Buying an Investment Property Sight Unseen

A little over a year ago, I purchased an investment property in Kansas City, Missouri. I have never been to Kansas City, Missouri. I bought the property sight unseen. I live in New York City and can’t afford rental property in this area so I decided to invest out-of-state where the numbers make more sense. I am a risk averse person and buying something sight unseen sounded crazy. I just didn’t have to time to fly out there to see the property personally. However, ultimately, I determined that me physically going to the location wouldn’t have made that much of a difference. Was it really necessary to drive around the neighborhoods, look at houses, and speak to the staff of company I was looking to purchase my investment from? With the power of the internet, I can research the neighborhoods, look at pictures and videos of the houses, and speak to the staff of the real estate investment company over the phone. I know very little about housing construction and the extent of my home improvement skills is changing a light bulb and hammering a nail into the wall. Yes, it is pretty pathetic. I am much better off in leaving this to the experts.

Here is what I did instead:

First, when choosing someone to work with, I went to the forums of Biggerpockets. There are many people asking for references and a few names consistently came up as being trustworthy. I contacted the people who gave the good reviews and asked them more specific questions about how their investment was going. I googled those companies and checked if there were complaints on BBB. The most important thing when investing (and especially when investing out-of-state) is to trust the person you are working with. And even if you do trust the person, you must always make sure to the best of your ability that what they are saying is true. Trust, but verify!

After narrowing down the companies that had great reviews, I contacted them and asked them more specific questions regarding the investment. If the person I spoke to take forever to reply to e-mails or phone calls or if they sound shady or overly optimistic about their investment, sounding like they were making a sales pitch, I’d be less inclined to work with them. Sure, an in-person meeting may be slightly better way to determine whether one can be trusted, but I don’t think it was absolutely necessary.

Researching the neighborhood and property:

Zillow: This is one of the best tools giving you a good amount of information about the property and neighborhood. It will provide you with a “Zestimate” which is their estimate as to the approximate value of the property. They seem to do a pretty good job estimating how much the property is worth. You can also look at the comparable sales in the neighborhood. There are also ratings for the schools in the neighborhood. Another great tool that Zillow has is their rent zestimate which estimates the amount of rent you can probably get from that property. It is a pretty good estimation but also check out Rentometer, which also gives a rent estimate. Another thing you can do is to call up local property managers and ask them how much rent they think you can charge for that property.

Trulia: It provides similar information to Zillow, but I like using Zillow better. I do like Trulia’s Crime Map which shows the amount of reported crimes in that neighborhood. It also has information about demographics as well as average commute time and businesses in the neighborhood. For more information about crime, SpotCrime is also a good resource. Another great resource with a wealth of information about various neighborhoods is neighborhood scout. (You will have to pay for more advanced data)

The Biggerpockets forum is not just a great place to get recommendations on companies to work with, but it is also a great place to find which neighborhoods you should invest in. There are plenty of helpful people who will tell you what areas to avoid and which areas are a good investment. Also, check out the City Data forum where there are many locals who will provide information about the neighborhood you are looking into. The Biggerpockets forum is geared towards investors whereas the City Data forum seems to be people talking about their neighborhoods generally and helping those who plan on moving there with information. Another way to look at the neighborhood and house without traveling there is to use Google Street View. Of course, these pictures may not be up-to-date but it still gives you a feel for the neighborhood.

Seeing the property- the turnkey company, realtor or whoever it is you are working with will send you pictures and/or videos of the property. If you want to make sure these pictures are accurate, you can hire an independent third-party to take pictures of the property and send it to you. For $69, WeGoLook will send an agent to the property to take some pictures and verify the condition of the property.

Finally, after all this research, I think that an inspection and appraisal of the property adds an extra layer of security. If you are taking a mortgage on the property, the bank won’t want to take the risk of giving you mortgage with a property that is in horrible condition and about to fall apart. The home inspector has no incentive to lie about the condition of the property. Consider using a different home inspector than the one recommended by the turnkey company or realtor you’re working with to ensure there is no conflict of interest.

I’m not saying you should purchase real estate out-of-state without seeing it. If you are able to fly out to see the properties offered, check out the neighborhoods, and talk to the people you will be investing with, it’s a great idea. I’m just saying that it is doable even if you cannot personally go there. Just make sure you do your due diligence. Investing in real estate has risks and investing in a property out-of-state has increased risks, but they can be reduced.

Would you consider buying a property without seeing it? If you’ve done this before, are there any other resources you would recommend using?

25 thoughts on “Buying an Investment Property Sight Unseen

  1. Done by Forty

    Man, we are cut from the same cloth. We did the same thing in 2014 with a home in Indianapolis. Then we did it again a few months later.

    Now, we’re trying to divest ourselves of the rentals. It’s just not our game, and the numbers aren’t as great when the tenant leaves your house in shambles and picks up sticks without notice. :/

    But I’m sure our experience isn’t typical, and think it can be a great investment & diversification opportunity, if you can handle the swings.
    Done by Forty recently posted…2016 Was the Worst (Our Annual Spending)My Profile

    1. Post author

      Sorry to hear that you’ve decided to divest from the rentals. I remember you mentioning that you had a horrible tenant. That part does scare me a little. I think a lot of the newbie investors may still be in the honeymoon period where everything is going well. I’ve been thinking about buying a second property but I’m not in a rush. It’s going to have to be a great deal, otherwise, it’s not worth the risk.

