By Toyin Dawodu, FOUNDER/CEO at GIC DEAL FINDERS
Some investors have been lucky to purchase and profit from buying properties away from where they live. For others, it’s been a disaster, especially if you don’t know what you are doing.
I once ran into a lady who owned a property in Ohio. She lives in California. The property has been vacant for almost six years. It has accumulated code violations, tax liens and possibly growing mold. This leads me to the question, should you buy in your backyard or venture out of state?
Most experts say you should not buy investment property more than forty miles from where you live. I live in Riverside, CA, about sixty miles east of Los Angeles. Under normal traffic, it’s about a forty-five minute drive.
For those who live in the Riverside area and work in LA, the traffic is a grind. It takes two hours in the morning and two hours at night coming back home.
I have bought a lot of properties. At the last count, I have over 400 properties bought and sold under my belt. There is so much information, or dare I say, misinformation that a lot of would-be property investors or newbies become confused and get lost in the shuffle. Hence they end up being paralyzed instead of joining the veterans and making money in the twenty trillion dollar real estate industry.
I bought most of my properties in and around my area of Riverside and San Bernardino counties. It’s a metropolitan area of about three million people known as the Inland Empire. Every empire must have its king, so I sometimes refer to myself as the King of Inland Empire, when it comes to buying and selling properties, because I have bought a lot of houses here.
A few times, I have had to venture sixty miles away into Los Angeles thinking it made sense. The numbers were right, but I failed to add the cost of my time, driving back and forth, inspecting and safeguarding the property. Since I buy about 5-10 properties a month, I always like to drive around my properties on weekends just to do inspections and review work done by contractors.
The first time I bought a property in Los Angeles, I had to travel there during the week. The sixty mile round trip took six hours. It took me almost four months to sell the property. The frustration of back and forth traveling forced me to dump the property without realizing my minimum profit of $30-40,000 per deal.
Since then, I laid down my rule for buying in Los Angeles, or away from home. I must net $1,000 for every mile of the property distance. So if I get a call for a purchase in Los Angeles, I will not pull the trigger for a purchase and flip unless I can net $60,000.
Although I buy all over the nation currently, and I know it’s hard to apply the same rule. However, I still try to make sure there is enough profit on the table to hire all the help without having to jump on the plane or drive across country. My current deal is almost 5,000 miles away from home, but there’s about $90k in the deal to play with.
Whether you buy to flip or hold, distance is a huge factor to your profit and cash flow.
What is your rule for buying long distance? Should newbies even try it? What advice do you have for newbies who want to buy away from home?