Looking for some advice on rental options (Denver and Indiana)

Buying & Selling Real Estate

Looking for some advice on rental options (Denver and Indiana)

Denver, CO · Member since 2018 · 5 posts · 1 vote

Looking for advice/recommendations. Disclaimer, I work in education and have very little experience with property management and financial investments so I’m looking for some help. Over the past month, I have been researching this as much as possible (Bigger Pockets posts, Real Estate books, talking to people, etc) but I thought posting here would help me continue to explore all my options.

My father is moving into assisted living next month in Denver (where I currently live) He has an old farm house in Indiana that is paid off worth around 125K. He can cover most of his monthly expenses with pensions and social security right now, but if his health declines, we will likely need to generate additional revenue to help with those costs. I will be helping him manage all of this and we are trying to figure out the best route with his house. I am married, work full time, and have two kids so don’t have a ton of free time to do the typical real estate investment strategy of leveraging his money to buy and manage multiple properties. Some options I can see them right now (open to all suggestions!):

Rent out his current house for somewhere around 800-1000 per month

Sell his house and buy a property in Denver with those funds and some other cash/investments he has (yes, I know the Denver market is insane right now) to rent out

Some other option/recommendation I am not thinking of even outside of real estate?

Thanks in advance for the help!

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Travis Konermann

Memphis, IN · Member since 2017 · 40 posts · 27 votes

8y

What part of Indiana? I'm a real estate agent in southern Indiana. I think it would be a lot easier and make more financial sense to rent out the house in Indiana and just collect the rent. I feel like it would be very difficult to sell the property and then find a property in Denver giving you a roi anywhere in the same ballpark.

