Why would you want to take the time and effort to acquire and manage real estate remotely?
Due to the demand, legislation, or tax laws, investing in your local real estate market is not always feasible. Remote real estate investing provides some distinct advantages that we discuss below. These advantages may provide the right mix of value and autonomy that you desire as you balance your investment strategy.
We featured this topic of discussion in a recent session of Royal Investing Group Mentoring. This session featured guest host Chris Weiler, who spoke in-depth about his experience investing in real estate opportunities outside of his immediate geographic location. Watch the Royal Investing replay.
When you invest in real estate remotely, vast swaths of markets become available. You are no longer looking at markets in your state but all 50 states. In some cases, you may be looking globally for deals. That means you will have more chances to find properties with favorable terms.
Suppose you live in California. Typically, an investment property in California will cost more than one in the South or the Midwest. For instance, California's median sales price is $505,000; in Ohio, the median sales price for a home is $145,700.
In reality, people in Ohio also have to find a place to live. If they can't buy, they will need to rent. As a California resident, you may want to stay local and purchase a single-family home for the median sales prices.
Or it might be financially sound to shift your investment to Ohio, where you could purchase three homes for the less. Then you could convert each of those homes into rental properties.
An unintended benefit of remote investing is that it's more passive. You won't be there to contribute your sweat equity. Instead, you will be able to find better and more profitable uses for your time–like finding more deals.
Here's the thing, you don't find the deals. To successfully invest and manage real estate remotely, you must establish a strong network of trusted partners. Networking is a critical step in increasing your net worth.
Partners include, but are not limited to:
Your partners should have skills and core competencies that you can leverage. Also, offering your partners an incentive to work with you is essential. It can't be a one-way relationship that only benefits you.
Another way that you could potentially find real estate opportunities is to look where you vacation. Investing where you enjoy visiting can be advantageous because:
All the day-to-day considerations are the responsibility of your partners. In other words, they are your boots on the ground. Preferably, you will provide strategic decisions and capital while your local network will handle the operational decisions.
Delegating requires a lot of trust and communication, which is why having a solid network is crucial to your success.
One thing that is non-negotiable for your success is following accounting and bookkeeping best practices. At a minimum, you and your network will need accounting practices to know:
Detailed and dedicated bookkeeping provides an accurate assessment of your ROI. It enables you to make the best decisions for your future. Since you are working remotely, you will need to do online accounting and bookkeeping. It's just more convenient.
Here is a list of accounting and bookkeeping products that may work for you:
When it's time to decide how to split the profits, everything is negotiable. There is so much fluidity because every situation is unique to you and your partner. A potential way to divide the profits is to structure the partnership based on each party's value to the deal.
One key fundamental is to get everything in an ironclad contract. A contract provides clear expectations about how the business should operate, who is responsible for what, and how you split profits. As an added protection, you might consider including an anti-embezzlement clause.
Scaling is entirely possible, but you have to make sure you delegate responsibly and appropriately. It's much easier to scale with a reliable and solid network.
In remote real estate investing, you exchange control for an opportunity. Protect yourself by being flexible and having multiple outs. You may decide to have plans to do the following:
Your decisions will rely on the market conditions and your discussions with your network of trusted professionals.
Some things may give you pause. You may not have the risk tolerance that remote real estate investing requires. After all, you may experience fear from being so far away to be on-site and control what's happening.
Another thing is that you have to be reliant on others and trust them to do their job right. That's tough because finding the right team can be challenging. When you find the right people, you still have to incentivize and grow the team.
If you have an internet connection, risk tolerance, and an ability to delegate, remote real estate investing might be right for you. To be successful, you will want to:
For more education about opportunities for real estate investors, join our Royal Investing Group Mentoring on Wednesdays at 12:30 p.m. EST. We meet weekly for an hour as a large group to learn, share, and collaborate on relevant topics in a fun and friendly format.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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