#18 – Long Distance Real Estate Investing w/ Jeff Albaum
Episode notes
In this first solo episode of Curiosity Class, I share my playbook for investing in real estate remotely. From building trust with local teams to analyzing deals without ever stepping footon-site, this episode breaks down what it really takes to succeed as a distance investor.
Transcript
Auto-generated transcriptGenerated automatically from the audio and formatted for reading. Nothing has been reworded, so expect the odd mis-hearing, and no speaker names.
As you're buying bigger deals, it might make more sense to to go out and see it in person. If you want to establish rapport quicker with your property management team to meet in person, that's a great idea and a great, great thing to do. Welcome back to Curiosity Class, the podcast where we breakdown complex topics into easy to understand ideas and bite sized pieces. My name is Jeff Albaum and I've been a curious person my entire life. Inspired by Albert Einstein's quote. If you can't explain something simply, you don't understand it well enough.
We aim to make learning accessible and engaging on this show. We're going to bring you experts from various fields ranging from personal finance to physics to help you understand everything from 401(k)s to how airplanes fly. So let's dive in and satisfy our curiosity together. What's going on everybody? Welcome back to another episode of Curiosity Class. This episode is going to be a little different. This is the first time I'm going to be doing a solo episode, and it's about a topic that is very near and dear to my heart. So if you're interested in this or if you like the episode, please like and give us a rating and review.
It'll make us know to do more of these. Conversely, if you don't like it, feel free to text me. You don't need to make anything public, so just say that. Yeah, I wasn't a big fan. Go back to interviewing people. So today I want to talk about specifically investing in real estate at a distance. For those of you who know me, real estate investing is very near and dear to my heart. I talk about this ad nauseam to my friends and family. And I realized I was having a very similar conversation a lot of the times when talking with people who wanted to get into real estate investing at a distance.
And so I figured I'd make this episode to give a high level overview of how to do that and what that looks like. So that's what this will be. So for starters, I'll, I'll tell you the kind of the background of how I got into real estate investing to begin with. And then we'll go through kind of some tactical ways to, to get started. So I read the book Rich Dad, Poor Dad in college and was blown away. I had never heard anything like that before. And, and basically the, the TLDR of rich Dad, poor dad is the he redefines the definitions of assets and liabilities.
So you know, many of us think of an asset as like your house or your car, right? And liabilities as credit card debt, etcetera. So in the book he kind of says like, OK, that is true. Let's suspend that definition for a second. We're going to have a new definition to work with. And the new definition is assets is anything that puts money into your pocket on a monthly basis, and liabilities is anything that takes money out of your pocket on a regular basis. So in that regard, your car is a liability, most likely because it costs money. You have to pay for your car every month for gas and insurance and a loan if you have 1.
And so I read that I was just like, blown. This is really interesting. And so he recommends real estate investing. So I was like, OK, I'm, I'm in. So I was studying engineering and I got a job as an engineer in the Bay Area. And I was, you know, the Bay Area is pretty expensive and was living in a house with a bunch of roommates. So I rented a room for $800 a month, was my rent. And I was making a Bay Area salary. So I was making, you know, pretty good money for being fresh out of school. And so I was like, OK, I'm going to save as much as I can and look for real estate.
I want to buy an investment property. So I'm looking around and I'm realizing pretty quickly like, oh, shoot, the Bay Area is pretty expensive. It's really hard to find a property that I could afford to buy. So let's look in other places. So, you know, it was really active and listening to Bigger Pockets, which is a great real estate investing podcast and we kind of being involved in the community, you get a sense of what people are doing. So a lot of people I knew were investing in the Midwest. So I started looking in the Midwest and the Midwest is a market known for being a lot less expensive than the Bay Area.
And so all of a sudden properties were were popping up that I I felt like I could I could reasonably afford. Long story short I end up finding a duplex that was the the purchase price was $65,000. This was 2018. And so after a $12,000 down payment, my all in monthly expense for owning this duplex including principal, interest, taxes and insurance. So the full sum that's going to be deducted out of my bank every month was $493.00 per month. And so that combined with the fact that each side of the duplex rented for about $700.00, I was like oh man, this is awesome.
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It ended up not being as as nice of a Grand Slam deal as that, but that's more for maybe another episode. So at the end of the day, that that's, that's how I did, that's how I first got started in real estate investing. And a couple of key takeaways that I want to highlight here is that a lot of people when I tell them that story, you know, they ask how many times did you go out to see it? How many trips to the Midwest did you take Excetera? And my answer was zero. I didn't see the property, in fact, from purchasing, owning and then eventually selling that property, I, I never saw it in person.