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Ryan DavidsonPro Member
Rental Property Investor · Brook, IN · Member since 2017 · 69 posts · 12 votes
8y
Joe, we moved from the wonderful state of Colorado almost 6 years ago, back home to Illinois. But just last year moved across the border to Indiana. I’m just getting started myself, but in this area you could pick up 2-3 or more units with the sale of the farm house. Rents could be 5-700 and they would be paid for. Would provide decent cash flow for addition costs that may arise. Where about is his house out here?
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Matt M.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
8y
I'd sell and pick up something here. I've got 2 units that I'm moving to an investor for $215k. You might have to 1031 as well. You'd be paying property management, etc which would eat into your profits. Does he have any other cash?
If you are going to try and leverage, how is he going to qualify for the loan?
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Joe Halter
OP
Denver, CO · Member since 2018 · 5 posts · 1 vote
8y
@Ryan Davidson Colorado is great, I don't know how you moved back to the gray winters of the midwest (power to you sir!) His house is just outside of Fort Wayne. Thanks for your suggestion, I appreciate it. In that scenario, is it safe to assume I'd hire a property management company to take care of day to day stuff? I'll start looking at options in Indiana, something I haven't looked too closely at.
@Matt M. As I continue to read and talk to people, I'm learning towards what you suggested although I'd love to hear more about the units you referenced. Can you give me a little more detail in terms of location, size, etc? in my brief research (I know I need to really put in the time), the stuff I'm seeing online for sale doesn't look to be close to cash flow positive. My father does have additional cash in checking/savings as well as some brokerage accounts that are probably in the 75K range in total so that could certainly come into play if we wanted to pay cash for something and rent it out. I know this is usually not the way to go for investment properties, but it might make sense for our scenario until I can dedicate more time to it.
Your last one is a good question, I hadn't really thought too much about the loan side. He has very good credit and obviously 20% or more down, but I imagine his debt/income ratio won't look good. Perhaps the cash route is the only way to go right now..........(continues to scratch head trying to figure this out!)
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Ryan DavidsonPro Member
Rental Property Investor · Brook, IN · Member since 2017 · 69 posts · 12 votes
8y
@Joe Halter I would think if your schedule if free enough you could manage a couple from out of state. Just need some systems in place. Maybe make a trip back 1-2 times a year. But yes a PM may be needed. I didn’t move back very willingly. Took some convincing, but it has been good and we hope to be back someday. Denver is crazy for housing. I don’t know how anyone is affording those prices. Appreciation will be better there, but if you need cash flow buying multiple units back this way will get more then out there I would think.
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Ryan DavidsonPro Member
Rental Property Investor · Brook, IN · Member since 2017 · 69 posts · 12 votes
8y
Joe you may consider a local friend or neighbor to assist renting the farm out or managing any other units. If he has been in the area for that long I’m sure for much cheaper than a PM company they could keep an eye on it for you.
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Scott Steffek
Flipper/Rehabber · Crown Point, IN · Member since 2009 · 482 posts · 216 votes
8y
Joe,
What city is the property located in?
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Matt M.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
8y
He's going to need cash flow. While everyone is taught to leverage, you reach a time in your life where you then need CF and not debt. I would speak with a social worker(for decent places & financial assistance) here and maybe an elder law attorney to make sure his ducks are in a row.
Those two units I mentioned were 1bd/1ba condos in SE Denver and E Aurora. I just picked up a condo here for $68k today near 9th and Colorado. It's a studio, but I'm going to STR it to nurses.
The other option is to have him "lend" you the money so you can go out and purchase a place with debt. You'd have to put him in 2nd position, but you could pay him 8-10% or whatever and increase your RE holdings too. Then you both would benefit. That's what I'd look at personally.
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Phillip Bicker
Real Estate Broker · Larkspur, CO · Member since 2017 · 115 posts · 77 votes
8y
Posted in error
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Randall Frederick
Investor · Fort Wayne, IN · Member since 2017 · 4 posts · 2 votes
8y
Joe Halter I've got a good PM in Fort Wayne, I can give you his contact info if you're interested.
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Joe Halter
OP
Denver, CO · Member since 2018 · 5 posts · 1 vote
8y
@Scott Steffek I sent you a PM
@Matt M. Thanks for that information. so it sounds like if cash flow is the primary goal (it probably is here), paying in cash so there is no mortgage payment is the best way to go?
@Randall Frederick I'd love to have that information if you're willing to send it my way!
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Ryan DavidsonPro Member
Rental Property Investor · Brook, IN · Member since 2017 · 69 posts · 12 votes
8y
Matt M that’s great buy, something sub 100k that close to downtown and all the hospitals. Should work well for you with travel nurses. I agree he will need the cash flow. I’ve been away for a few years now but haven’t seen much under 200k out that way recently. Joe if you can find something there and have it paid off rent will definitely be higher. Deals are just harder to come by it seams.
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Travis Konermann
Memphis, IN · Member since 2017 · 40 posts · 27 votes
8y
What part of Indiana? I'm a real estate agent in southern Indiana. I think it would be a lot easier and make more financial sense to rent out the house in Indiana and just collect the rent. I feel like it would be very difficult to sell the property and then find a property in Denver giving you a roi anywhere in the same ballpark.
1 Reply
Axel MeierhoeferPro Member
Rental Property Investor · Escondido, CA · Member since 2017 · 679 posts · 550 votes
8y
If it were me I would rent out the house in Indiana too but before doing that I would probably see if it is possible to get a HELOC on it. If you get 80%, that gives you $80K for investments in Indiana. Based on what I have seen you could probably get 3-4 places that would cash-flow you another $1000/month and you are building equity over time. Your dad would not only help you increase cashflow but also allow you to create a growing inheritance.
For the property management question I would suggest to take a look at David Green's book about out of state investing and listen to the two podcasts on BP with him.
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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
8y
@Joe Halter so I'm a bit late to the discussion. I am bullish on Denver long term but based on everything you have said, you need cash flow. There is a reason you see posts here every week about Denver based folks looking to midwest markets for cash flow. Sure @Matt M. can do better with STR a small 1 bed condo but he has experience and time which you said you had neither. My vote is to hold pat. Rent the farm house with the help of friends and family there until you need the money and then sell. Have him live off the capital until he passes or runs out. I don't think getting a loan of any kind would be a good route to go. It's kind of morbid but you just have to hope he doesn't outlive his money.
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Jeff Kelly
New to Real Estate · Highland Park, IL · Member since 2016 · 65 posts · 20 votes
8y
Most good investors buy deals where their numbers work for their specific goals even if no appreciation takes place. They consider any appreciation to be icing on the cake. With that approach, it helps them buy well and wisely. Seeing as how your need seems to be cash flow, and considering the insane appreciation Denver has experienced in recent years, you might want to focus on renting the farmhouse first. Then you will have some cash flow coming in, and you can take the time you need to then decide whether to sell the place, or get a Heloc on it to try to expand your portfolio, or make some other move. Not that Denver can't continue to appreciate, but to go through the process of selling a perfectly rentable farmhouse in a cash-flow friendly market only to move that money into a cash-flow tight market like Denver where there's lots of competition among buyers and prices rise as houses are sold very quickly after being put on the market, all when cash-flow is basically what you need anyway, would be something to think twice about. You can find a good property manager to run the farmhouse and not eat into your cash flow too much.
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Joe Halter
OP
Denver, CO · Member since 2018 · 5 posts · 1 vote
8y
@Bill S. and @Jeff Kelly I appreciate the responses (no worries on the lateness, this is a long process) Those perspectives both really help. The good news is that I have some time to continue to process this as we won't be back to Indiana for another 3-4 weeks at the earliest.
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Drew Wiard
Rental Property Investor · Fort Wayne, IN · Member since 2014 · 251 posts · 129 votes
8y
Not to bud in, but if you're looking for some support from us Indiana investors, here is a link to the REIA in Fort Wayne. Lots of great local info being discussed in our Facebook group, and of course, your always welcome to come to one of our meetings! Always free. Never a sales pitch. Just networking and learning.
More details here: https://www.biggerpockets.com/forums/521/topics/36...
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Joe Halter
OP
Denver, CO · Member since 2018 · 5 posts · 1 vote
8y
@Drew Wiard thanks for that info, I just found you all and liked the page on Facebook!
1 Reply
Jeff Kelly
New to Real Estate · Highland Park, IL · Member since 2016 · 65 posts · 20 votes
8y
@Joe Halter. I wanted to add that you could see this from a portfolio diversification standpoint, too. If you own your own residence in Denver, and you end up deciding to rent the farmhouse in Indiana, then you could consider yourself to be diversified between 2 different types of markets. 1 is a market where appreciation is ongoing (Denver) and expected to continue, and you already own a residence there (unless I'm wrong and you don't!). The other market is a cash-flow style market (Indiana farmhouse), where you might not be getting much appreciation, but you can expect regular cash flow, at least. To me, it's like having some money in stocks and some in bonds.
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