Need advice on hassle free rental investment
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Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
3y@Nawab I., if investing was like that don't you think EVERYONE would be doing it?
1) Yes, you can buy a turnkey property, BUT that doesn't mean there won't be any maintenance. Appliances break, sewer lines get clogged, water splashing from the tub/shower gets under the LVP floor damaging the wood underneath. Lots of things happen to property in turnkey condition and that isn't even addressing issues caused by the tenant's themselves.
2) Buying a nice well maintained property in a good neighborhood generally gives a LOWER return than a more marginal working class neighborhood for a variety of reasons. For one, increased owner occupancy adds another layer of competition driving up the purchase prices because an owner occupant isn't trying to make a profit, just offset their living costs by living in a multi-family.
3) Managing from a distance is more expensive. In much of Pennsylvania municipalities have adopted rental ordinances requiring local property managers because of all the issues they have had with absentee landlords.
Even if you can get away without a local property manager, you will likely need to pay someone for tenant placement which will run approximately 1 months rent. If the tenant stays 2 years on average, then you will be losing 1/2 months rent every 2 years PLUS turnover costs to prep the unit again PLUS the lost rent during the time its vacant.
4) A nicer property has more risk for tenant damage. Vetting tenants is difficult and with a nicer property damage costs more to repair. If you only own 1 property a bad tenant experience can be catastrophic.
To conclude, I'm not saying investing remotely is a bad idea, but it sounds like your expectations have too much wishful thinking baked into it. Test all your assumptions and look for where the opportunities really are. The opportunities that are a little more difficult will likely be much more lucrative.
26 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
@Nawab I., if investing was like that don't you think EVERYONE would be doing it?
1) Yes, you can buy a turnkey property, BUT that doesn't mean there won't be any maintenance. Appliances break, sewer lines get clogged, water splashing from the tub/shower gets under the LVP floor damaging the wood underneath. Lots of things happen to property in turnkey condition and that isn't even addressing issues caused by the tenant's themselves.
2) Buying a nice well maintained property in a good neighborhood generally gives a LOWER return than a more marginal working class neighborhood for a variety of reasons. For one, increased owner occupancy adds another layer of competition driving up the purchase prices because an owner occupant isn't trying to make a profit, just offset their living costs by living in a multi-family.
3) Managing from a distance is more expensive. In much of Pennsylvania municipalities have adopted rental ordinances requiring local property managers because of all the issues they have had with absentee landlords.
Even if you can get away without a local property manager, you will likely need to pay someone for tenant placement which will run approximately 1 months rent. If the tenant stays 2 years on average, then you will be losing 1/2 months rent every 2 years PLUS turnover costs to prep the unit again PLUS the lost rent during the time its vacant.
4) A nicer property has more risk for tenant damage. Vetting tenants is difficult and with a nicer property damage costs more to repair. If you only own 1 property a bad tenant experience can be catastrophic.
To conclude, I'm not saying investing remotely is a bad idea, but it sounds like your expectations have too much wishful thinking baked into it. Test all your assumptions and look for where the opportunities really are. The opportunities that are a little more difficult will likely be much more lucrative.
- 3yJeremy TaggartBusiness MemberReal Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 646 votes
@Nawab I. Rental properties are never going to be 100% passive. You can get them mostly passive by hiring out property management/leasing and buying something that has been fully renovated but there's always going to be the chance of maintenance needing done or tenants not paying. If it was 100% guaranteed and hands off then you wouldn't be able to get outsized returns compared to say index funds or treasuries.
As for $225k that can get you a duplex in a pretty good area here that is mostly turnkey. We do have older housing stock though so going to have a little more maintenance compared to something new construction. That's also one of the main reasons the real estate is much cheaper here.
Just have to figure out what you want your level of involvement to be knowing something that will require more up front work on your end will likely give you a better return. Less up front work, lower return. Generally speaking in most cases.
DHRE- The Jeremy Taggart Team590 Reviews - 3yNawab I.Union City, CA · Member since 2017 · 12 posts · 11 votesOP
Thanks @Kevin Sobilo and @Jeremy TaggartHow do you check "rentability" in an area? Zillow, Redfin etc. provide some estimate for rents but I couldn't figure out how much time does it take to find a tenant. @Jeremy Taggart
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes3y
There is no hassle free rental property. I would not expect to raise a baby 3000 miles away from home. This is an active investment that requires work.
Everything wears out, hurricanes, fires, damage is always in the future. The child needs paint/maintenance/constant education of the parent. Tenants are not all kind or pay. Taxes go up, costs rise, and plans are intended as models for possibility.
Someone selling you "turn key" doesn't mean much. New construction can have flaws.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes3y
@Nawab I.
"Nawab I. posted about "pittsburgh" in Need advice on hassle free rental investment"I just came over here laughing because that was the notification that popped up under the bell icon. "Pittsburgh" and any term like "hassle free rental investment" don't usually go well in a sentence together.
This isn't a good idea, Nawab. If you want to try it, by all means, but don't say you weren't warned.
