Buying investment properties in a city where you don’t live

Buying an investment property in another city
(sight unseen?????)

When I came into the property management business, I was surprised by the number of investors that were buying investment properties in Rochester from not only all over New York State but all over the world. In our 27 years in business we have had clients from South America, the Middle East, Canada and even one client from Tasmania! Along with my surprise was the discovery that some of these investors had purchased their investments without even seeing them. Being an investor myself I could not imagine how someone could purchase a property without even seeing it except in a picture. In looking over our clients, past and present, some have been very successful and some have encountered problems they did not anticipate. I want to share some thoughts for when you are considering making an offer in a city where you do not reside.

FIND OUT AS MUCH AS YOU CAN ABOUT THE AREA
When looking at investment opportunities you need not only find information regarding the growth and makeup of the city or area you looking into but also the makeup of the exact location where the property is located. This is where a good property manager comes in handy. Some investors use the Realtor they purchased the property with as a property manager it is helpful having an independent voice to express to you the pros and cons of the purchase without having a monetary interest in the transaction themselves. From the start of our company I have always offered to investors a verbal analysis of the neighborhood they are looking at without any cost or strings attached. I have never advised on the financials as this is for you to decide, but there have been clients who have taken a recommendation from a Realtor and purchased a property only to find that right next door was a drug house or down the street there were 3 or 4 vacant properties in great disrepair. All of these factors affect the investment, not only for future growth of value but also in the ability to rent to good tenants.
SPEND THE MONEY AND HIRE A GOOD BUILDING INSPECTOR
It amazes me that property purchasers will spend the money and always hire a building inspector for the property they are going to move into themselves but skip this for investment properties. A building inspector can give you insight into not only current problems that you or a realtor might not see but provide estimates of future problems that might occur. Remember if you live in a home your may have the option of putting off repairs until you can afford them but if you own an investment property you are running a business where tenants and government agencies can force you to make repairs. We have had clients that have purchased properties with asbestos exposure that was covered up by the seller (can you believe this???) and after purchasing the property found he could be liable for tens of thousands of dollars. Another client bought a house with a kitchen floor that looked good but after buying it found there were soft spots in the corners and had to replace the entire support rafters for the room. Buyer beware!
Best if you buy a property with a current Certificate of Occupancy
The numbers on the deal may seem good if you buy an investment property without the seller providing a Certificate of Occupancy (C of O) but always consider the negatives. If you are purchasing in a city like Rochester where there are extensive lead paint regulations and strict building codes it may cost you more after you complete the purchase that would change those great financial numbers in a much more negative direction.