John: Hey, this is John Sonmez from simpleprogrammer.com.
I’ve got a question here today that is not on the software side, it’s on the real estate
side.
I’ve done a few of these types of videos.
I know a lot of you are interested in—You’ve read in Soft Skills about how to do real estate
investment and you’re interested in some of the real estate investment advice that
I have so that’s what this one is going to be about.
I got this question from Nadir, I think it’s Nodir.
I always mess up these pronunciations but it seems like Nadir or Nodir.
Sorry if I’ve messed up your name here.
Just send me a comment and let me know.
Anyway, it says, “Hi John, this is coming full circle.
I already benefitted a ton from your career and health/nutrition advices.
This is one is a real estate question.
I’m planning to buy a rental apartment in a different state where I’ll be living 5
years from now.
I would love to hear your suggestions about buying real estate far from your current location.
Thanks again and keep up the great work.”
This is an interesting thing.
Buying real estate of state, well, I mean buying real estate in general there are some
basics which I’ve talked about in some of the other videos.
Essentially you want to make sure that it’s a sound investment that the rent is going
to cover all of the things that—the mortgage, the insurance, the property management fees,
all of that.
I mean the first piece of advice I would give you in any kind of investment is to make sure
that you do your due diligence and check it out.
Make sure that you’re going to be able to rent this out for more than or preferably
with a decent buffer more than what is going to cost you to carry the property.
Do not invest for speculation unless you like to gamble.
That’s not really investment, that’s called speculating and so I’m not going to advice
on speculating because anyone can strike it rich in speculation.
It’s the same as gambling.
But as far as investing you have to have the clear fundamentals that are going to make
this a good investment.
That’s not going to matter where you’re at, whether you live in the same city or not
and that’s the key.
The only reason why I’m bringing up this, by the way, is because you’re telling me
that you’re going to move there in 5 years.
What I don’t want you to do is to say, “Well, in 5 years the price of this property is going
to grow.”
You don’t know that.
It might shrink.
It might go down.
If you make a solid investment for the long term, if you’ve figured out that the rent
is going to cover the mortgage and whatnot and that’s going to give you a good investment
then that makes a lot of sense, so first you start there.
The second thing I would say is that you have to get good property management in place.
I’ve actually bought a lot of properties out of state.
In fact, I’ve bought properties in state site unseen which is going to sound a little
bit crazy here, but when I lived in Boise, Idaho I bought a property that was about an
hour away from me in Caldwell but I did my due diligence, I checked out the property
as far as the income and verified the rents and I had an inspector go out to the property
and I had my real estate agent and I actually never went out to the property before I bought
it.
I just bought the property site unseen because—now, this wasn’t my first property, but I had
enough confidence in those fundamentals and I had a good property management in place
that I was sure that I didn’t need to see the property.
Why did I need to go out there and see that create a bunch of worries for myself when
the fundamentals were telling me that this was a good investment?
I’ve done that out of state as well.
The key thing though is that those fundamentals are there and then, again, the property management
company is going to be the biggest thing that’s going to determine whether or not this becomes
a headache for you or not.
You find a good property management company.
Now, I fired lots of property management companies because most property management companies
are, let’s see, how can I put this politely?
They’re scumbags, right?
They are looking to swindle you.
They’re looking to drum up all kinds of fake charges to be able to really make a lot
of money off of you because most investors that they work with are very unsophisticated.
They own one rental property and they’re right for being taken advantage of.
I mean the whole real estate industry, by the way, if you’re going to get into this
you have to realize that a lot of real estate agents are scumbags.
A lot of people, 95% of the lenders and all the people that you deal with in the real
estate industry, sorry if you’re watching this and you’re in the real estate industry,
but you’ll probably agree with me, perhaps you’re the 5% that’s not a scumbag.
But having my own real estate license, investing in real estate for the last 20 years I can
tell you that there’s a lot of sharks out there that are looking to take advantage of
people.
It’s like the used car industry, the used car salesman.
It’s the same type of stigma and it generally applies.
Be very, very careful when you hire a property management company.
Interview several of them especially if you’re out of state.
You’ve got to do your due diligence here.
Make sure that they’re good.
Call their references.
Actually call the references.
You wouldn’t believe how many times when I hire someone professionally, when I call
the references that that becomes a deciding factor.
People will give references and then you’ll call the reference and the reference will
tell you the truth and tell them that they’re crap.
You’d be surprised.
The reason why people give those references is because they think you’re bluffing.
They don’t think you’re actually going to call because 90% of people don’t so they’ll
hand out that reference sheet and that reference sheet will actually have really valuable information,
definitely do that with property management companies.
Interview them, check it out and make sure.
Once you’ve got that set up and you’ve found the good deal, then it doesn’t matter.
You don’t even have to fly out to sign the contract.
You can buy that property completely site unseen out of state as long as you’ve done
your due diligence.
One last piece I’ll tell you with this is hire an inspector, a good property inspector.
You want someone who will tell you every defect that is wrong with that property.
Find someone who you can trust as a property inspector.
If you’re going to do multiple purchases out of state you’re going to create your
network there, you’re going to find a good real estate agent that you trust, you’re
going to find a good inspector and you’re going to find a good property manager.
You can use them to check on each other.
This is another really cool thing is you can have the real estate agent give you an idea
of the property management company and the inspector and you can have the inspector give
you an idea on the—because they’re all connected.
You can even hire someone outside.
Let’s say that you’re going to hire one property management company.
Call up another property management company and say, “Hey, I’m not going to use you
guys, but if I paid you X number of dollars would you give me a report on—would you
act as an adviser to me in finding a good property management company in the area?”
You’d be surprised.
This is a good technique to use.
Anytime that you have a professional you can pick another professional against that professional
and pay them some amount of money in an advisory role.
They know they’re not going to get the business themselves so they’re not going to be partial,
but they’re going to get money for just giving their advice which a lot of people
would love to get money for giving their advice.
This works in a lot of industries surprisingly.
If I hire a contractor actually to work on my house to do some kind of projects on my
house oftentimes I’ll hire another contractor and I will tell him, “You are not going
to get this job, but you are going to act as an adviser.
Will you accept X amount of dollars to make sure—to do the due diligence because I don’t
know anything about woodworking.
Can you make sure that this person that I’m about to pay $5000—can you check his work
after he’s done?
Can you do this and how much would you charge for that?”
Well worth that money.
Anyway, we’re getting a little bit sidetracked here but basically if you’re going to buy
property out of state just make sure you do the due diligence as much as possible especially
if you’re not going to be present and that you have someone that is going to represent
you that you can trust.
That property management company is going to be the key there.
All right, well that’s it.
Good luck with this.
Unfortunately this is something that is probably going to take some trial and error so start
small I would say because you might make a mistake here and it could be costly.
It takes some time to figure this all out.
Don’t take all your life savings and put it into one property on this one bet.
Start small and see how that works out for you.
I wish you the best of luck and let me know how it goes.
Hopefully you get a property and you can make a good investment there.
All right, if you have any questions, even some real estate questions, you can email
me at John@SimpleProgrammer.com.
I won’t do as many of those just because this channel is mostly focused on software
development but I believe in a holistic view so you’ve got to get everything under control.
If you really want to be successful in life you can’t just focus on your career.
You’ve got to know finances.
You’ve got to know fitness.
You’ve got to know all these things.
So yeah, so thanks for watching this video and thanks for the question and don’t forget
to subscribe.
Talk to you next time.