The real estate industry is still dominated by property tours and open houses, emails and phone calls, and in-person back and forth negotiations. However, slowly but surely, the traditional way of investing in real estate is being disrupted by technology.
For a growing number of real estate investors, virtual real estate investing is quickly becoming the new normal for buying and owning rental property in some of the best real estate markets from coast to coast.
Key takeaways
- Virtual real estate investing simplifies the process for owning property outside of an investor’s local market.
- Investing in real estate virtually may provide investors with a wider variety of investment opportunities to help increase potential returns.
- Main steps to virtual real estate investing include gathering the right tools and information, analyzing the best markets for owning rental property, and choosing the right real estate investing strategy.
- Virtual real estate investing may be a good choice for investors who want to save valuable time and money instead of touring properties and attending open houses.
What is virtual real estate investing?
Virtual real estate investing is a term used to describe the process of doing real estate deals completely online.
Also known as remote real estate investing, virtual real estate investors locate and research the best markets for rental property, analyze the ROI of individual rental properties, perform due diligence, and close escrow remotely.
Investing in real estate virtually may also significantly reduce the costs and time spent on individual real estate transactions, and potentially increase returns:
- Virtual real estate investing eliminates the traditional boundaries by allowing investors to select the best options and strategies to meet their unique goals and objectives.
- Out-of-state real estate markets may prove to be more profitable over the long run than the city where an investor lives, helping to boost potential returns and grow generational wealth.
- Cutting-edge, state-of-the-art technology provides virtual real estate investors with the knowledge and tools to purchase and own residential investment property.
How to begin virtual real estate investing
Some of the biggest benefits to investing in real estate virtually include the convenience of doing deals from home, cost savings from not having to travel to each prospective property to purchase, and the flexibility to diversify an investment portfolio with different rental properties across the U.S.
In order to reap those potential rewards, here are the steps to follow to begin virtual real estate investing today.
1. Gather the right virtual real estate investing tools
Most people already have the hardware and software in their own home to begin investing in real estate virtually.
A computer or laptop, a reliable internet connection, a smartphone for remote access, a scanner or printer, and a space to work from is all of the equipment a virtual real estate investor needs. Add in spreadsheet software and a word processing system, and investors are good to go.
Software and online resource tools for virtual real estate investing include:
- Real estate websites such as Zillow and Realtor.com, and investment property platforms like Roofstock.
- Residential real estate market reports and news from sources like the National Association of Realtors (NAR), HousingWire, and state and local real estate associations.
- County recorder and assessor websites to learn who currently owns a property, determine property taxes, and find motivated sellers with property in probate or homes going into foreclosure.
- Google Earth to get a satellite view of a home, including the surrounding homes and amenities that could help make or break a deal (such as a near-by sewage treatment plant).
- Online real estate investment groups and social media real estate investor websites to connect with other virtual real estate investors and learn how remote real estate investing really works.
2. Analyze the best real estate markets for rental property
Some real estate markets can perform better than others in terms of both cash flow and appreciation. One of the advantages of virtual real estate investing is that investors have an abundance of data and information at their fingertips to help analyze the best real estate markets for rental property.
Population and job market growth
The pandemic accelerated the trend of people and businesses moving to areas where the cost of living and taxes are lower and the quality of life is higher.
WalletHub maintains a list of the Best Places in the U.S., using categories such as the best small cities, the best cities for jobs, and the best-run cities. Check it out for a good resource to start narrowing down your list of potential targets.
Diversified economy
As a rule of thumb, cities where the local economy is diversified may stand a better chance of weathering an economic downturn than places that depend on one main company or industry for employment.
Diversity in companies and industries help to avoid “boom-and-bust cycles” that can impact not just the local job market but the demand for rental property as well. Online resources to learn more about local economies include Census Reporter, Data USA, Census.gov, BLS.gov, and the economic development websites for the city or state.
One exception to the diversified economy rule may be small college towns. While renting to college students can require more property management, rental income and returns may be higher because of demand.
Housing prices
The Freddie Mac House Price Index (FMHPI) measures the typical price inflation for houses within the U.S., at the national, state, and MSA level.
In many cases, cities where home prices are high also have a higher percentage of renter-occupied households. For example, cities with the highest percentage of renters – such as Miami, Florida and College Station, Texas – also have high house price indexes.
Metrics to look at to help tell how strong the demand for rental property in a market is include:
- House price index (HPI) and Housing Affordability Index (HAI)
- Median household incomes and per capita incomes
- Percentage of renter-occupied households
- Change in rent prices year-over-year
- Number of Gen-Z and Millennials in the marketplace (because younger people tend to rent rather than own)
3. Select a personal real estate investing strategy
Some of the common strategies investors use to make money in real estate include buying a rental property, fixing-and-flipping, and real estate wholesaling.
For many investors, buying and holding a single-family rental property is a common way to virtually invest in real estate. Single-family homes are plentiful, there are a variety of sources for financing residential property, and many tenants enjoy the additional space that a home offers.
Investors may find there are two other advantages to the buy-and-hold real estate investing strategy.
First, less time is involved compared to active investing such as flipping a home. Secondly, less direct involvement is required when daily tasks such as tenant communication and property maintenance are assigned to a local property management company.
4. Invest in a rental property virtually and learn the ropes
Choosing how to virtually invest in real estate is just as important as analyzing the best markets for rental property investing.
In less than 6 years, buyers and sellers have completed more than $4 billion in transactions through the Roofstock Marketplace. Investors can do deals with buyers and sellers across the country by using technology to help make investment decisions using insights and proprietary data.
When a listing is submitted, Roofstock performs up-front due diligence such as ordering a title report. Offers are negotiated entirely online, with Roofstock coordinating the entire closing process from start to finish.
Buyers can connect with financing partners to seek loan pre-approval and with preferred property managers to take care of the tenant and property once the transaction closes. It’s easy to understand why some investors believe that virtual real estate investing and Roofstock go hand in hand.
Is virtual real estate investing the right choice?
There are a number of potential advantages and disadvantages to consider before investing in real estate virtually:
- Access to opportunities in some of the best real estate markets to buy and own rental property in the U.S.
- Save valuable time, money, and energy by not traveling back and forth to inspect the property, deal with tenants, and handle repairs.
- Real estate investing marketplaces like Roofstock make virtual real estate investing almost as easy as investing in stocks.
Of course, virtual real estate investing may not be the right strategy for every real estate investor.
Researching the best real estate markets for rental property can be time consuming, requiring investors to stay at home in front of a computer instead of visiting property and attending open houses.
Owning a rental property remotely also means an investor must hire a local property management company to take care of the day-to-day details of tenant communication, maintenance, and repairs.
Because virtual real estate investing normally requires less owner involvement, the strategy may not be a good choice for investors who prefer to be actively involved with their rental properties.
Closing thoughts
Virtual real estate investing can help to simplify buying and owning a rental property. By using cutting edge technology, investors can participate in real estate markets across the country from anywhere and at any time.
As with any other investment, investing in real estate carries risks. But when done right, virtual real estate investing may open the door to an astounding variety of opportunities.
