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Updated about 4 years ago, 10/01/2020
rentals
I am new to investing, researching various area across the US to invest in. Mostly interested in buying cheap, renovating and retaining. I currenlty live in Chicago...taxes are extremely high here.
Anyone have any suggestions on markets? I have been hearing Detriot and Atlanta are hot. Lots of development in the next 10 years.
Thanks in advance!
If you are new I highly recomend you buy locally. Investing long distance can be done but with added risk. The fact you are new increases that risk exponentially. The grass in NOT always greener on the other side of the fence. Trust me there are good deals near where you live.
Is there a reason you want to invest out of your area?
#3 Off Topic Contributor
- Attorney
- Viera, FL
Originally posted by "ncarey":
Is there a reason you want to invest out of your area?
Honestly dude - I can tell you why having owned rental property in Chicago as well as in a real cashflowing area. Cook county doesn't cashflow for crap. Only one area I know comes close and that's Harvey. You want to invest in Harvey go ahead but make sure the life insurance is paid up and you've gone to confession.
It's easy guru-speak to say "good deals are everywhere" and we tend to repeat it because it may be true in our specific geographic area. For me where I'm at outside of Chicago, good deals really are just about everywhere. 5 years ago in Buffalo, NY - good deals were everywhere. That's just not the truth in some geographic areas when it comes to the business of owning rental property. Some times markets are just too high priced for rent.
Here's another neat thing about investing in Chicago rental property. Did you know that as property taxes went up last year, Section 8 rents went down? How's that for Chicago's politicians helping you with your long term hold strategy?
Anyway to answer the original question - go across the border and into Indiana. 30 minutes to the border.
Tim
Tim your right to challenge me. While I truly believe good deals are everywhere that doesn't mean any strategy will work anywhere and Chicago may be a tough place to buy rentals.
However I would consider 30 minutes away to be close by and certainly a better choice than 10 states away.
I certainly wouldn't look for the next "Hot" area. What's hot today, will be cool tomorrow. Lot's of development in Detroit in the next 10 years? WHAT? The population of Detroit has been declining for over 50 years.
Forget the fads and invest close to home for the long term.
Mike
Originally posted by "MikeOH":
I certainly wouldn't look for the next "Hot" area. What's hot today, will be cool tomorrow. Lot's of development in Detroit in the next 10 years? WHAT? The population of Detroit has been declining for over 50 years.
Forget the fads and invest close to home for the long term.
Mike
Although with Ford posting a $100MM Quarterly profit this last time around, that *may* start to change... but I still would agree with what everyone has said here and stick local to begin with...
#3 Off Topic Contributor
- Attorney
- Viera, FL
Originally posted by "ncarey":
However I would consider 30 minutes away to be close by and certainly a better choice than 10 states away.
It's not so much a challenge to you personally as it is a challenge to a general mindset that has been given to us by flash in the pan "gurus" and "mentors". I used to believe it myself and wasted a lot of time and money in it which is why I get passionate about it. The truth is that the success of some businesses is directly tied to its geographic location, i.e. salmon fishing, ice cream stands, mountain guiding and landlording.
Yeah, it's a lot easier to do "out of state" rental when out of state is closer than your commute for work.
You need to be close to your rental properties. No one will take as good of care of them as you will.
If you don't want to buy in Chicago, then move to somewhere else. But don't be a long distance landlord.
I believe that there are good deals everywhere, but that does NOT mean that there are cash flowing rentals every where.
There are different types of deals. "Good deal" isn't limited to cash flow deals.
If I can buy a house with $100,000 instant equity, I can sell it and make $100,000. That's enough for me. I don't have to have cash flow, too.
There are differnt types of real estate deals that don't involve renting.
There are some areas where it takes a lot of time and effort to fnd the deals, but that doesn't mean they don't exist. If it were easy, anyone could do it. But most deals are only there for the people who want to put in the effort to work at it.
#3 Off Topic Contributor
- Attorney
- Viera, FL
Originally posted by "PNW":
True - just sticking to topic which was "buying cheap, renovating and retaining." The only way to retain and build is through positive cashflow.
Well, I can't help but to completely disagree with another poster here as I own several cashflowing properties in Chicagoland (not in Indiana). Although I do own a bunch in Indiana as well and they cashflow nicely. I guess we also have to consider that many people say they are from "Chicago" and in the end the are really from Naperville which is actually 40 miles west of Chicago.
But the actual location is MOOT for this topic. Without a doubt when starting out, you want to be close. What is defined as "CLOSE" is up to you. However, I would suggest that you don't want to think of driving to the property as a "hassle".
Originally posted by "CSWREO":
Close or not. The Chicago market is out. All cards in the deck are stacked against the landlord. Rental income sucks, ROI blows, property taxes are high, maintenance/labor is expensive, local government is very pro-tenant and anti-landlord and tenant eviction period is long.
If you like swimming upstream, be my guest.
You mention Detroit. Man, I don't know about that one. I kind of have a rule against investing in a city that has significant negative population growth.
Tim mentions Harvey. Yeah, that is close, but there are less rough areas with better ROI, if you are willing to drive a farther east (hint: Indiana, Ohio).
#3 Off Topic Contributor
- Attorney
- Viera, FL
Originally posted by "MatthewGIl":
Yeah - when you have a hard time finding property that grosses 1% of the purchase price in monthly rent you know you're starting from a rough position. I even helped a lady out with a rental property she had that was eventually leased to Harpo Studios (a.k.a. Oprah) for guests on Oprah's show and that didn't even "cashflow". She was already rich so she was able to buy it cash - however had it been bought by the standard investor it would have negatively cashflowed a couple hundred a month.
