Turnkey from Shanghai

[Adam Matteson]

Hello~

I’m a 35-year-old guy from western North Carolina living in Shanghai, China for the last five years. I save about $2,000/mo. So far, I have been investing all I can in Vanguard funds, but now I’m looking into real estate. I’m still very much in the education phase, learning how to analyse a good deal and trying to understand the numbers.

I think I can have about 30,000 USD ready by winter or spring of 2018, which should be enough for a down payment on a single-family home (say 20-25K plus a little padding). My credit score is 792. I am thinking to prioritise cash flow over appreciation, as appreciation is speculative and financial independence is my end goal.

Locations: I’m going to stick with the US because I know it’s less risky. I’m leaning towards North Carolina, Memphis, Florida, Atlanta and Kansas City – Nathan Brooks’s podcast interviews were inspiring.

My investing style is pretty hands-off. Rather, I’d be very involved at first then later hands-off. I would like to use a trustworthy and fair turnkey company that can do some hand-holding for my first property purchase.

Some questions I’m trying to figure out are:

1. How to finance the second purchase? Ideally, I’d like to buy several properties over the next few years with the rents producing income for me. However, I think it would take a while to accumulate another 20-30K for a down payment. I wonder if there is a quicker way to do this.

2. Is it wise to value cash flow over appreciation for a first property, or should they be balanced more equally considering my goals?

3. What is a reasonable cash flow to look for from a 20-25K down payment and working with a turnkey company? $1,500 per year? $3,000?

I’m happy to be here and grateful for any help! Also, if anyone is in Shanghai with a similar goal (or somewhere else with a similar goal, or in Shanghai with a different goal) just message me^^

[Chris Grenzig]

@Adam Matteson If you're looking to be hand-on now, I'm not entirely sure how that would work with a turnkey company because they basically do everything for you. They've renovated it, they'll find the tenants, they'll manage it, they'll do any repairs that are needed, etc. 

As far as cash flow over appreciation it all depends on what you want. I personally think cash flow is a safer game, but if you don't have a ton of money to play with, appreciation may be a way for you to try and scale that pool of money quicker. That being said, buying for appreciation can often times be gambling basically. It's incredibly tough to predict a market downturn, and if you buy solely for appreciation, you find yourself stuck in a bad deal in 3 years times. If you buy for cash flow and plan on holding it indefinitely, it's a lot tougher to lose because people will always need somewhere to live. you're returns and rent and occupancy can drop, but if you underwrite in a way that it can sustain levels that drop, than you should be alright. We always look at what happened to a market in '07-'08 and stress test our deals to make sure that if something like that ever happened again, we would be alright. 

I think you can reasonably expect to earn 6-7% cash on cash from a deal without having to do too much searching. 6% of $25k is $1500 a year, 7% is $1750. Can you earn more, absolutely, but 6-7% you should be able to find all day long.