Owning rental property away from your home town

[PaulSharpe]

Hi, if you have a couple of minutes, I would love to hear about personal experience or any insight about what it is like to own real estate investments apart from the city you live in. How much time did you spend travelling to the property to purchase it? Was it a pain to manage? If you hired a property manager, was that any more difficult than owning in your own town?



I received so many quality replies to my first post, I thought I would pose another question. I don't have much to offer in the way of real estate investing knowledge, so unfortunately, this is kind of a one way street. However, I do have substantial accounting knowledge as well as access to accounting materials and experienced coworkers. I would be happy to help with any accounting questions people might have.



Thanks again,



Paul

 

[Rickson9]

Without regurgitating it all here, you can read about my experiences on my web site at http://www.ticonline.com



I live in Mississauga, Ontario. I own investment real estate in Phoenix, AZ.



Near the bottom of the same web site are my two Moneysense magazine interviews on the same topic.



[quote user=PaulSharpe] Hi, if you have a couple of minutes, I would love to hear about personal experience or any insight about what it is like to own real estate investments apart from the city you live in. How much time did you spend travelling to the property to purchase it? Was it a pain to manage? If you hired a property manager, was that any more difficult than owning in your own town?


I went to Phoenix, AZ once before purchasing.



It isn't a pain to manage because the price I paid was low and I don't actually do anything other than speak to various people in the property management company.



I would always buy at a price that would comfortably support a property manager. I can barely change a light bulb. I don't want to waste my time doing that kind of stuff. Besides, physical labour isn't my forte.

 

[Thomas Beyer]

Owning out of town makes sense only if there is a certain economy of scale. Flying or driving somewhere else takes time and costs money. The property margins have to support that.



Owning out of town also implies that someone else manages the property. Again, the margins of the asset have to support it.



I started with a rental pooled condo in Calgary when I lived in Calgary, in 1997. The next property was one in Edmonton, where I did my MBA and where my wife grew up and her parents lived, so we went there often, I lived there and knew it fairly well. Nevertheless, I probably went there 5-6 times before I committed to a property. It was also rental pooled as I did not have time nor inclination to manage a single unit.



The next property was also rental pooled, but in Phoenix, AZ. Big mistake. I went there 3-4 times on business and to also look at properties, but that was not nearly enough to gauge true value and to research areas. That was in 1999. Today I am smarter and could do it in one or 2 trips, but not then. I sold the unit after 9/11 when the Phoenix market tanked big time for a small loss.



The remaining assets from 2000 to 2005 were all in Edmonton, and I went there usually monthly for 1-2 days each. All multi-family assets. That was the base for my success.



I then strayed to other towns and cities .. many with good success .. some without. Now, in 2012 the portfolio is basically clean again, with 2 exceptions to be dealt with.



Focus is critical. Know one market and one asset class real well. Not 3x4 or 2 x 2 ! 1 x 1 ! Only once you have a lot of money should you diversify into many cities and many asset classes.



So I'd say: pick a town with upside where you like to go 3-6 times to look around, meet people, research the areas you like to buy in, look at lots and lots of similar assets you envision buying (be it townhouses or trailer parks or multi-family apartment buildings or commercial strip malls or up/down bungalows). Then find a person or firm that can manage the asset you intend to buy impeccably. Then buy. Then visit often in year one .. less often in year 2-5.



So, pick any of the top 10 town in Alberta, then research sub-areas, then pick a PM, then buy, then manage manager. Then sell for a profit (or re-fi to pull equity out). Then party.