New, hungry, eager to start while also patient. Large risk appetite.

[Zach Howard]

I have no experience with real estate investing. 

I do not live in the US, and I'm not a citizen. I went to university in the Midwest many years ago. Currently living in China - have a very stable job, decent income. Have a small flat here that was just recently purchased and under mortgage. Have some ok-ish savings, and I really, really, really want to try to get into real estate investing. 

From my limited research so far I believe I'm most interested in BRRRR and Multi-Family. Seller financing is also quite attractive, though I guess there are few of these kinds of deals available.

I have no particular area that I'd like to start with or focus on, but probably prefer somewhere in the south of the US due to my strong aversion of winter. Not that I plan to live in or even visit the US anytime soon, but I don't want to deal with winter-related issues like heating, de-winterizing a home etc. 

For any deals that I actually jump into I'll need a property manager. 

It seems like there are additional obstacles to success for me since I'll have to do pretty much everything remotely, but an expression that I like, and I'm paraphrasing here, "If the path you're on seems easy, you're on the wrong path"

Would love any and all advice, guidance, comments, warnings or whatever else you'd like to share. Desperately hope to find a mentor, or partners to invest with. Also totally willing to go in by myself on deals. I just want to soak up as much knowledge as possible and get my feet wet as soon as the right deal presents itself. 

Oh, I'm pretty decent at video editing - just thought I'd throw this out there in case anyone needs simple video editing services. I'd be willing to do small projects for free to spread some goodwill. You have to give in order to get. 

Thanks for reading! 

[Jonathan Greene]

I wouldn't start investing in the US if you have no plans on coming back from living in China. The distance and detachment is too much to make it worth it at this point in your journey, not knowing much about what you want to do. BRRRR is not a great strategy in the current market due to the mortgage rates so it's not as applicable as many think from reading older posts or books about how easy it is. It's a good time to review markets, but living in China there are a lot of other closer, international markets that could be options as well.

[Patricia Steiner]

It sounds like you've done a great job in investing in yourself and taking personal risks. I've lived and worked in China and at one time had quite a few Chinese nationals as investor clients in my Florida based firm. What I can share is that the risk-reward will not be worth it as a 'newbie' due to your limited capital and inability to actively manage your properties. I recommend a few things: define what you want to achieve and why investing in the US is the vehicle to achieving that ROI. Save...it takes a lot more money than most new investors believe (don't drink the Kool-aid that you can get in cheap) and residing outside the US will be seen as a substantial risk to most lenders which will limit your financing options. Learn...what you don't know WILL hurt you. And, know this: it's not investing in real estate. It's a business - acquiring/building, managing, and growing a business. There are other ways to be part of the real estate industry besides being an investor and those may be more financially advantageous for you. Best...

[Zach Howard]

Quote from @Jonathan Greene:

I wouldn't start investing in the US if you have no plans on coming back from living in China. The distance and detachment is too much to make it worth it at this point in your journey, not knowing much about what you want to do. BRRRR is not a great strategy in the current market due to the mortgage rates so it's not as applicable as many think from reading older posts or books about how easy it is. It's a good time to review markets, but living in China there are a lot of other closer, international markets that could be options as well.

 Thank you so much for the advice. As I said, I'm definitely a risk taker, it's either going to be Bitcoin or real estate, I'd prefer a mix of both though. 

As for other international markets, I think the US is probably the best even with the distance. In this day and age of zoom meetings and working from home, I don't believe there is much of a difference between investing in the US vs Australia if one is based in China. Other international markets may be too opaque for me, and I'm definitely going to invest in China as it's not possible to even have more than one property in your own name (to the best of my knowledge) and the local government can find many ways to screw you over if they wish to. Perhaps it is hard for people from the states to understand - but the rule of law, and clarity in regulations etc really makes it so much more attractive than other places where you never know what new policies might come into effect forcing you to take massive loses etc. I am currently in Hong Kong, and there is no way I can or will invest here as home prices compared to rent yields just don't make sense according to any of my calculations. So, again, to me there is not much difference between remotely investing in let's say Vietnam vs the US, because I don't have any intention to move to either location. 

thanks for the heads up on BRRRR, I'm just at the start of my research, so always happy to hear opinions and information from others. To me buy and hold also seems good, I'm not very interested in flipping as that seems to be a step to far to manage remotely. I believe if I manage to acquire a property or two now, rent them out and hold them for 10-20 years they will most likely appreciate in value. In the meantime, if rental income is able to pay for the cost of the mortgages then I frankly do not really care what the interest rates are. Or am I misguided here? Thoughts would once again be greatly appreciated.

