to learn as much about a market as you can before putting any money into it.
But how do you get rid of the shell shock of just how many options you have?
Here are some things you’ll want to look at when choosing a market.
For the most part, a fast growing, thriving population is good for your real estate investing business. That increasing population translates to faster appreciation and more housing demand. If a market is staying stagnant or is declining, then it’s best to steer clear and find a local market (go down to the county or city level) that people can’t seem to resist.
You can find out the population of almost any market with a quick Google Search.
Alternatively, you can search through data on The United States Census Bearau’s website.
Dependent on multiple industries
One way to ensure that your business doesn’t last long is to invest in a one-trick-industry market — that is, a market with only one big company or corporation supporting the employment rate.
That’s a recipe for an impending market crash.
Instead, choose a market with multiple strong industries and/or corporations supporting it. That will make for a much more stable market for your real estate investing business.
To determine what industries support a market, connect with other people in the area (real estate agents are great) and ask them. You can also use Google to do a chunk of your research if necessary. Also consider looking into the local unemployment rate and comparing that to the nation-wide average.
Parents want their kids to go to good schools. And if you invest into a neighborhood that has poor-quality schools with a bad reputation, you’re setting your business up to struggle.
Finding buyers or tenants for the properties that you own will be far more difficult than it needs to be if your properties are in an area with a low-quality school. But how do you check which schools are preferred by the local community?
Well, one of the best ways to find out is to call people in the area and ask them.
Or you can go to GreatSchools.Org and do all the research on your own.
Most people don’t want to live somewhere with high crime rates. Tenants typically will try to leave as quickly as possible and your pool of buyers immediately shrinks. Plus, appreciation won’t be as pretty, either.
So try to invest in an area with a crime rate that isn’t too terribly high.
You can determine a lot about an area’s crime rate with a quick Google Search.
Having a healthy vacancy rate is an absolute must for the market that you choose. Find a market with a vacancy rate that is similar to the national average or, ideally, a little bit better. The lower the vacancy rate on rentals and for-sale homes, the better for your business.
You can find loads of information over at Moving.com.
Step #2: Build Relationships With Local Real Estate Experts
“I have always believed that personal relationships are vital in business and that people should be directly accountable for their actions.” — Richard Branson
The best part about having a long distance real estate investing business is that you don’t have to be tied to living in one area. You can work from wherever you want, whenever you want.
But you will still need to enlist the help of local real estate experts, trustworthy contractors, and maybe even a property management company (depending on what kind of investing you’re planning to do).
In regards to that first one, the more local real estate experts that you network with, the more referrals you’ll generate, the more potential for longterm partnerships you’ll have, and the easier it’ll be to navigate market-specific regulations.
You might also consider using a real estate agent’s services to show your houses to potential tenants or buyers, as well, which gives you all the more reason to build meaningful relationships with local experts. You can start by calling other agents and investors in your chosen area of operation, introducing yourself, and telling them what you’re doing. You might be surprised at the opportunities that arise.
Step #3: Find Trustworthy Contractors
Like I mentioned earlier, in order to build and manage a long distance real estate investing business, you’re going to have to let other people do a lot of the work for you…
Which can be a great way to force yourself out of the I-must-do-everything entrepreneurial mindset if you tend to be a micro-manager. It’s also just a great way to build a business that doesn’t require you for every little task.
Still, you’re going to need trustworthy contractors who do what they say they’re going to do, charge a fair price, and can help you out whenever something happens to one of your properties.
Perhaps the best way to find contractors you can trust is to look at online reviews and ask for references from companies before working with them. You can use a website like Angie’s List to find contractors in your area of operation.
Step #4: Vet and Hire a Property Management Company
If you’re going to build a buy-and-hold real estate investing business long distance, then you’re definitely going to need a property management company to give you a hand. If you’re going to strictly wholesale, then you might be able to dodge this step.
In the case that you do need to hire a property management company, expect them to charge between 4% and 10% of your gross monthly income. Some will also be able to help you find tenants for an additional fee.
Property managers can do everything from filing taxes for the property to finding contractors for unexpected work and invoicing tenants. It’s up to you how much control you want them to have, but you’ll most certainly need their help if you’re going to hold any of your inventory. I’d start with a Google search for property management companies in your area of operation and I’d also ask local agents and investors if they have any recommendations.
Step #5: Set Up Clear-Cut Processes
When you’ve built a local real estate investing business, you can make up for a lot of half-assed processes. You can talk to tenants one-on-one, you can drive to the property if you need to, or go to the title company, and you can even try to fix things yourself.
But when you own a long distance real estate investing company, it’s absolutely critical that your processes are clear-cut and systematic. The better your processes for finding tenants, coordinating with your property management company, and finding contractors, the easier running your business is going to be (which is kind of the goal anyway).
Don’t cut corners, and don’t leave a bad process to fend for itself — it could cost you time and money in the long run, it could even topple your business if you’re not careful.
I like Michael Gerber’s explanation of how to build a business…
“Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.”
Is a Long Distance Real Estate Investing Business Right For You?
I can’t say one way or the other.
But I do hope that this article has helped you answer that question.
You now know the pros and cons of building a long distance real estate investing business.
You also know the high-level steps to build one. The only thing left to determine is… is a long distance real estate investing business right for you? Or would you be better off building a local business?
The choice is yours.
I’ll just say this: there’s almost just as much potential in building a long distance real estate investing business (if you do it right) and there is certainly far more freedom.
What do you think? What has experience taught you?
Is a local real estate business the way to go? Or can long distance real estate investing be just as lucrative and fulfilling?
Let me know in the comments!