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Investing Strategies

Remote Rehabbing 101: Market Selection

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A Quick Word from JP Moses, the Director of Awesome...

lori greymontMeet Lori.

Lori’s one of our esteemed Mogul faculty members.

Lori’s sold over 1,350 houses and, until recently, had never seen a single one of them.

Wait, hold up a sec…let’s back up a minute…

That’s right, Lori hasn't actually seen any of these 1,350 houses that she’s bought and sold over the years. 

Lori’s experience in real estate is long and wide – her whole family’s been in the game her whole life, and since 1987 she’s been involved in all matter of traditional and creative real estate deal making (rehabs, wholesale, lease options, sub-2, land contracts), she was even a Bulk REO maven for a season, she’s managed fund acquisitions, and property management on a nationwide scale…

But at the moment, Lori’s modus operandi of choice is rehabbing remotely.

In other words, she lives in San Jose, CA and runs a rehabbing operation in Atlanta, GA. Even more specifically, she specializes in rehabbing turnkey rentals, which she sells as great deals to passive cash flow investors.

I know, right!?!

This gal’s got a machine of an operation, and frankly she’s one of a very few people I've ever met who’s actually cracked the code on how to do this and do it really, really well.

Recently I had the chance to corner Lori for an extended conversation in which I got to really grill her about her about what she does and how she does it.  I really love these kinds of unscripted; nothing held back, who-knows-where-we’ll-end-up type conversations.

So what follows is a slice of the awesomeness from our little chat. I’m planning to release more of these great nuggets of information from Lori in the future, so keep an eye out. There’s a TON we can learn from her.

Oh, also for Mogul members with the right access, you can download and listen to the audio from my conversation with Lori too. Look for the link in the Power Pack Tools for this lesson on this page.

What You’re Going to Learn from Lori, THE Remote Rehabber

In the next few lessons Lori’s going to share with you her system for remote rehabbing.  We’ll start here with our 101 Session showing you exactly how you’ll get started deciding what markets to get into remote rehabbing.

By the end of this lesson you’re gonna know the 7 Factors that will help you determine the right markets to do your remote rehabbing in.  So let’s get cracking.  Lori’s going to share with us how she selects her remote opportunity markets.

From Lori Greymont, Rehabbing Advisor...

How I Select My Remote Opportunity Market – 7 Factors

house checklistWhen I go out looking for a new area to invest in and more specifically to find properties I can fix up and flip to a long term investor who wants to make long term cash flow from rentals the criteria I look for when considering a remote opportunity market includes 7 factors.

As a side note and before we jump in I just wanted to clarify something.  As I said I’m looking for remote rehabbing opportunities that I can look to flip to long term investors – those who want to buy and hold for long term cash flow or appreciation, versus a more traditional fix and flip where the end buyer is usually your typical retail buyer or versus a wholesaler who plans to do the rehab him or herself). 

I just wanted to mention this before we get started but I’ll explain a bit more after I've covered my 7 factors that I believe every remote rehabber (or wanna be remote rehabber) needs to consider when choosing your opportunity market.

Factor 1: Signs of Recovery

signs of recovery

You’re going to want to make sure you're in a market that has some economic recovery, and that’ll be recovering going forward in the long term. 

Now what exactly do I mean by “economic recovery?”  Well, it’s those areas that are already starting to see things turn around.  There are new jobs cropping up, people are buying houses again, and people have some stable jobs to support paying rent or a mortgage – and you might actually be seeing new houses starting to be built again.

Factor 2: More Than One Economic Driver

economy driversNow, these signs of recovery are heavily influenced by several economic drivers.  What you want to do when researching markets is to find out what industry is supporting the signs of recovery? 

There are five primary market drivers that I look at when I consider a market as a viable remote opportunity.

The 5 Primary Economic Market Drivers are:

  1. Finance
  2. Healthcare
  3. Technology
  4. Construction
  5. Government

The important thing to remember here is to be sure the locations you are considering are not centered on only one economic driver, because if it goes bust, there goes your market overnight.  

Let’s take the “dot-bomb” that happened not too long ago.  If you had based your decision on investing in the Bay area solely based on the tech industry you would have lost everything when technology tanked.

So when choosing a new market to plunge yourself into, even if one or even two bottoms out, you want to make sure it won't destroy your market overnight. 

As they saying goes, “don’t put all your eggs in one basket.”  You’d never want to base your decision to invest in a new market on one economic market driver alone. So the more market drivers, the better.

Factor 3: My 30% Driver Rule

thirty percentNow that you've found a market that is either showing signs of economic recovery and/or has more than one of my five key economic drivers you still have to remember my 30% driver rule.  

Make sure one market driver has no more than 30% impact on a market.

Why?  Because just like I don’t want you to go into a market with only one of my five primary economic driver industries, likewise, I don’t want you to go into a market where one economic driver has more than 30% impact on a market.

Take for example the major real estate crash in Las Vegas.  One reason Las Vegas was so dramatically impacted by the market downturn is because the economy is focused so heavily around construction (to many peoples’ surprise - not gambling), and so the impact was far greater than in other areas. If they'd had more economic drivers contributing to the long term viability of their economy, they would have been much more stable or stabilized much more quickly.

So how do you research these market drivers research?

This all might sound a little bit overwhelming, but don’t worry. Just head on over to our little friend Google!

