Questions from a new investor..... :-/

[Carlos Quiros]

Hello All-

New to investing and had a few questions for those seasoned investors. My wife and I are looking at the mid-west to start investing (Ohio, Wisconsin, Indiana, Pennsylvania or Kentucky) My question are in the models I am running I am losing money on deals or barely breaking even. Should I expect to cash flow SOMETHING or just be happy with a breakeven/small lose and expect property appreciation to help later as a buy and hold.

For those of you that are already investing in these markets are there some your prefer over others?

What percentages are you seasoned investors assigning in your models for

• Insurance (I know that I can look this up but is there a baseline number to get an idea)
• Maintenance %age
• Repairs %age
• Cap ex %age
• Management Fees %age
• Who typically pays for (Gas, Electricity, Water, Sewage/garbage)

Should I avoid properties where I pay water as it would eat into my profits?

For those of you that are already investing in these markets are there some you prefer over others?

There’s so much to unfold and it’s definitely overwhelming but I thought I would ask those who have been in my shoes before. I know it’s a lot but it can be done since there are already so many successful investors here that show me all I need to do is keep going and ask questions.

Thank you in advance to anybody who takes time out of their already busy day to help a noobie

Carlos

[William Anderson]

Carlos, I am not familiar with those markets but some basic things apply to any market.  Given the economic situation now, higher prices for property, and higher interest rates, be very careful overextending in the "hope" that you will overcome at least one shortcoming.

I do not believe that we are going to see appreciation shortly, the market is currently in a period of adjustment with prices likely to drop rather than increase.  A few years ago you could invest based on appreciation, that's not the case in much of the country now.  

You should have at least six months of free cash to make up for any losses that were incidental and not planned.  I recommend to my clients that they should wait a while for the market to stabilize, there will be many foreclosures, particularly with short-term rental owners.  There will be a good time to snap up those distressed properties fully furnished.  

Remember cash is king.  Hold on to as much as you can now and be very careful about taking on debt.  I sincerely believe that now is always a good time to buy but you need to buy right.