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Many single-family rental investors look beyond their local market to diversify their portfolios and benefit from market variety. When these out-of-state investors start, the first thing they do is research the market. They look at financing, data on home sales, rental demand, price points, local industry, job market health, etc.
Up to a certain point, the properties themselves don’t matter. After all, it’s not a personal residence. You don’t need it to suit your tastes.
At the same time, certain things about the investment properties you buy matter—a lot. As you navigate the world of single-family investing, focus on these five essential elements of due diligence.
1. An Excellent Turnkey Provider
If you’re buying remotely, you’ll need a turnkey partner. The definition of “turnkey” varies, so you’ll want to thoroughly investigate exactly what’s being offered versus not. Ideally, you’re looking for a company that owns and invests in the properties they’re selling. They’re not middlemen. They are just there to broker a deal. They should have experience, well-developed operations, and in-house or highly trusted partners for property management and renovations.
Ask hard questions. Do your homework. Know their mindset and philosophy. And most importantly, know what you want and need so that you can choose a partner that aligns with your vision.
2. A Clean Inspection
We can’t stress this enough: No matter what property you buy or who you buy it from, get your own inspection. Remember, turnkey might mean something different to everyone. Problems you consider big might not be significant to the seller or turnkey provider.
It’s worth repeating: Get your own inspections done. Never waive them. You may want to go above and beyond for peace of mind—get the crawl space looked at and ensure your pain points are addressed.
Remember, you’re not likely going to be there for any final walk-throughs or see things for yourself in person. You need trusted eyes and ears on the ground.
3. Minimized Inconvenience
In addition to considering what your ideal residents want, consider what they don’t want. We’ve all seen properties that are just…off. Weird layouts, outdated design choices, quirky features—while these might be things someone likes, most people won’t.
You want to focus on ergonomic, appealing, and convenient properties. If they aren’t presently like this, what renovations would it take to get it there?
Sometimes it’s hard to see how inconvenient or frustrating a property can be until you’ve lived there for a while. That isn’t an option in this case, so anticipate needs and pain points. Listen to feedback as you go and seek out solutions. The more user-friendly a property, the less likely residents will have a reason to leave at the end of their lease.
4. Key Location
Location matters in both a broad and a specific sense. It’s the one thing you can’t change about a property. Be strategic. An imperfect house can be improved over time if the location is ideal.
At the same time, a perfect property in a poor location may have trouble staying occupied. Be mindful of the specifics.
5. Attention to Detail
You’re investing from a distance. Sometimes, it’s hard to know all the details, let alone focus on them. This is where your turnkey partner and property management team come into play. From the very beginning, you should only be with partners you trust to uphold a standard of excellence you can sign off on. They’re the ones who will see things and fix things—or not.
Sloppy renovations and corner-cutting maintenance efforts aren’t good enough. Leave your property in the hands of people who value quality from every angle. No investment property will be perfect—but they can get close! Choose stewards who show pride in their work and value your investment.
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This article is presented by REI Nation
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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