Keep Your Flips Close: Why Long-Distance Investing Doesn’t Work For Beginners

Tarek El MoussaBlog, Flipping Houses, Real Estate Business, Rehabbing0 Comments

A small toy house on a stack of coins

There’s been a lot of talk lately about the “best” markets for house flipping in the United States. Because they keep seeing amazing deals in cities like Baltimore, Chicago, and Tucson, I’ve had a lot of our Success Path students asking me about long-distance flipping and whether or not it’s a good idea. Honestly, Christina and I are currently doing it, but do not recommend it for new flippers. We made a lot of mistakes and were ripped off a few times but since have established two out-of-state markets with great teams that are doing well.

Real estate investment

Just the other day I had a new student say to me, “But, Tarek, with mobile tech, you can basically be wherever you want. You can sign and send documents from your phone, Skype or FaceTime with your contractors, and employ a realtor to do the job. You never have to be there for any of it, and it opens up a lot of opportunities. Why wouldn’t you consider it for me?”

That question made me pause, but I still don’t recommend it for beginners. Here are a few of the reasons that investing in out-of-town flips is still more trouble than it’s worth when starting out.

You Don’t Know the Neighborhood

When you look at the MLS, REO listings, short sales, and foreclosures in your area, you immediately have a context for the properties you’re looking at. You know how close they are to schools, jobs, stores, and other amenities. You know which neighborhoods are in decline and which ones are showing a big comeback. And even if you aren’t that familiar with a particular area, you can just hop in your car and take a quick drive.

Getting to know your local markets is a lot easier than trying to research real estate markets across the country or trying to hire the right person to do it for you. You could fly out to find out more, but you’ll only have a limited time, and nothing beats having instant access and years of experience and familiarity in your market.

The Numbers Don’t Lie—But They Don’t Tell the Whole Story Either

According to one market analyst, Detroit is one of the top-10 best cities for house flipping in the whole country. The prices on flip properties in Detroit are incredibly low, even for houses in relatively good shape. Flippers who know what they’re doing can find distressed properties in neighborhoods that are growing, and they can make a lot of money doing it.

Here’s the problem: Detroit has a huge number of vacant homes. In the 1950s, the population of Motor City was almost two million. By 1990, that number was cut in half. Today, there are fewer than 700,000 people living in Detroit. So, while you’ll find a lot of distressed properties at really low prices, there’s not a huge demand for housing there. And without the knowledge of the area to know where to buy, you’re likely to get a house in an area that’s in total decline.

Invest in Your Local Economy

Finally, one of the reasons that Christina and I loved keeping our house flipping business local when first starting out is that it helped our local economy. Every time we flipped a house, we help cut down on vacant homes and improved property values. That brings in more residents and helps build up local businesses. We’ve grown Success Path to help you do the same in your area when starting your flipping business. It’s more profitable, less stressful, and it’s a great way to help your community, too.

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