Any Multi-family investors in Hartford and neighbourhood areas?

Question

Hi Bigger pockets champions!

I'm a potential out of state investor trying to learn and build a network with fellow investors who are either local or out of state investors particularly who are in Hartford neighborhood. Also would love hear below

1) One advice that you wish someone gave you before you learnt it the hard way

2) Your story/biggest challenge you faced in the journey.

Lemme give my story in short, I'm from Seattle and looking to enter multi-family rental units to diversify and possibly generate cash flow for passive income. I would also love to find ways to generate tax benefits that can offset my W2 incomes but trying to start small. I looked into Hartford market for rentals as my wife went to School there and found bunch of opportunities with good cash flow. I'm bit overwhelmed and worried about things I don't know and hence reaching out to this  awesome forum to grow more wisdom. I would love to learn from you before I make my first investment and mistakes.

Drew Sygit · Answer

@Venkateswaran Venkatasubramanian

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?

Good luck with whatever you decide😊

Samuel Eddinger · Answer

@Venkateswaran Venkatasubramanian - happy to connect.  I run a property management company in central CT.  I would highly recommend you not chase the return.  The return is high for a reason!  In Hartford proper, most underwriting does not have high enough vacancy and bad debt.  I specifically do not manage those areas because it is a full time job.

William Collins · Answer

1)First piece of advice- house hack if you can before you get married. If you have a multifamily house and you can house hack your personal apartment in that investment house by renting to friends/co workers it accelerates everything.

2) Saying yes to investments I should have said no to- causing lack of focus.   Connecticut has some great meet up's. Get out there- talk to folks, they love to share their stories.

Nicholas L. · Answer

@Venkateswaran Venkatasubramanian

Can you pick a market that is within 2-3 hours of you instead of one across the country?

Can you house hack?

Would you be able to make multiple trips to CT to get a team set up?

Do you have cash for reserves?

I always get nervous when first time investors pick random high cash flow markets.  I do think you can be successful anywhere but you need a really strong team in place...

Nickolas Graham · Answer

Hello Venkateswaran

I am also looking to break into the multi family space as well. So I do not have the experience of owning a property but just things I have gathered from other investors and research I can help you in that aspect. When buying you want to do your market search that being rental rates and tenant laws those are just a few things to consider. Running the numbers on the property is important. The great part is you can use the tools on this website will allow you to do that pretty easy. If you are going to own across the United States getting a good property manager will be vital to your success. Having someone boots on the ground can help with day to day tenant issues. You will want to also create systems and processes so you can more easily run your business as well.

Hope that some of that insight might help you in your investing journey.

Chirag Gulati · Answer

@Venkateswaran Venkatasubramanian I'm a local investor here would be happy to chat and can give provide you with more insights. Feel free to reach out

Venkateswaran Venkatasubramanian · Answer

Great points Samuel. Makes sense to plan for these issues. Thanks for sharing your insights.

Samuel Eddinger · Answer

@Venkateswaran Venkatasubramanian - CT has best cashflow numbers based on your underwriting.  What did you use for vacancy and bad debt?  Many times this is not included and so when things are good your cash flow is accurate but when tenants do damage or don't pay or leave and you cannot get it rented than your cash flow numbers are incorrect.  To level out over long times, most savvy investors put in Capital Expenditure (CAPEX), vacancy and bad debt numbers so that you get your expected CAP rate and/or cash flow averages over long periods.  In reality, you should be removing cash from operations and putting it in a stand alone account so that you can cover vacancy, bad debt, and CAPEX for when it comes.  Roofs cost over $20k right now.  If you need a roof, do you have the money set aside to cover it from reserves?

Venkateswaran Venkatasubramanian · Answer

@Nicholas L. Great points. I jumped at CT because it had best cashflow numbers and agree that it is too far and likely making trips to CT is something I'd rather not have to do. I'm certainly open to looking at markets 2-3 hours away and though i have cash reserve I'm certainly nervous like you said about making costly mistakes.

Venkateswaran Venkatasubramanian · Answer

Thanks a lot everyone for taking the time to respond to me. This is the kind of insights that is not easily available and this is why I love this fabulous community.

@Drew Sygit - Fantastic insights esp on the aspect of neighborhood and the entire dynamics that revolves around it. I realized that many agents don't take these factor into account (I assume genuine ignorance or that they just don't care and just want to get their commission by landing something soon). The post you linked gave a great perspective of the flipside and I'm glad I reached out to this community.

@Samuel Eddinger Can you elaborate on this, "In Hartford proper, most underwriting does not have high enough vacancy and bad debt." Did you mean to say "has high vacancy and bad debt".

So the learning for me is do not put in an offer before having a property manager reviewing the place and is happy with the condition (I'm not looking at BRRR projects so beyond inspection, property manager is a key stakeholder in the equation).

@William Collins Can you please share details on any virtual meet ups that you'd recommend?

@Nickolas Graham I'd love to chat more with you, do you have checklist of things that you consider when looking at a potential multifamily property. I assume you're looking at your local market and not OOS.

Thanks again folks! Your unbiased opinions, genuine perspective and willingness to share your wisdom is what has made this community very special.

Any Multi-family investors in Hartford and neighbourhood areas?

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