Rookie Ready to Move Forward - Need Input

[Phil Clark]

BP Investors,

I am moving forward but need help in a couple areas and am hoping for your feedback and advice. 

Business is LTR multi family properties, duplexes and triplexes specifically. 

Initial investment funds from a $50,000 HELOC on my home in California to cover down payment. Current rates I am seeing after a cursory search are not thrilling.

First property I am looking for turnkey cash-flow out of market (I am in California and point of entry is VERY high). I need something that does not need anything more than a cosmetic rehab as out of market, new investor, no team in place yet, etc.  

Looking for best deal and not in a specific market. I figure if I like the deal, I am look at the market, and then move forward if everything is kosher. 

When analyzing properties I am using 12% for property management, 5% for Repairs, 3% vacancies, and 3% Cap costs. What do your numbers work out to, and where are your properties?

Insurance - I am woefully ignorant on this topic. What are you paying in your markets for properties as named above? Just need an example to better figure my numbers. I got a random quote on a property I was reviewing and it seemed very high. $5500/year on a duplex in Lubbock, TX?

If there is anything I am missing, or any advice you have for this FNG, I would be grateful to hear it all. 

Getting close. 

[Drew Sygit]

Some things to think about:

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Good luck with whatever you decide😊