Investing out of state has become very lucrative for savvy investors. Many foreigners are even running to US to invest in real estate as not only are the deals incredible but the dollar is very weak in comparison so it is another huge opportunity. Investing in the US however is not without it’s pitfalls. There are still good deals and bad deals. Investors must be smart, here are some vital tips and pitfalls to avoid.
1. Partner and work with the experts – Find the experts and build a team. Partner with experienced investors and create win-win relationships where your goals are aligned. You can make tremendous properties hassle free by working with the best.
2. Understand the risk and returns - We are investors, we are in it to make a return. Investments have risk that can get in the way of your returns. You must understand the deal in order to minimize risk and maximize annual return. Some markets good deals are hard to come by, others there are tons of tremendous deals. Find these markets and the strategies that work. The experts will be able to assist you with this.
3. Do your due diligence - Due diligence must justify that it is a worthy investment. This includes evaluating comps, cash flow, the neighborhood, rehab, exit strategies, backup plans, worst case scenarios, risk, returns, etc. This is the same due diligence you do in your local market, you just need to do more because you are not an expert in this new market.
4. Get multiple opinions - Do the important things in 3s. For instance, get 3 rehab bids, talk to 3 property managers, have 3 local experts analyze your findings, etc.
5. Overcome challenges – There are challenges such as getting funds to do deals. Don’t let challenges hold you back. Face them head on and overcome. If this were easy then everybody would be doing it
Pitfalls to avoid:
1. Avoid the duds - There are good deals and bad deals. I see people fighting over deals we would not touch with a 10 foot pole. I see warzone properties sold for 2-3 times what they were purchased for. You must confirm the property has equity, cash flows, has strong and multiple exit strategies and is in a solid area.
2. Don’t follow the herd - Fact is 95% of people do what everyone else is doing. But what if everyone is wrong? That is often the case with over hyped markets and strategies. Make sure your due diligence justifies your decisions. Never make a decision because everyone is doing it.
3. Do not speculate - The market is out of your control. Never bank on appreciation as it is an extra bonus. There are so many incredible deals, find a market ripe with discounted properties that cash flow. It is in those markets that you can minimize risk and maximize your annual return.
4. Watch out for the slimy salesmen - Do your research on the salesman and so called expert. They may be using sales tactics such as “Everyone is doing it” or “If you don’t buy now it will be gone in an hour”. These people pray on others and have the attitude that there is another sucker out there. They often buy in bulk and sell unworthy properties in bad areas, in disrepair and on inflated values and cash flow. Always do your due diligence on these people and the property.
5. Don’t be a victim - I have seen this one many times. People run into a surprise or challenge and they freeze and do nothing. Become a problem solver, take control of the situation and fight back. I bet many wish they had some kind of control when the stock market was plummeting. Instead they just sat and watched helplessly as their portfolio shrank. With real estate investing, you can take control. You don’t have to be a victim, you can improve and salvage the situation.
These tips and pitfalls come from hours and years of research and investing experience. We started out doing deals out of state. Then we did local deals. After doing tons of research on where to invest and what strategies, we now have mastered our strategies and markets. We invest in 2 markets in what we believe have the most opportunity and with strategies that minimize risk and maximize our annual return. We still follow these tips and avoid these pitfalls even though we are experts and have it all dialed in. Investing from another state or country can be very lucrative, but be smart and follow these tips and avoid these pitfalls. We encourage you to share your experience and ask any questions that you have.
Also, Learn what is a great cash flow deal and read our guide on foreign and out of state investing in the US.