How to Buy Rental Property Sight-Unseen

Buy turnkey house sight with confidence

It sounds scary, right? Committing to something as significant as a real estate purchase — often with a large mortgage — and you have never even seen the property.  Yet busy professionals who don’t have time to jet around the country looking at potential investment properties do it all the time.  Why? Because their local real estate market may not be booming … but that doesn’t preclude them from profiting from a market that is. 

Look … seeing is believing, but it’s not always possible, and incredibly,  20 years ago no-one would even think of buying a house without seeing it, but we live in a virtually abundant world now.  So if you’re considering buying a rental property sight-unseen, here’s a quick guide on how to do it right. 

“What if they’re selling me property that doesn’t exist?”

This question comes up a lot, and it’s honestly not an issue at all. Even if you don’t get on a plane to inspect the property yourself, it’s almost impossible to close a transaction on a property that doesn’t actually exist. Multiple people will be able to attest to the fact that there is, in fact, a house on the property in question and to the condition of that house. 

There’s the appraiser and other people who report to the lending company about the collateral they are lending against. There’s the home inspector you may hire for the physical due diligence. The insurance agent won’t be able to track down the house for their purposes, and finally it will raise some serious red flags in the title work, if the house doesn’t actually exist.  It is actually more likely that the house does exist, but there’s a flaw in the title or the seller is not the actual owner.  It’s something that can happen even if you’re buying a house next door to where you live. At MartelTurnkey we make sure you have a clear and free title before you close. 

Bottom line — don’t worry too much about signing for a house only to discover you are actually getting a burnout or an empty plot of land. There are several professionals confirming the property is-what-it-is along the path.

Build a Local Team

Real estate investing is a team effort, whether you buy down the street or in another state. The key to successfully buying real estate sight-unseen is to have a team on the ground along with a trusted turnkey partner.

 

Your team could consist of:

 

Realtor or wholesaler.

Local realtors and real estate wholesalers can be valuable “boots on the ground,” especially if they want a crack at selling the property at the end of the investment cycle. 

 

Contractors and handymen.

You need these guys in place for the inevitable repair tickets your tenant will file. They can also be your “eyes and ears,” giving you checkups on the condition of your property after closing.  Of course when you work with a property manager, they have a Rolodex of professionals and often an internal team too. 

 

Property manager.

You don’t have to hire a professional property management company, but doing so can go a long way to making an out-of-state rental property a truly “passive” investment.  All MartelTurnkey properties come with a property management team in place. Read more about this here.

 

Having a local team makes particularly good sense if you plan to buy multiple deals in the city,  building an out-of-state turnkey empire.

 

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Being an “out-of-state” landlord is not as difficult as it sounds. MartelTurnkey makes it even easier by providing out-of-state investors with already-tenanted deals to purchase at competitive prices with a property manager in place. No renovation, no rehab, no long vacancies to weather — just close the deal and start collecting rent, all from the comfort of your own home!  Financial freedom can be yours. 



How to Do “Due Diligence” on a Rental Property, in 3 Easy Steps

Due Diligence MTK

“Do your due diligence!” If you have heard it once, you have heard it a million times — often from someone who has never done “due diligence” in their lives.

 

It sounds good, but no one ever stops to think about how unhelpful that platitude is. Okay … I should do my due diligence. Granted. But what does that mean?

 

Honestly, there is no need to be cryptic. When it comes to real estate, “due diligence” means three things … and none of them are rocket science. In many cases you will have professional help.

 

Here are the three critical stages of due diligence.

1. Financial Due Diligence

Financial due diligence is the process of “crunching the numbers” on your investment. This is how you determine whether or not it is a “good investment.”

 

Here’s how to do it …

Market Analysis

Analyze the current conditions of the local real estate market and determine whether or not you are getting the property at a good price. A real estate agent may be able to help, or you can do it yourself using online tools like Redfin or Zillow.

Cash Flow Analysis

Determine the gross potential rent the property can produce (based on prevailing market rents for similar properties) and subtract the total expenses. We break down the major expenses a landlord should account for in this article.

 

Check online to see what market rents are for similar properties. Look at utility bills and maintenance contracts. Examine any current leases and property tax bills. Try to corroborate everything with documentation.

 

If you are conservative in your estimates and come out with a positive number, you have a reasonable chance that your rental will produce positive cash flow, not negative cash flow.

Tax Savings Analysis

Figure out how much you will be able to save on your taxes every year as a result of owning this property. If you have a CPA or tax prep specialist, they may be able to help. Details to look at include which expenses in the cash flow analysis can be deducted, and how much depreciation you can take. We  explain depreciation in this article.

Appreciation Analysis

Decide how many years you expect to hold the property. Three years? Five years? Ten years? It’s up to you. You can always change it later; this is just for the purposes of due diligence.

 

Determine how much you expect your property to appreciate in value each year. Also, set a number for how much you expect your rent and expenses to increase each year, and project those numbers for however many years you decide to hold the investment.

 

Now take the total appreciation, cash flow, and tax savings over the time horizon you identified and add it all together. Throw in the mortgage principal paydown you expect over that period while you’re at it. How much bigger is that number than your down payment, closing costs, and initial repair budget? Use that number to determine your total projected return on the investment.

2. Physical Due Diligence

Physical due diligence means inspecting the property itself to determine its condition. Our lenders do not require a professional property inspection but you are able to coordinate one if you choose to do so.

 

Issues relayed in the inspection may affect the calculations that go into financial due diligence, including your budget for future repairs and maintenance.

 

3. Legal Due Diligence

Legal due diligence determines whether the property can legally be transferred to you. Determinations from legal due diligence include verifying that the seller is the legal owner and has the right to sell you the property. Legal due diligence also reveals whether the property is subject to any easements, liens, covenants, or other encumbrances that might affect the sale or the value of the property.

 

Legal due diligence is actually the easiest part — the title company handles this for you, during escrow.

 

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As you can see, there’s no great mystery to due diligence. It has defined stages, and you can rely on professional help at most of those stages, especially if you are new to the landlord game.  MartelTurnkey makes it even easier. With our portfolio of available turnkey rentals, we have done much of the due diligence for you. Contact us today — we’re happy to show our work and explain everything to you until you are ready to buy with confidence, satisfied that you have “done your due diligence.”