In the past, real estate investors had to see a property in person to determine if it was a worthwhile investment. Today, with the advancement of real estate investing platforms and the accessibility of property data from anywhere in the world, real estate investors can invest in a property without ever traveling to see it in person. With increased competition in hot real estate markets, virtual real estate investing has become more popular. In this article, we’ll take a look at some of the important distinctions between investing virtually and in person, as well as how to set yourself up for success as a virtual investor.
What is virtual real estate investing?
Virtual real estate investing refers to investing in real estate remotely, usually without visiting the property. This is not to be confused with purchasing virtual, online-only “real estate.” In virtual real estate investing, the property is real, and so is the money that investors generate by flipping, wholesaling, or renting the property.
Virtual real estate investing has become a popular option largely due to technological advancements that have enabled investors to identify and view potential deals in new markets. This includes investment platforms that allow investors to search for possible deals by using filters to find properties with specific distress factors such as pre-foreclosures or absentee owners. Then investors can get a look at the property using public records, satellite images, Google Street View, and occasionally through virtual tours. Technology is also enabling virtual closings that allow investors to view, sign, and have their documents notarized online.
How to get started in virtual real estate investing
Virtual real estate investing is an option available for all property types and investment strategies. Whether you’re seeking a rental property, a wholesale deal, or a property flip, this strategy can help investors expand and diversify their portfolios in a way that surpasses investing locally.
To get started, the most important tool for virtual investors is real estate investment software. While real estate investment software can vary in scope and quality, whichever one you use should allow you to apply filters to find properties with certain characteristics. There are the obvious filters, such as condominium versus single family home. Then there are the more sophisticated filters, such as the distress factors mentioned above.
Next, you need to familiarize yourself with the laws in the state and city where you’re investing. This is especially important if you plan on wholesaling or owning rental properties in a certain area. Different states–and even different cities within the same state–can have their own rules for wholesaling or renting to tenants.
The due diligence required to invest in a new market
You may find a property online that fits your criteria, but it’s essential to learn about the market it’s in when determining if it’s a worthwhile investment. Whether you’re a wholesaler, flipper, or rental property owner, you should make sure that there is demand for housing in the area where the property is located.
You don’t want to be motivated purely by price, because that can lead to investing in a region with a dwindling population and you could struggle to find a buyer or renter for your property. The best markets for real estate investing have a diversity of employers. That way, your ability to sell or rent your property isn’t contingent on the success of one major employer in the area.
Pros of virtual real estate investing
Virtual real estate investing has become popular because of the freedom it offers investors. For real estate investors who live in an expensive market, virtual investing gives them the ability to invest in markets where property values are lower. Being able to choose your market also means that investors can select a market with lower competition.
Another advantage of remote real estate investing is that you’re far less likely to have an emotional attachment to a property. In some cases, investors can get attached to a property even after discovering it no longer makes financial sense. With virtual investing, you’re less likely to get attached to a property that you’ve never stepped foot in.
The last major advantage of virtual investing is the ability to purchase properties in higher volumes and scale up faster. If you were to only invest in an expensive market, it would take longer to acquire a volume of properties, but being able to invest in a variety of markets allows you to invest in more properties with potentially higher yields.
Cons of virtual real estate investing
Getting to the point where you can easily invest in a market virtually requires a significant amount of planning and footwork. First, it’s important to be able to identify markets that have demand for housing, whether you’re looking to wholesale, find a fix-and-flip or buy a rental property. While wholesalers and flippers can be confident in their investment if the housing market is strong, investors in rental properties need to evaluate the long-term demand in a market. As previously mentioned, having multiple employers in a market makes it more likely that you’ll have a large population of renters.
The other hurdle with virtual real estate investing is the need to develop relationships with real estate professionals in the local market. Unlike investing locally, where the investor may have an abundance of long-standing contacts, virtual investors need to start from scratch. It’s generally best to start by finding a real estate agent and requesting referrals for the other real estate professionals you plan to work with, such as the contractor and title company. title company. Before you hire someone, make sure to read any online reviews for their services. Also, make sure to ask for references and then call those references. Even if your real estate agent swears that someone is a great contractor or property manager, you need to hear what it was like working with this person from one of their clients.
The last drawback of virtual real estate investing is that your property could need a repair and you wouldn’t know about it. That’s why it’s so important to ensure that your team on the ground is experienced and can identify any issues before it’s too late.
Key takeaways
Virtual real estate investing appeals to investors for a variety of reasons. By looking to other markets, virtual real estate investors are able to expand and build a portfolio that matches their investment strategy. By investing in different locations, these investors are also less vulnerable to an economic downturn that hits a certain region especially hard.
While virtual investors can conduct business remotely, it’s important that they have trusted connections on the ground that understand the market. Whether you’re wholesaling, rehabbing or buying a rental, your virtual investments will be more successful when you have connections with real estate professionals in the market.
