Rehab Multifamily Property for Part Time Out of State Investors?

[Polly Wu]

Hello BP comrades,

My husband and I are new to BP. We are from L.A, both have full-time jobs. We're looking for out of state 5-10 units multi family property to start. There are a lot of books and forums talking about getting a property with rehab works. We understood that's where you make the big bucks. But as beginner part-time out of state investor, we are reluctant to deal with rehab. Does anyone have any experience in this? 

Polly

[David Faulkner]

Yes, I have experience with forced appreciation via rehabs. The best way to learn is by doing hands on, part time, in your local market, and often on your primary residence first. For a newbie, out of state is NOT a practical or realistic way to do it IMO. Yes, it is possible, but the risks are many and largely unknown as of yet to a novice investor. I would also add that these rehabs will take just as much effort, time, and money (less money actually if you self manage and do some yourself) ... the main difference is that you add 2x-3x to the value add profits generated by the same rehab in most cases compared to less expensive out of state markets. For example, +$10,000 NOI from rehab => $100k value add in an out of state 10 CAP market ($10k/0.1) but $200k value add in a local 5 CAP market ($10k/0.05).