7 Research Tips for Out-of-State Investment Properties

I received an excellent question recently from an investor in California who frequently reviews the "Pasteurized Property Listings" that I send out on a weekly basis. Right now, some of the areas that I recommend buying multifamily units are in Texas and Louisiana. I like the Lone Star state because of the job growth and migration of people into that area. I also recommend Baton Rouge, Louisiana, because of the low vacancies and tax incentives. If an investor purchases in a Go-Zone designated area, they are able to depreciate 50% of their property in the first year! Wow, this "accelerated appreciation" is a phenomenal tax break!

Here is his question:

Hi Linda,

Assuming I have found an apartment building for a great price and 100% occupancy in another state. How should I verify, for example, that the rent is what the owner is saying or if it really is 100% occupied and do other due diligence with me not being there physically?

Thank you,
Albert S.

Here are my 7 Tips for Out-of-State Success!

When an investor is so far away, it's important to do as much research as possible before hopping on a plane to the area. Not every property that looks good online will be worth the expense of an airfare and lodging. A property should be pre-screened to make sure it has the potential to be a good investment.

1. Check with the local sheriff's department to see if the area is crime-ridden or in a "blighted" area. Just call the closest law enforcement office nearest to the subject property. I always ask: Is this a gang-infested area? Is there a lot of crime in that vicinity?

I just tell them flat out: "Hello, Sir. I am an investor from California and I'm thinking about investing in your beautiful city. I was wondering if you could be so kind as to tell me if this is a good area, because I don't want to buy in a problematic neighborhood" (They will know what you mean). Be sure to thank them for their time as they are very busy people.

2. Do a search on Google Earth and find out was surrounds the subject property. Any good stores, restaurants, parks, schools, Starbucks? (just kidding, well sort of). My broker in Arizona told me about this one.

3. Do a demographic search of the surrounding area utilizing Loopnet.com -- If your subject property is not on Loopnet, just type in the zip code or find the next closest property listed on Loopnet.

4. Have the agent take photos of the inside and outside of the subject property -- they will do it if they want to sell the property, it's so easy now with technology.

5. Call local property managers BEFORE going into contract. Ask them straight out: "Is this in a decent area or will I have a problem with deadbeat tenants and a high turnover???" Remember, property managers want to avoid headaches. Some property managers refuse to handle certain areas -- can you guess why?

6. Get the property inspected. But call the property inspector and ask him questions not only about the building, but around the neighborhood. A good question to ask: "Would you live here if you had to live in an apartment?"

7. Be wary and do your due diligence: Visit the property first-hand!! I have never bought a property sight unseen. Many of my clients do and that is why I started this service, to help people with a busy schedule. But, I am a very picky investor and I don't sell what I would not buy -- many agents are unlike me. I always see my investments BEFORE I BUY. That way you can see firsthand the good the bad and the in-between.

I recommend spending about three days to really do your research. Try not to rush because when you are in a hurry, you may miss a few key things. Take your time, enjoy your stay and really get to know the area and the people. I suggest you meet two or three property managers PERSONALLY, meet your local insurance agent if possible, meet your broker and their staff, and perhaps squeeze in a few interviews with handymen or other service professionals or even other competing agents. Make them want your business and you will have their service when you need it.

REMEMBER: When you invest money into a property, you also need to make a commitment to the area, the community, and the people who call it their home.

These are my tips for long-distance landlording success. I've owned out-of-state apartment buildings in five states simultaneously. I've been a landlord in Los Angeles since the age of 25. Currently, I own apartment buildings in four states: California, Texas, Arizona and Louisiana.

I'm 100% fully occupied except I do have a vacancy coming up in mid-October at my building in Los Angeles. But, you have to take vacancies, leaks and evictions in stride. When one owns apartment buildings, you have your good days and bad ones, like in any other business.

I've assisted first-time buyers as well as seasoned investors through my network, http://www.cashflowcows.com/. I have also helped numerous real estate brokers, agents, loan officers, financial planners and attorneys in locating multi-family unit investments out of state for their clients.

Our network also helps monitor our clients' investments by communicating with property managers frequently and helping clients resolve any issues that may come along the way.

Sign up for our FREE e-mail alert service today at: http://www.cashflowcows.com/

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