The Biggest Mistake Out-of-State Landlords Make

0:00This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills, fast. It's a simple way to make sure your listing is the first candidate to see. According to Indeed Data, Sponsored Jobs have four times more applicants than non-sponsored jobs. So go build your dream team today, with Indeed. Get a $75 Sponsored Job Credit at Indeed.com slash podcast, Terms and Conditions Apply. We focus something super sexy and cool is happening tomorrow inside the Orat school community. We're having one and only Mark, the financial firefighter, who has rentals in Pennsylvania, but lives in Hawaii, talk about the other juxtaposition of life. But hey, he's going to be talking about how he uses him lane to help him out of state manage his properties. And I know not everyone is inside school. So I thought I'd ask Dana to give us a tease on what they will likely be covering tomorrow. Dana, thank you for doing this.

1:00I know it's an extra hour out of your very busy day as CEO, but I think the community will really benefit from it. Yeah, though we're really excited about it. So a couple of things that I love about what's to come tomorrow and why you should listen. Out of state investing can be very challenging. And Mark had some of the biggest challenges in out of state investing and what I really like about Mark is he's very honest about it. A lot of people aren't willing to talk about like, yeah, I've completely messed up on F&C. And I wish I would have done these 12 things differently. And so that's why I'm really excited to have Mark on the show. What's crazy is I've known Mark, I think, for probably four years. I mean, he's been on Hamline for quite some time. And I didn't realize he's never been out to the properties. I think it was that I think it was at your event this past year. I had assumed he went out at one point, and I told him I said, I'm going to Pittsburgh

2:03next week. I'd love to drop by your properties if you need anything. Just let me know. And he goes, oh, yeah, I haven't seen them. Can you take some pictures? I know. I told him I said you want me to take pictures. It's actually, I always think if you're on the ground, you can learn so much more. Just being there once you kind of have people have a photographic memory. So as much as like, when you're out of state at investing, as much as you can be like, no, don't give me just a photo, give me a video of the whole place. Let me know where everything is and makes things so much easier. But yeah, we have 56% of users on the Hamline platform are managing a property out of state. And that's a huge number. And it honestly was more than I had expected. I would not have guessed that either. I didn't, I thought it was a, I thought that was way too high, but we recently pulled the data on that. And so, you know, I think from that perspective, one, it shows a value.

3:04Like who's the type of person who's coming to Hamline? That's always one. And then the second thing that it shows is like, hey, you can do it. But I do think I have kind of three takeaways of what you need to do in order to succeed without of state investing. OK, that's here. OK, the first one is, and you'll hear a little bit more tomorrow on this. Don't go out and buy a ton of properties at once, like 10 properties. Don't be like Mark. Don't do it, Mark, don't buy 10 properties. And then just assume that it's going to work out, iterate, like go buy a property, see what's working, see what's not. You're going to learn as you go through that process. And so much that you learn is like, what is going on with this neighborhood? Am I, you know, I put these numbers on a spreadsheet? Is this an alligator property or not?

4:04Exactly. Renovations are huge. You will, I can't tell you how many out-of-state investors I have seen, where I actually go to the MLS listing. And I'm like, oh, wow, that looks beautiful. And now to say an investor will buy it. And then I actually physically go to the location. I see the property and you go inside. And you know those ones where the turns are quick. It's like a fix and flipper who doesn't really care about it. It's great. Yep. Yep. What's crazy is then you actually go inside. And you're like, this is a different property than what the photo is. They got catfish. They got properties. Totally different. And so that's why, you know, even with a realtor, once you trust one, you'll continue to work with them. Yeah. Until you know, you definitely want to take it slow. So that's the, that's the first thing. Yeah, I want to hit that one again, because I have unfortunately seen hundreds of people do what Mark did. So it's, you know, Mark's not the only one who saw a market. So it was cheap. Had a pile of money and go went ham, right?

5:06Yeah. And got four, eight, 10, 12 properties before, before you really checked the proof of concept. So yeah, absolutely right. Go, go slow. Get one. Wait six months. Get a second. You're going to need time to get the systems and all of that. And again, this is hard for you, especially if you have a pile of money. Yeah. I want to be very, very clear by one, wait six months, by another. It'll just save you heartburn, headache, events, because again, if you go to, I've seen people go too fast and then they become the motivated seller and they lose money and they never come back. Yeah, totally. And then the second is actually a point, Michael, that actually really, like, do you talk about it? And I, I hope everyone actually listens to it. Do one market. We have investors who are in multiple different markets and we promote that, hey, you can have hemline and be in multiple markets, but your systems, your processes, everything is so much better and smoother when you're just in one market and you know one market.

6:07And so it's not to say don't go into two or three or experiment, but that's when you're scaling. That's not at the beginning. And so just make sure you're focused on one market. I mean, I think you did it so well with Fresno, Baker Spell, no Fresno. You did it so well where you were there, you really knew your market and what's fantastic about that is when you make your fourth, fifth, sixth purchase, you know it's the right one because you know your market so well. Yeah, there's so many. I mean, a lot of people don't realize the economy is scale, not only in the portfolio, but in the network and the bigger your network becomes in, especially in out-of-state market, the more people that will help you, the more people know of you, the deals will come to you, you know, the neighborhoods. And I wish more people would, would focus on a single buy box in an area and that doesn't mean you can't go to your point other markets, but go with intention. Don't just pray and pray and go, I'm going to get one here and one there and one here and one there. It's like, oh man, you're going to forget who the painter is and who the electrician

7:09is and that's just going to be a mess. Yeah, and that's the, that kind of leads to that, the third point I have is when you are out-of-state investing and you are doing management remotely, there's this concept that you can be fully remote, no, you actually need a really good local team on the ground. And for us, it's interesting because, you know, the best investors who are the most successful on Hemlein with it have one go to person. Yes. It's like their handyman or someone who's driving by the property, someone with 30 units, is going to need someone who drives by weekly to pick up the trash and they just execute on things and you want someone who is reasonably priced for that and can oversee it. You know, we have the vendor network and we have handyman and electricians and plumbers and all of that. We also have local agents to find and place a tenant.

