Long Term Rental Investing

[Corey Blake]

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

[Jonathan Greene]

It's hard to find a question in there. Are you looking for recs on an area or how to buy a property? Get your finances in order and talk to a lender so you know what you can afford before thinking about location. NY is not scary as a landlord, but expensive. NJ is the same. PA is a great alternative to those because you can drive there and there are some great well-priced, lower tax alternatives to NY and NJ. Start with a lender, go to local meetups to meet other investors, and take your time.

[Corey Blake]

Fair, I can see how I was scatterbrained there. First post jitters! Appreciate the reply as well!

1.) Looking for alternative areas outside of NY/NJ/CT area

2.) What are the biggest hurdles with purchasing in a state that is much further away (Midwest etc) and is it smart for a first property? It seems money can travel much further outside of our area.

3.) Recently opened an LLC and would like to run the financials and everything through that. Will a lender still need to look into personal capital etc?

-If I move money from my homes equity into the business account, will that red flag? 

-How does LLC/personal loans differentiate when applying for loans?

[Min Zhang]

Hey Corey, I’d recommend starting with a turnkey cash flow rental. It’s a great way to get a feel for being a landlord while building your trusted team.

If you’re focused on cash flow, the Cleveland/Dayton area is worth considering. For appreciation, the Columbus market is a strong choice. Columbus has seen significant growth, especially with tech giants like Intel, Meta, Amazon, and Google establishing operations and driving up property values and job opportunities.

I can send you a list of contacts in Ohio to help you build your team and find a property manager. Let me know how I can help!

[Sam McCormack]

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

 Lots of ways to start, but I normally recommend figuring out your WHY, and then match that WHY/your goal, with a location. Cash flow, you may want to look in certain markets over others. "Appreciation", you would avoid cash flowing markets and go for an area on the up and up (unless you can get both AND a motivated seller. Double Whammy). I think Greater Cincinnati, the market I am in, is great. It works great for my investors so far, it has cash flowing areas/properties, and other areas that are coming up and have been up that have great value/appreciation potential. I could go on, but shoot me a message if you are interested, would love to talk you about the market!

[Jimmy Lieu]

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

Hi Corey! I started with a house hack when I moved from Portland OR to Columbus OH. Purchased rentals that are all clean BRRRRs and now have a successful rental portfolio. If you're looking for cash flow, I personally recommend Columbus - we still find great deals here that hit 1% and positive cash flowing. Plus there is lots of potential for appreciation because of the major companies developing here. Population is growing, the job market is growing, and macroeconomics is great overall. With OOS investing, make sure to work with someone who has your best interests at heart and can easily plug you in with their network of lenders, PMs, and GCs to be able to build your core team. Happy to connect and answer any questions you may have.

[Wale Lawal]

@Corey Blake

To invest in multi-family properties, consider markets outside New York, analyze properties for passive income, and consider financing options like conventional loans, FHA loans, and DSCR loans. Build a team of professionals, network with investors, and mitigate risk by screening tenants, having proper insurance, and having reserves. Start small and scale gradually, reaching out to local agents and investors.

Good luck!

[Nathan Gesner]

Yes, there is a lot of information, hundreds of different opinions, and it can easily overwhelm a new investor.

Dummy it down. Think back to 1985 or 1998 or 2007. People did not have BiggerPockets, YouTube, podcasts, or hundreds of books on real estate investing. So what did they do?

They know real estate was a good investment. If you buy a property and hold on, it will increase in value and make really good money. Without coaches, without gurus, without any other resources, they simply saved some money, bought a property, managed it as best they could, and held it for 30+ years. It's really that simple.

Find an affordable market with a good property manager who can handle things for you. Find a property that will bring in enough rent to cover all the expenses. Buy it. Hold it. Rinse and repeat. Later, when you have more experience and time, you can learn how to crunch numbers and improve the rate of return.

You don't have to be in a big city like Columbus, where everyone else invests. Stay away from coastal states until you have experience. Find a state with fair laws that are easy to understand and follow. Some examples include Kansas, Indiana, Ohio, Iowa, Oklahoma, Tennessee, West Virginia, etc. Which one performs best? Don't get bogged down in that nonsense! People are making money in all of these states. Focus in on a city with good schools, low crime, and good jobs. Narrow in on a community, buy a house, hold on.

P.S. You won't be managing from afar, so find a quality property manager before you find houses. If you can't find a quality PM with a good, long-term reputation, then don't invest in that city. Once you do find a good PM, they can often help you search for an investment. You can generally trust them to help you find a good one because they don't want to manage a dump.

[Account Closed]

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

Good morning Corey! 
It’s great that you’re considering a multi-family property as part of your wealth-building strategy. Since your goal is passive income, breaking even, and long-term wealth, here are some general steps to guide you:

Location Research: Focus on areas with landlord-friendly laws, especially since you want to avoid tenant-landlord issues like those in New York. Consider states with strong rental demand, population growth, and stable or appreciating real estate markets.

Financing: Look into various financing options. If you plan to live in one of the units, you may qualify for favorable terms with an FHA or VA loan, which often allows you to put less down on a multi-family home. If it's strictly an investment, you may need to consider conventional loans or other creative financing options.