If you already have a city or two in mind already, all you need to do is Google "economic drivers” + “the city name” or “Top 10” + “the city name” of the area you are looking to possibly start rehabbing in.  The search results will usually tell you what you are looking and if the city is a good fit for your remote rehabbing efforts.

Another great place to look if you aren't sure where you want to do your remote rehabbing yet is a site called, Sperlings Best Places

A Word of Caution

Be cautious about economic data you may get from biased companies and websites.  Take the information with a grain of salt (these sites and companies likely have a huge reason for making bold statements around economic drivers and recovery in their local area). 

You want to make sure you are getting your data and information from unbiased sources like the Department of Commerce in the local area.

You definitely don’t want to skimp on researching this data. 

Factor 4: Infrastructure Improving

improving infrastructureNow it’s time to also look at what he local government in your potential remote rehabbing area is doing.  Is the local government putting money into infrastructure improvements? Are they building or planning to build roads, public transit or have redevelopment efforts under way or planned?

If the government is investing in the local community, then there is room for growth, creating a great place for you to do some good remote rehabbing deals. 

Let’s take for example, if you’re considering a rural area and it seems not likely to be growing and not a great place to choose as a remote rehabbing opportunity market.  But then you hear or find out through your research that a new major road is going to be built in this area in the next one to two years then it’s likely to be a much more valuable area. 

Factor 5: Quality of Life Improving

improvement aheadNow that you are looking at the local government in your remote opportunity market you also want to see what they are doing to put money into the quality of life of their citizens. 

Are they supporting and building parks, theaters, shopping centers, etc. 

People want to live in or relocate to areas where there are nice amenities and the local government makes an effort to improve the quality of life of all their citizens.  This means you have more people wanting to move into your rehab projects. 

Basically you want to be in areas where the local government is drawing in more population. More population = more renters.

Factor 6: Affordability

affordabilityIs the market affordable for renters?  Can the average person afford the rent you need to get on the property to make it positive cash flow for you (if you are holding) or for your investor buyer if you are fixing and flipping the property?

If the rental rate is higher than what the average person can spend on their cost of living then your property is likely to sit vacant causing a negative cash flow. 

If people are finding it hard to make ends meet because the cost of living is too high in an area then they will eventually move to other areas that have positive economic trends and lower cost of living.

Factor 7: Inventory

inventoryHere in the bay area the inventory is crazy tight. You'd never get a solid rental here unless you’re prepared to go into negative cash flow every month. 

So you want to be in an area where the inventory is not too tight where you can find a deal that you could easily fix and flip and make a profit and also provide at least a small long term rental profit for your end buyer. 

Likewise, a market where there is flood of inventory might also mean you may have a hard time selling the property once you acquire it due to an overabundance of inventory.

Side Note: My Model vs. Others

two roadsAs I mentioned earlier, my remote rehabbing business may differ from a lot of others of you out there doing regular fix and flip.  A number of these criteria I've outlined have to do with long-term quality of a market, which is especially important when rehabbing rentals (for yourself or someone else).  

But if you were just rehabbing to retail flip, you could more realistically play around in markets with fewer economic drivers, or ride the wave (in the short run) of one big economic driver that's really fueling a market in fast forward.

Remember, my model is to rehab and then flip turnkey rentals to investors who are holding them for the long term. Because of this, I care more about the long term market conditions than someone else might who's just rehabbing to resell to a retail buyer.

If you're just fixing a house to do a flip, pretty much any market will work so long as you know what the end value is going to be. And this is actually one of the toughest parts about the market today, isn't it?

What You Need to Do to Start Rocking A Remote Rehabbing Business

Are you ready to take on a new market?  Never done a deal or only a few in your own backyard? Interested in how your local area stacks up and is it really the right place to be investing right now? 

These 7 Factors are really important to consider no matter if you are remote rehabbing or just fixing-and-flipping in your own community.

What you need to do is take the area you are looking to invest in (or even the area you are currently investing in) and research these 7 Factors to check market opportunities and viability.

Do It To It! Immediate Action Steps
  • Start With Google: Pick a possible city to target, then head on over to Google and get started researching your area. If you already have a city or two in mind already, all you need to do is Google "economic drivers” + “the city name” or “Top 10” + “the city name” of the area you are looking to possibly start rehabbing in. 
  • Then Try Sperlings: Another great place to look if you aren't sure where you want to do your remote rehabbing yet: Sperlings Best Places
  • As a quick reminder, here are the 7 Factors you need to be weighing:

    • Factor 1: Signs of Recovery – is your area showing signs of recovery?  If not, it’s probably not a good fit.
    • Factor 2: More Than One Economic Driver – if the area you are investing in or plan to invest is is dependent on only one economic driver or does not include one of the 5 primary industries then it’s not a good fit.
    • Factor 3: My 30% Driver Rule – if the economy is dominated by more than 30% with one industry then it’s not a good area to invest in.
    • Factor 4: Infrastructure Improving – is the local government investing in infrastructure?  If so, then it’s a good bet for remote rehabbing.
    • Factor 5: Quality of Life Improving – is the local government investing in improving the quality of life of it’s citizens?  If yes, then you have a great opportunity for a short or long term rehabber investment.
    • Factor 6: Affordability – can people afford to live in the area?  If so, then you will have people able to pay for their rent and stay in the area long term.
    • Factor 7: Inventory – if inventory is tight and you are going to have to pay premium for a property then you probably aren't going to make any money, in fact you may lose money!

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