8:10But for you yourself, if you need someone to go out and install a lock box, you can use our handyman for it, but you also might just want someone that you have yourself on speed dial, whether it's a person we sent out before and you build a relationship with them from our network, we definitely promote that. For someone else, I think there's almost this misconception that no one has to see the property or be the oversight and for us, like, no, you physically don't need to be there. You can manage remotely. Institutional investors do that, too, but you do need some ears and eyes on the ground and the larger you get, the more that you will need someone recurring, rather than never. So yeah. I think about what Hem Lane and Mark are going to talk about tomorrow, a couple of things. What is the work orders and the process again? That's the biggest thing for somebody going out of state is trusted boots on the ground or teams. You do your own vetting, you communicate that, you track it, audit trail, all of that.

9:12Number two, it is that team, that relationships, right? I always like to have trusted boots on the ground that I could call. I always use the analogy, will this person show up at my funeral? Yeah. If they're going to get on a plane to come to my funeral, I'm going to trust them as opposed to just being a paid resource. And then the last one is the time zones. I mean, can you imagine being in Hawaii and dealing with properties in Pennsylvania? That's like six hours difference. So again, if Mark can make this work with Hem Lane, you know, most of you can. So I think it's the right thing to get Mark in the school community because I do think out of state investing with Hem Lane gets easier and frankly more profitable and less risky, right? When I think about a state investing, again, Hem Lane makes it more profitable, makes it less risky and just makes it more efficient. So I look forward to you two sharing that story tomorrow. Yeah. And one important point about that, the more, I think that's really important. There have been sometimes properties that come to us, you know, it's like a hundred unit portfolio and it's so far gone and there's so many tenants that are delinquent.

10:17And there's no money and there's none of this and you're almost like, how did you get this? Yes. How did you get here? We will be able to optimize all of that. But if you over, if you don't do the work and you pay for an alligator property that is so much an alligator property, like there's no miracle to say like we can get 30% above market rate on rent with a qualified tenant. And you know what I mean? There's like, there's just nothing that we can do from that perspective. And so I think the more is a really important point. I try to be realistic when an investor comes to us and it's like, this is the price I want. If I'm looking at the numbers and the analysis, it's like, well, you could list it for that, but it's going to stay on market for six months before you just like to reduce the price listed at that. But like you're not going to be making any money, oh, but you know, my realtor said I could get this price. Well, where did they come up with that price because everything else on market in your area? That's very similar is a thousand or fifteen hundred dollars below that price.

11:22And so then and we'll post it at that price and then we'll see you look a week later. There's zero and worries on it. You got it. And so I do think, you know, I can't overemphasize doing the work and just making sure you have all of that because you sleep so much better at night knowing when you come to us, like, you know, eight times out of 10 when someone comes to us and we say, here's kind of the rent range based on what's in your area, we'll have the person respond great. That's exactly what I was thinking to and it's like fantastic. We're all aligned. You did your research. We've done ours and we're all aligned. But you'll have a couple of situations where someone's like, I was looking to get so much more than that. And then it's a signal that like, oh, no, they might not be aligned. We can do it as much as possible, but like we can't we can't do miracles. We can't get a tenant. Yeah. You're not going to do a bet. It's a horrible deal. Good deal. That's not your deal. Totally. And so, no, it's been really fun. I mean, my favorite thing about out-of-state investing is so funny.

12:23My husband said it the other day, he's like, you know, so much about small towns. And like, you know, like all of these, like, different or like tiered three cities and, you know, fun facts about them. And I'm like, yeah, because where he's doing our research, where he's curious where investors are. Why did they go there? What are the industries? What's the population grid? Nice. And so, I think it's really cool because you get to learn, like some people say they live, like, to travel across the US, like in a car or like, you know, my dad would be on a train. I would find that so boring. I'd rather be in the market doing it, like, seeing what's going on. And so, it's really cool to see these parts of the US that I never would. And I almost feel like it's that vacation. Like, you get to go across the US and actually see what's going on. But definitely, definitely don't go into a lot of markets. Do the work and don't, don't buy your next one until your current one. You have optimized and working and everything going well. Because if you say great, I'll buy a portfolio of three and that sounds great.

13:26And then you find out the person you purchased from was not a good deal and they oversold you. Now you're in a situation where you have three times the problem. Exactly. Exactly. And I love to stay investing is a way a lot to people are growing, but please grow with care, get a proof of concept, get a platform that's going to help you communicate, get boots on the ground, run it more efficiently. And if you are in school, you're going to get to ask questions tomorrow with Dana and Mark. I think it's 12 to 1 tomorrow. Is that right? 12 to 1 Pacific type. Yes. All right, folks, take care yourself. Have a great day. Dana, any closing thoughts? Thanks so much. I guess I would be do the work. There you go. Do the work. President Barack Obama. Virginia, we are counting on you. Republicans want to steal enough seats in Congress to raid the next election and wield unchecked power for two more years. But you can stop them by voting yes by April 21st. Help put our elections back on a level playing field and let voters decide not politicians.

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