Niche.com collects a bunch of useful stats on crime rates by zip code and neighborhood. That's probably a good place to start. - 3yNed J.Pro MemberInvestor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
"Turnkeys" are never "hassle free".....LOTS of "turnkey companies" out there, and LOTS of them slap lipstick on a pig and sell it to OOS new investors. Quality of their renovations are garbage and their in house PM systems nickel and dime you at every turn. Their numbers look fantastic but often leave out multiple expenses that are going to happen.
Not to say their aren't good quality turnkeys companies out there, but even those are not "hassle free" and completely passive. You need to manage the management.
If you want truly "passive" then you invest in syndications..... all of your "hassle" is up front vetting the operators and deal.... once you invest, you have ZERO input or responsivities. Which can be good or bad..... with less direct involvement, you are paying someone else to take that job and less profit on your end.. its a trade off.
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes3y
If you're looking for turnkey rentals in the Midwest or cities like Pittsburgh, Michigan, or Baltimore, I've got to provide some caution. Back in 2012 to 2016, when I was just starting out, I used to buy these rental properties, and it was a great way to get my foot in the door. But here's the thing, if you're an accredited investor or have a net worth of at least a quarter million or half a million dollars, I would recommend exploring other options.
Buying these smaller rental properties might not be the best long-term strategy. They aren't very scalable, which means it's hard to grow your portfolio over 10-20 of these. Plus, they come with a lot of liabilities and headaches that you might want to avoid, like legal liability. Since 2018, prices have skyrocketed, and many turnkey providers have had to look for properties in less desirable areas like Pittsburgh.
Now, don't get me wrong, investing in turnkey rentals can still be better than getting into the short-term rental game, where income can be inconsistent especially in a recession where people stop taking recessions. But it's important to be aware that there's often nothing "turnkey" about turnkey rentals. They require ongoing management and maintenance, and most times the promised returns don't quite match up to reality.
Personally, I've moved away from buying individual rental properties and have started focusing more on syndications and private placements. These investment vehicles are better suited for higher-income earners and those with a higher net worth.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes3y
- 3yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
It isn't a bad idea to get a place that is in good condition and ready to rent. Make sure you know the rental rules before you start looking at homes and find a place that is NOT tenant friendly. Then find a good PM and a good realtor (who is used to working with investors).
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes3y
My advice would be to abandon the idea of real estate.
Hassle free doesnt exists and with that mindset its way more logical and conducive to do high yield mutual funds, dividend investing or something in that realm.
- 3ySam McCormackBusiness MemberReal Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
Quote from @Nawab I.:
Hi there
While I have lived on the Westcoast for a good part of my life, I am out of US for past few years. Recently I discovered cheaper houses in Pittsburgh (compared to the west coast cities), and I am thinking to put my cash toward a hassle free rental investment either in sfh or a duplex, in that area .
Hassle free means a turnkey property which will likely not require any maintenance for next few years.
In a good neighborhood, where I wont have a challenge in finding good renters as I won't have time to evict anyone or chase someone if they damage the property.
With the above two constraints , what are my options? My budget is ~ 225k (including downpayment and financing).
Does anyone think it is a bad idea to remotely do this? I am ok to visit for a couple of weeks while doing the transaction.
Thank you in advance.While I agree with most others, that this is not the place you should be for, "hassle free". I assume you are okay with that and just wanted others thoughts. With a purchase price of 225k, you'll definitely want to look at places with lower purchase price, something in, or like the midwest. Ohio has 2 cities is specific you would like, Cleveland and Cincinnati. Cleveland more cash flow heavy, while Cincinnati has most potential for value add in the future.
I am in Cincinnati/Northern Ky, so let me know if you are interested so I can help you navigate Cincy!
Sam McCormack Realtor - 3yErin ChurchPro MemberReal Estate Agent · North Augusta, SC · Member since 2017 · 254 posts · 233 votes
@Nawab I.
I always run my numbers with property management in there even though I self manage. If the numbers don’t work with it there, I just don’t buy it.
If you can get a duplex, I recommend that as it’s less likely to have a month with no rent coming in. :) I’m not familiar with the area, so unfortunately, I can’t recommend a location.
- 3yPatrick DruryBusiness MemberReal Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
@Nawab I.
A budget of 225k is definitely doable. I would definitely recommend Columbus OH. It's a solid hybrid market of cash flow and appreciation. Columbus has lots of job opportunities and population growth. It’s great for investing in from out of state since it’s landlord-friendly, has a low barrier of entry and cash flows. - Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes3y
Quote from @Nawab I.:
Hi there
While I have lived on the Westcoast for a good part of my life, I am out of US for past few years. Recently I discovered cheaper houses in Pittsburgh (compared to the west coast cities), and I am thinking to put my cash toward a hassle free rental investment either in sfh or a duplex, in that area .
Hassle free means a turnkey property which will likely not require any maintenance for next few years.
In a good neighborhood, where I wont have a challenge in finding good renters as I won't have time to evict anyone or chase someone if they damage the property.