Cash Flow Analysis: Do a thorough analysis to ensure that the rental income will at least cover your mortgage, property taxes, maintenance, and vacancy periods. Break-even or positive cash flow is key for passive income.

Property Management: Since you’re aiming for passive income, consider whether you’ll manage the property yourself or hire a property manager. A good property manager can handle tenant issues and reduce your hands-on involvement.

Building a Network: While you don’t currently have local connections, networking with other investors, attending real estate meetups, or joining online communities can provide valuable insights and opportunities.

The next steps depend on your financing options, preferred markets, and whether you’re willing to manage tenants directly or prefer to stay hands-off. Happy to dive into any specific questions you have. 

[Michael Smythe]

@Corey Blake

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

PM us if you’d like to discuss this logical approach in greater detail!

[Samuel Diouf]

Quote from @Corey Blake:

Fair, I can see how I was scatterbrained there. First post jitters! Appreciate the reply as well!

1.) Looking for alternative areas outside of NY/NJ/CT area

2.) What are the biggest hurdles with purchasing in a state that is much further away (Midwest etc) and is it smart for a first property? It seems money can travel much further outside of our area.

3.) Recently opened an LLC and would like to run the financials and everything through that. Will a lender still need to look into personal capital etc?

-If I move money from my homes equity into the business account, will that red flag? 

-How does LLC/personal loans differentiate when applying for loans?

1. A lot of Midwest markets like Columbus, Ohio have excellent MFH markets 

2. One of the biggest challenges is understanding the different areas of the market and building the right team to handle your OOS investing without having to travel to your investments all the time. 

3. For the lending it will be dependent on what type of loan you will be using. DSCR loans are based solely off of the properties income so the LLC wouldn't need any income source.

- I would speak with an attorney regarding transferring the equity to your businesses.  

[John Williams]

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

 Welcome! Start by clarifying your goals and vision. Once you know exactly what you want to achieve, your path will be more clear. How much passive income do you want? By what date?

Narrow it down to a few markets / property metrics and connect with a great real estate team in those markets. 

[Remington Lyman]

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

 Finding a solid Realtor, property manager, contractor, and lender is your first step!

[JonPaul Kessinger]

Quote from @Nathan Gesner:

Yes, there is a lot of information, hundreds of different opinions, and it can easily overwhelm a new investor.

Dummy it down. Think back to 1985 or 1998 or 2007. People did not have BiggerPockets, YouTube, podcasts, or hundreds of books on real estate investing. So what did they do?

They know real estate was a good investment. If you buy a property and hold on, it will increase in value and make really good money. Without coaches, without gurus, without any other resources, they simply saved some money, bought a property, managed it as best they could, and held it for 30+ years. It's really that simple.

Find an affordable market with a good property manager who can handle things for you. Find a property that will bring in enough rent to cover all the expenses. Buy it. Hold it. Rinse and repeat. Later, when you have more experience and time, you can learn how to crunch numbers and improve the rate of return.

You don't have to be in a big city like Columbus, where everyone else invests. Stay away from coastal states until you have experience. Find a state with fair laws that are easy to understand and follow. Some examples include Kansas, Indiana, Ohio, Iowa, Oklahoma, Tennessee, West Virginia, etc. Which one performs best? Don't get bogged down in that nonsense! People are making money in all of these states. Focus in on a city with good schools, low crime, and good jobs. Narrow in on a community, buy a house, hold on.

P.S. You won't be managing from afar, so find a quality property manager before you find houses. If you can't find a quality PM with a good, long-term reputation, then don't invest in that city. Once you do find a good PM, they can often help you search for an investment. You can generally trust them to help you find a good one because they don't want to manage a dump.

 As a realtor, PM, and investor in WV, I can confirm there is money to be made here. West Virginia doesn't come to mind at first when considering investing out of state, but we have low home costs and high rent in quality areas! I work from Morgantown to Bridgeport, WV, and we have some nice cash flowing areas in A-B neighborhoods. It is much like other states, though; it's not all great; you have to be careful where you invest because there are areas that could cash flow a ton but may not be worth the headache.

[JonPaul Kessinger]

Quote from @Remington Lyman:

Quote from @Corey Blake:

Good morning all!

First and definitely not last post or question here. I looked around a bit and didn't find anything that came up in relation to my personal question. Anyways...!

I am looking to purchase a multi-family home, outside of New York due to tenant-landlord issues here (really the fear of it). My goal is more for passive income/break even along with wealth later in life, currently 35 YO. I've been doing homework, listening to pod-casts, reading and the knowledge out there is phenomenal and overwhelming at the same time. I do not have any affiliation with others locally or anything either to discuss, willing and open to knowledge and conversations!

That being said, if doing so, what is the best way to go about it? I'm sure I'll have many more questions to follow as well. 

Appreciate you all!

 Finding a solid Realtor, property manager, contractor, and lender is your first step!

 Those will be your core people. If you find one of them, ask them to refer you to another one. A good PM will have a good contractor (in some states, may be a realtor also), a good realtor will know good lenders, and visa versa. Once you know the state you want to be in, a lot of the time, all it takes is finding one of those four, and they can plug you into the other 3. 

[Nathan Gesner]

A good property manager can point you to a good REALTOR, contractor, lender, etc. And the property manager is the only person with a long-term interest in your property, so their opinion carries a lot of weight!