    1. Post author

      Yes, there are some great tools out there. Good luck on your search. I’d be interested to read a post about that topic.

    1. Post author

      Good to hear. I’ve heard great things about the city. And yes there are a lot more tools available nowadays.

  2. Steven

    I don’t think I could buy an investment property without more due diligence unless it was done by a trusted partner or colleague in the area. This is only my preference but I’d expand my area from the big city and look to focus on something that I could still physically see. I love the “idea” of turnkey properties, I don’t trust anyone without more investigation, I probably have trust issues!
    Steven recently posted…Should I invest in my 401 (k) company match or Pay off Debt?My Profile

    1. Post author

      Yes, originally I was focusing in an area where I knew someone who lived there but couldn’t find a company that I wanted to work with. I think the tools available plus the independent agent like wegolook gives you some peace of mind. You’re paying them to confirm what you’ve been told by the turnkey company. I like turnkey properties too, but I like the hybrid approach even more. If you can buy at distressed prices, renovate, and then rent it out, you can have more equity whereas in a pure turnkey play…you’re paying fair market value.

  3. Mustard Seed Money

    Honestly I’d probably have a hard time buying something sight unseen. Although real estate makes me nervous because I’m not sure I wanna deal with midnight calls and have had some friends share some horror stories to me about bad property managers. But I will definitely need to take a look at Biggerpockets and give it a second look.
    Mustard Seed Money recently posted…Why Winning the Lottery May Not Be So GreatMy Profile

    1. Post author

      Right, I wouldn’t want to deal with midnight calls either. Having a trusted and reliable property manager is the most important thing.

  4. Laurie @thefrugalfarmer

    I am so impressed that you guys had the guts to do this. 🙂 I’m not sure we would have. Luckily, we’re surrounded with enough lower costs housing areas that I think we can realize our real estate investing dreams right here.

    1. Post author

      Yes, I would definitely prefer to invest in a surrounding area but the numbers just don’t make sense here.

  5. Revanche @ A Gai Shan Life

    I never would have thought I’d be willing to take the risk and do this but I was able to borrow an already assembled team from a friend in the area I was interested in: a property manager, a broker, and their insurance contacts, and within 45 days of starting the search, I was closing on a new rental property! Doing it entirely on my own would probably have been too worrying.

    I still use Trulia and Zillow to do my initial reviews and searching, and my broker keeps me apprised of good listings on MLS, so I may pick up another one in a couple years. I had initially thought I’d get one every two years, that should be enough time in between to let the expenses settle down, but life derailed that plan. So far, so good, though! Two tenants, one bad, one good, and the cashflow is good.
    Revanche @ A Gai Shan Life recently posted…Net Worth & Life Report: January 2017My Profile

    1. Post author

      Awesome that you did this also. Will have to check out your posts on that. I had the same plan about one every year or two but I’m not sure it’ll go as plan. Also, I don’t want to keep to that timeline if the numbers don’t make sense.

  6. SMM

    This reminds me of that show on HGTV, Flip or Flop. They have bought some of the fugliest properties, but in “half hour” totally transformed them! Ok, in reality it takes them a couple months typically, but the shows for a half hour :-).

    There’s no way I could buy a property unseen. I’m still regretting the decision I made years ago of buying a couch online instead of going to the store and sitting on it first. It’s not as comfortable as I thought it would be and didn’t to go through the hassle of returning something so huge.

    1. Post author

      Well with a couch, everyone has personal preferences since they sit on it everyday. For a rental property, it only really matters that someone will want to rent it out.

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  8. Dividends 4 Future

    Even with seeing the property, I think 3 times about investing, imaging not seeing. I agree the power of the internet can help us make better decisions and narrow down so we are not looking at 150 properties before deciding on one, but the final 4-5 I would need to see it to see how hard would be to rent or even sell in that same market later on.
    Dividends 4 Future recently posted…January 2017 UpdateMy Profile

    1. Post author

      I think seeing it is always a good thing. Just don’t think it is a requirement. How would seeing it in person have helped you determine whether it can be rented out or sold later on?

  9. DC @ Young Adult Money

    Logically this totally makes sense. In today’s day and age you really don’t have to physically see the property. Emotionally I think most people feel a need to see the property, at least before purchasing. Makes sense though to get in where properties cost less. The Minneapolis-St. Paul metro is where I wanted to buy up properties over time, but if it continues at it’s current trajectory, it may end up being too expensive.

    1. Post author

      Interesting that the Minneapolis-St. Paul area is heating up. Well you do rent out a portion of your house right?

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  11. Smith

    What is the typical (median or average) minimum amount of capital invested? What return do most investors expect? I understand there is a wide range to both of these questions depending on the specific opportunity, but I would be interested in hearing ballpark numbers.

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