[Zach Howard]

@Patricia Steiner

Thanks for your post. 

Haha, you're right, I've definitely drank some kool-aid, but at the same time I don't think that things will be easy or cheap. I just think that I'd like to get started with one property. As long as I do not lose money I think I'll be ok with that. I'm fine with losing lots of time and effort even if it just means breaking even. One thing life has taught me is that really and truly, one of the best ways to learn is by doing. Sure, I wo't have the same financing options, but I might be able to work with hard lenders, or perhaps eventually set up a LLC and maybe that will open up some other financing avenues.

You're also right about the fact that it is building a business. I agree wholeheartedly, and if you've lived in China I guess you'll be familiar with the concept of "guanxi" which I think translates quite well to real estate. It's all about building relationships, trust and have a long-term mindset. 

As for my goals, I want to own one property and not lose money! That is my first goal. I think if I can achieve that I will rapidly learn, then be able to evaluate what steps might be best for the next stages. As for why the US, simple - trust, market size, and access to information. I also think Australia is a great place to invest in real estate, but it's harder to find resources, deals, financing options and so on. 

I'm hoping to start some social media campaigns which are completely unrelated to real estate, but if I build up a sizeable audience over the years, then maybe I can get others to invest with me. And my final dream is to buy land in my home country to build affordable housing for people there. Where I'm from people do not like living in apartments/high-rises and so on, but I think more options like that would make housing more affordable to the average citizen. I'd really love to be able to give back one day, haha, assuming I ever become successful. 

Anyway, these are just my dreams. Now it's time to see whether I can bring some of them to fruition. 

[Zach Howard]

@Robby Sanchez

Thanks for the offer - actually Texas is one of the places where I've started to look at potential properties and so on. My ideal location would currently actually be Augusta, GA because I really want to start somewhere with a very low crime rate. 

Any part fo Texas you might recommend that are safe?

[Julio Gonzalez]

You came to the right place to learn more about real estate investing, Zach! 

-Julio

[Avrom W. Smith]

Hey @Zach Howard,

Happy to connect with you and put you in touch with some solid individuals in Augusta, GA. Let me know if you're still looking at Augusta, GA. Feel free to DM and we'll connet.

Thanks!

[Zach Howard]

Quote from @Avrom W. Smith:

Hey @Zach Howard,

Happy to connect with you and put you in touch with some solid individuals in Augusta, GA. Let me know if you're still looking at Augusta, GA. Feel free to DM and we'll connet.

Thanks!

 I'm definitely still looking at it, but one concern is the population growth, it seems to be decreasing slightly? 

[Drew Sygit]

@Zach Howard some copy & paste advice below:)

-------------------------------------------------------------------------------------------------

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

DM us if you’d like to discuss this logical approach in greater detail!

[Zach Howard]

Quote from @Drew Sygit:

@Zach Howard some copy & paste advice below:)

-------------------------------------------------------------------------------------------------

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

DM us if you’d like to discuss this logical approach in greater detail!

 I'm interested in class C, and also class B depending on the price of deals I can find. Solid advice about using the relevant assumptions and strategies for the various classes. 

[Zach Howard]

@Drew Sygit

Oh, I forgot to ask - any free tool recommendations for determining the various classes of neighborhoods in different regions? So, not necessarily Detroit, but other locations such as Des Moines, IA, and Augusta, GA etc.?

[Drew Sygit]

@Zach Howard there is no agreed upon Classification in the 1-4 unit market.

We've done our best to logically create a system for our market, mostly based upon relative sale prices, but also using crime rates, rents, occupant income and a few other variables. 

[Robby Sanchez]

Quote from @Zach Howard:

@Robby Sanchez

Thanks for the offer - actually Texas is one of the places where I've started to look at potential properties and so on. My ideal location would currently actually be Augusta, GA because I really want to start somewhere with a very low crime rate. 

Any part fo Texas you might recommend that are safe?

Yes sir! Dallas TX is a great market right despite the current downturn. Austin tx is not as bright but the future market of Austin is promising! I'd be glad to hop on a call and talk more if you'd like!

[Jackson Harris]

Hey Zach, 

My partner and I have actually worked with a few out of country investors to help them get investment properties here in AZ. 

This area definitely gives you good weather year round, summertime gets hot so as long as you're getting systems serviced before then and then in the fall you're usually ok. 

Let me know if I can help you get a better understanding of this market sometime!