Purchasing your first multi family

[Chris Vacek]

I'm just interested in what you all think here.  If given a choice between a property close to home in a tax heavy state or one in a "hot" national market which would you choose as a first time investor?

Thanks for the info!

[Jason Powell]

Choose close to home, hands down. I say this for a few reasons.

1. Unless you are thinking about purchasing a very large property, paying a property manager will be a significant expense and eat away at cash flow. Most property managers reduce their fees the larger the building gets. Having 100 houses takes more work than one 100 unit building. Why not pocket the 7-10% fee and learn something while doing it?

2. Real estate is a more tangible investment vehicle that requires care (as opposed to stocks or bonds), it greatly mitigates risk to be at least somewhat involved in the business operation of the property. Are tenants paying the rent on time, but trashing the place as they live there? You may never know if it's out of state. Is a property manager skimming a little extra off the top by reporting a higher vacancy (Most reputable property management firms would never do this, but I've seen enough horror stories to make me consider it!)? Can you stay familiar enough with the area to know competitive prices to rent, buy, or sell?

3. You may not have dreams of being a landlord forever, but it will pay off in the long run to gain some experience managing the day-to-day operations and tenant relationships! Remember, real estate is a business, and rents pay the bills and put money in your pocket. Do you really want someone managing your business when you have never once done the job yourself? A crash course in property management will teach you valuable lessons that can only be gained from experience.

Hope this food for thought helps. I'm certainly no guru, but maybe the points are good for consideration.