And so a lot of people will kind of be really surprised by this. And this is what I want to, what I want to focus on for this episode is how to do, how to invest in real estate from a distance and things to consider. So when I was looking for places, like a lot of people, when you say, hey, I, I want to invest in real estate and I, I can't do it in the market that I live in, whether it's too expensive, there's not enough deals, etcetera. So I'm going to invest out of my market, out of state at from a distance. There's a lot of things you can do with that, right?
So a lot of people say, in that case, oh, great, talk to an agent, you know, call a real estate agent. That's a good first place to start. And I'm actually going to advise against doing that, at least as the first step. And here's why. Real estate agents are incentivized and they get paid based on buying and selling properties, right? So a good agent knows that it's a relationship game and they want to develop a good relationship. But the end of the day, real estate agents are paid by buying and selling, by transacting real estate. So they're paid when they sell you a house or a property, not necessarily a good property, right?
As an investor, we care about, we want to, we want to own good properties, right? And so the, the piece of advice that I would recommend is as follows. If you're looking at getting into out of state real estate investing, the best and most important person to have on your team and the first person you should have on your team is an amazing property manager. And here's why. Property managers have the same incentives as you do as an investor. Their incentives are aligned with yours. And what does that mean? It means that similar to how an agent gets paid when they sell you a property, a property manager gets paid when tenants pay you rent.
This is a much better alignment of incentives that then a real estate agent has. So property managers are going to have a lot of knowledge that you otherwise wouldn't have because you're not local to the area. They're going to know what are the good areas, what are the areas to stay away from? What are the areas that are up and coming? You know, what are types of properties that are easy to rent, types of properties that are harder to rent, types of properties that you know have a lot of upkeep associated with them and vice versa. And also they might have access to better deals than you otherwise would be able to get because they might have a whole list of clients who are also investors who might want to sell their properties.
So you're going to have a lot of really good access. And this is a really, really helpful way to get into real estate investing at a distance is by establishing a good relationship with a property manager. So that being said, the best way to do that is to pick up the phone and and call 10 property managers, see who you jive with. At the end of the day, it is a relationship and you're going to be having conversations with this person on a pretty regular basis. So if you can't get along over the phone or if you know they don't call you back or it just doesn't feel like a good fit, move on.
There's there's other property managers out there for sure, but this is a really good way to to get into it. And so going back to the, the beginning of the story, when, you know, I told people that I didn't go out at all, I didn't see the properties whatsoever. It was because I had a lot of faith in the property management team that that I had, I had met and, and hired. And also a couple other things on the not seeing properties in person. The best analogy I've heard for this is I originally heard it from David Greene, the old podcast host of the Bigger Pockets Real Estate podcast.
And he had this great analogy and he was basically making the the point. He's like, let's say you're driving down the road and your engine starts smoking. There's smoke coming out from under your hood. What does everyone do? You pull over to the side of the road and you pop the hood, right. But why? Like personally, I'm not a mechanic. I don't know what I'm looking at. All I see is an engine that's smoking. I don't know what to do. I got to call a mechanic. So this is similar with real estate investing. So if you're going out and you're a professional property inspector, OK, maybe you do have value to add by seeing it in person, but I'm not.
So if I were to go out to a property, all I would see was kind of the general vibe of the neighborhood. But that doesn't really matter because I'm not going to be the one living there. I don't need to fall in love with the kitchen layout or fall in love with the flooring or fall in love with the paint because again, it's, it's not for me to live in. It's as an investment. And so sure, I want to make sure that it's a good area that it's a, you know, the, the kitchen layout makes sense. That's it's not going to be this weird thing that no one's going to want to live in because then it's not a good investment.
So you want to make sure that you're not getting in the way of yourself. So, you know, always make sure you get a good property inspector to tell you all of the problems that they're going to have that you wouldn't be able to see, right. They're going to tell you, is the roof in good condition? Are the gutters working? Is the electrical system up to date? I couldn't do any of that, right? So there are exceptions to this. So it, you know, as you're buying bigger deals, it might make more sense to to go out and see it in person. If you want to establish rapport quicker with your property management team to meet in person.
That's a great idea and a great would great thing to do. But in general, that's, that's my two cents on how to start investing in real estate from a distance. So if this was helpful, if you like this type of episode, please give me a thumbs up, like and subscribe on Spotify and YouTube or wherever you're listening. And personally, if you didn't let me know, maybe not in the comments, maybe not publicly, just you can just text me that. And thanks so much. I'm looking forward to seeing everybody next time.