Before 1990, if you wanted to invest in real estate someplace other than where you live, it was a huge risk. You either had to spend hundreds or thousands of dollars to travel to the location where you were considering investing just so you could get eyes on the property or you had to trust someone close enough to the property, to be honest with you and email you photographs of the property that you hoped weren’t Photoshopped. Today, long-distance real estate investing isn’t nearly as risky. Here’s why.
7 Practical Reasons Long-Distance Real Estate Investing is a Charm
BiggerPockets podcast co-host David Greene wrote an article detailing seven reasons why long-distance real estate investing isn’t risky. Here’s a summary of his talking points:
1. The Internet makes real estate research easy and accessible. You can do practically all of your due diligence online without proprietary information from professionals involved in the transactions.
2. Finding rent estimates is easy. Greene recommends emailing a landlord of a property listed on Craigslist and asking about the rent. In fact, you can email several landlords in a city you’re interested in investing in to get a good idea of rents in the area or search for aggregate reports published by brokerages that operate in the area.
3. Confirming property condition is a cinch. It’s common practice today to perform video walk-throughs on properties and post them online. Everyone in the industry is doing it.
4. Online reviews allow you to check reputations. Yelp, Google, Yahoo!, and other online review sites keep people honest.
5. You can research real estate agents on Zillow. If you’re trying to sell a property from a distance, you’ll need someone local to show the property to potential buyers. Zillow can make your search for an agent easy.
6. Pictures are posted online to make it easy to see what you’re getting into.
7. You can find your own comps at places like Zillow, Trulia, and Realtor.com. No longer do you have to rely on an agent to run MLS comps. You can perform your own comp research by checking on list prices of similar properties nearby.
Due Diligence: Perform Your Own, Or Trust a Marketplace
None of this is to say that you’re off the hook in performing due diligence. Just because information can be found easily online, doesn’t mean you shouldn’t think like an investor. Your job is to find reasons not to invest in a property, so don’t just accept the rosy picture that listings and online photos show you. Dig a little deeper and get the real scoop.
If you do a lot of investing in one area, even if it’s long-distance, try to find someone you trust in that area who understands your investing criteria and get them to screen the properties for you. That person, called a bird dog, can meet with agents on your behalf, take photos with their smartphone, and perform preliminary research that is biased toward information relevant and important to you as an investor.
Checking comps at popular real estate portals may help you better understand a particular market, but it shouldn’t be used to determine ARV and LTV. You still want to do the math and base it on real, verifiable data.
Finally, the eighth reason long-distance real estate investing isn’t as risky as it used to be is because of online marketplaces like Sharestates vet properties, sellers, borrowers, and property sponsors for you. A platform with solid underwriting and risk assessment procedures help investors find good deals and, in many cases, put their own skin in the game. If you perform your due diligence on the platform, online real estate investing can be fun, lucrative, and help you diversify your portfolio for short-term and long-term gains.