With the above two constraints , what are my options? My budget is ~ 225k (including downpayment and financing).
Does anyone think it is a bad idea to remotely do this? I am ok to visit for a couple of weeks while doing the transaction.
Thank you in advance.Get to know and trust a good property manager, so you don't have to chase anyone.
Investing remotely is a great idea since it expands the inventory you can purchase. Here in Ohio, 225k would get you a great 2-4 unit in a great area in markets like Toledo and Dayton.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
Quote from @Nawab I.:
Thanks @Kevin Sobilo and @Jeremy TaggartHow do you check "rentability" in an area? Zillow, Redfin etc. provide some estimate for rents but I couldn't figure out how much time does it take to find a tenant. @Jeremy Taggart
The time to find a tenant isn't just about market, but also about YOUR approach.
For example, some landlords try to find replacement tenants BEFORE the current tenant moves out. That can create a whole set of issues to cope with but can also reduce vacancy if it goes well.
I personally wait until the unit is vacant, do 90% of the prep to make it rent ready and then show it with the expectation that a new tenant will be in place in about 4-6 weeks on average. 2-3 weeks to find the tenant and 2-3 weeks for them to move in. I budget for a vacancy every 2 years which factors out to about a 5% vacancy. I also work to EXCEED that by how I manage the property and what amenities I offer.
Rental real estate isn't clear cut, its a market and a business. So, its always changing because its a market and YOU have influence over your experience based on how you approach and manage things.
This also goes for market rent rate. MANY landlords look at the HIGHEST rent being asked for with comparable units and feel THAT is market rent. However that may not attract the best applicants and certainly may not keep them very long!
To me market rent is the rent that will READILY attract and KEEP good tenants for AT LEAST 2 years preferably more. That is likely somewhat under the top dollar some landlords try to get for comparable rentals and also varies depending on what you offer and how you manage. Offering amenities you might not think of can make a difference such as providing a washer and dryer. It isn't common in many markets but could be something that attracts and keeps a good tenant longer! - 3yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Logical Property Management4.9453 Reviews - Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes3y
Quote from @Nawab I.:
Hi there
While I have lived on the Westcoast for a good part of my life, I am out of US for past few years. Recently I discovered cheaper houses in Pittsburgh (compared to the west coast cities), and I am thinking to put my cash toward a hassle free rental investment either in sfh or a duplex, in that area .
Hassle free means a turnkey property which will likely not require any maintenance for next few years.
In a good neighborhood, where I wont have a challenge in finding good renters as I won't have time to evict anyone or chase someone if they damage the property.
With the above two constraints , what are my options? My budget is ~ 225k (including downpayment and financing).
Does anyone think it is a bad idea to remotely do this? I am ok to visit for a couple of weeks while doing the transaction.
Thank you in advance.Houses in Pittsburgh are almost all old.
Especially in that price range. They will all have maintenance from time to time unless you get lucky.For under 300k I’d be skeptical of anyone who sells you a house that they say will have none of these problems in any market.
- Columbus, OH · Member since 2023 · 427 posts · 254 votes3y
Hi Nawab, long distance is doable today if you network well. You will need a solid, experienced team on the ground, namely a contractor, agent, PM, and lender. It adds an element of risk, but with the right team and open lines of communication you can be successful in any market. That being said... as many others have noted, nothing about buying a home is "hassle free," but I'm assuming you're just not looking for any sort of immediate rehab project.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes3y
Quote from @Nawab I.:
Hi there
While I have lived on the Westcoast for a good part of my life, I am out of US for past few years. Recently I discovered cheaper houses in Pittsburgh (compared to the west coast cities), and I am thinking to put my cash toward a hassle free rental investment either in sfh or a duplex, in that area .
Hassle free means a turnkey property which will likely not require any maintenance for next few years.
In a good neighborhood, where I wont have a challenge in finding good renters as I won't have time to evict anyone or chase someone if they damage the property.
With the above two constraints , what are my options? My budget is ~ 225k (including downpayment and financing).
Does anyone think it is a bad idea to remotely do this? I am ok to visit for a couple of weeks while doing the transaction.
Thank you in advance.People invest out of state from Cali all the time. Although, truth be told, things are a bit more landlord friendly if you go one state to the west with Ohio.
- Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes3y
A "cheap" house is cheap for a reason and typically not in a "good" neighborhood. Cheap houses often end up being the most expensive....
- Investor · New York City · Member since 2020 · 164 posts · 75 votes2y
I would say investing in a syndication or fund could be a good option given your situation. With syndication, you can acquire undervalued commercial properties and transforms them into cash flowing assets without needing too much capital and earn passive income.
We syndicate self-storage projects. We like self-storage because even if there is a recession, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions. And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases
These syndication can provide an 8%+ cash-on-cash return - providing you monthly cash flow - and a 15-20% IRR over the length of the project.
Marcus & Millichap published an outlook of the self-storage industry that you may find helpful:https://www.marcusmillichap.com/research/market-report/multiple-markets/2023-us-self-storage-investment-forecast
If you want to discuss further, feel free to reach out.
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