There is one market within Chicago that I've seen a "regular person" be able to make work in regards to cashflow. Ryan MacIntyre, a student of Greg Pinneo (whom I think is an excellent gentleman and investor), has found a niche within what can best be described as fully furnished, short term corporate rental to graduate medical students. Maybe if you can find a similar niche you can make that work - operating a luxury dorm room.
No reason to be near rentals! That's what management companies are for. Are you guys crazy? What is the difference between having 100 rentals in Memphis that are cash flowing $300/ mo or having 100 rentals in Miami that are cash flowing $300/mo. I live in Memphis, however I am not managing any of them. It doesn't matter unless you are managing them yourself, but why would you do that when you really should be doing more deals!!!
I used to live in Memphis...and if I owned rentals there I would have a manager go take care of them too. The idea of being shot doesn't appeal to me. That is most dangerous city I've ever lived in.
Outside of that, however, I don't agree with using property management unless you are at such a level where the hefty cost is justified. Think about it. A tenant has an issue, they call the prop mgt company, the company calls a repair guy. Why can't I just save myself the 8% of GROSS rents and take that phone call and call the repair guy myself?
You're right about that! Unless you work long hours at your job where you can't answer the phone, you can save a LOT of money by managing the property yourself.
How does managing the property yourself prevent you from doing more deals? Quite the contrary, I find that as I'm managing my properties, I find a lot of deals. I find more deals by managing my properties than I would by hiring a manager.
Mike
Grand & Mike
I get your point. But, I don't want to wear all of those hats. How can one possibly manage...wait, why would someone want to manage 50 rentals. I make my living doing deals, not managing properties. If my goal was to have 1000 rentals, how could I ever accomplish it if I were managing the others. Should I start rehabbing personally so I can save a few more bucks? Don't get me wrong, if you have a few rentals, no problem. Manage. But the context of my post was in response to a few members commenting on being "close" to their rentals, not the little snipits that were chosen to comment on. And Grand you are right, Memphis is tough, shouldv'e moved to Germantown.
I own and manage more than that and it's not difficult at all. In my opinion, management is the most overpaid job on the planet. Even at 8%, with 50 properties with average rents of only $500 per month, that is still $2,000 per month for doing VERY LITTLE. Can you collect rents; show a few properties to applicants; answer a few phone calls; and call a maintenance man for $2,000 per month? Yes! And you can do that while you're "doing deals" (whatever that means).
Clearly, managing 1,000 rentals would be a lot for one person and you would probably need some help. If I had 1,000 rentals, I would hire an assistant or two (or 3). If you paid a management company for management at 8% (with average rents of only $500), that would be $40,000 per month! I would hire assistants and keep most of that $40K!
Mike
Two points of view here. One is self manage and two is outsource the service. Both are viable choices and realy depend on the individual investor and the investor's geographical location to the investment.
I live in CA. Do you think I can buy sfr's here and have positive cash flow? The answer is very rarely or more accurately, a needle in a haystack!
Therefore, I must invest out of state, and since my state is so large, out of state means hundreds and in my case, a couple thousand miles away. I can certainly answer phone calls and hire service providers to do misc. rpairs, etc., but how do I confirm the job was done right, that I was not charged for itmes that were not completed or necessary? I need someone on the ground to protect my interest.
Now that brings up the discussion of "how do you trust your PM?"
Well, jsut like everything else, that takes time, effort, and you have to stay on top of them as well. Having the right team memebrs is crucial and knowing how to interview and hire them is just as important.
#3 Off Topic Contributor
- Attorney
- Viera, FL
Originally posted by William Howard:
You can do either way I guess but be aware if you're going to rely on PMs. Three things, and Mike hit some of these points but to reiterate.
1 - Buying property right is the easiest and least time consuming process of this entire business. In 2 days you can do a top down buying inspect of 20 sfrs, numbers, cashflow everything if you are efficient in your system. If you buy half of what you analyze you will have 1000 units in only 2 years. That's it. Most people waste so much of their time in stupid analysis that does not deliver a return on investment.
2 - If you have 50 rentals you're going to spend your time managing your manager. There's no way around that. 50 rentals is not enough for him/her to support their business on so you will be in competition with his other clients or the manager's own portfolio for the best service. Wait and see how fun it is to get fined by the city because your manager didn't inform you about the code violation they told him about a few weeks ago.
3 - At about 200 units you're going to hit a point of critical mass where it is cheaper to own and operate your own property management company with your own employees running it who answer to only one investor, the owner (you) rather than a contract property manager who answers to whichever client is the squeakiest wheel that day if they return the phone call. When you hit that point, will you have systems in place to run your property business? Those who have been following Napolean Hill's model and creating personnel for specific positions (even though they may have had to temporarily do it themselves) will be ready.
I know one guy out of Chicago who seems to do the combination of these two approaches the best. He uses PMs and contractors but lives close enough to the properties to make a half day jaunt out there and get the lowdown on everything that's going on.
Tim
#2 Off Topic Contributor
- Real Estate Investor
- the villages, FL
I was buying so much out of area that I moved to the area!! Now I'm doing stuff 3 states away in MS for tax purposes. I don't agree on the Detroit area unless it is bottom end. FWIW, Money mag projected the top area for appreciation may 07 AND May 08 was the very same area. Texas had 30% of the top 20 projected areas for appre.
Hi Chris, I am new in this business and I am working on my first deal right now. I live in Marietta, Ga very close to Atlanta. Let me know how can I help you. My expertise is very little but I have some connections that might help.