Thoughts on OOS Investment With a Mentor From DFW area?

Question

All,

I have been learning a bit from a mentor who is a very active investor in the DFW area while I currently live OOS in Denver area. Considering the Denver market I was speaking to him about approaches to investing in Denver etc and he suggested I come down and do some driving through areas that he is very active in. He further offered to help me invest if I found something and would not only have his team (wife is a RA) help with the purchase and all the documentation regarding being a landlord but would also do the management of the properties for me at a price of 6%.

The area he is actually fairly active in is south of the city and east of 35W. between 30 and 20 east of 35W

What are peoples thoughts on this area or are there some suggestions on areas around there?

What are peoples thoughts on this kind of management fee plan?

my thoughts were to run a family vacation to dallas over thanksgiving and use this time to do some driving around the area to familiarize myself with the properties etc and get to know the mentors team etc.

Just seeking some input as I look towards my first purchase.....it is that 90 day challenge time after all :)

Bo

What are peoples thoughts on this kind of management fee plan?

my thoughts were to run a family vacation to dallas over thanksgiving and use this time to do some driving around the area to familiarize myself with the properties etc and get to know the mentors team etc.

Just seeking some input as I look towards my first purchase.....it is that 90 day challenge time after all :)

Bo

Bo A Vanecko · Answer

@Chris Lopez  funny how we have to "disclaim" advice all the time in todays world...another topic ...thanks for the heads up ...  I am pretty sure we are thinking the same thing and if nothing else, keeping good tabs allows me to write off if it is possible...  so better safe than sorry :)

bo

Chris Lopez · Answer

@John A vanecko Definitely go visit and drive around. Don't forget to write off the mileage either! :)

6% PM fee is very good.

I don't know the area. But focus on the quality of your team.

As long as you have a good, solid, trusting relationship with him, it could be a great opportunity. Also, don't get too excited and overlook the fact he has a financial interest in you buying properties down there. Now, I'm not criticizing that, just saying keep that in the back of your mind.

Bruce Lynn · Answer

@John A vanecko   I will be here over Thanksgiving if you want to meet up.   Everyone has their own strategy and own success.  What I can say is the area you describe can be some of the toughest in Dallas.  A few areas are starting to turn, but it can be tough.   One of my criteria is to buy where you would feel comfortable with your wife going to knock on the door to collect rent after work when it is dark?   Not sure all of that area meets this criteria.

6% sounds way too low to me.  10% is normal.  I don't think anyone gets rich off of property management...although it feels like it sometimes.  If they're only charging 6% they're likely going to make it up from you somewhere else.....like frequent turnover of tenants....or upcharging on maintenance.

I'd be happy to give you an independent look at any of the deals they are offering to you.

Bo A Vanecko · Answer

@Travis

@Travis Evenson Thanks for your input.  Basically, this person has lived and invested heavily in these areas for 10+ years.  He is currently actually consulting at the company i work for here in Boulder CO and I met him b/c heard me listening to BP podcasts and he also started asking questions about my thoughts on real estate etc (without telling me he invested).  As we started talking more he told me his story and told me about other books etc to read.  i started bouncing Denver ideas off him and he suggested ultimately that i look elsewhere to start.  That is where i began discussing that OOS would be tough b/c i would have to find a strong PM.  Conversations moved from there.  ultimately, i will be investing my own money and he is willing to drive me around the area to better understand the market, housing, people, etc.  He offered up the discounted PM fee as a way to help me get going and better understand the ins and outs.  We have since spoken about some long term goals and partnering on future investments b/c he loves my academic background and ability to analyze properties etc.

down there i can get some deals in the 15-20% COC range where here in CO it would be extremely tough to do so.  Start and learn OOS and then potentially move to some bigger stuff here in CO is what i am thinking.so for now I am heading down there over thx giv to look around the place and see what is what.

Bo A Vanecko · Answer

@Ronald Rohde  Thanks for the heads up.  From my research, this is a "niche" that does offer its set of both excellent returns and potential "excellent" headaches.

Ronald Rohde · Answer

C class landlords often make the highest CoC returns. Depends if you're good at handling the tenant base. Whichever way you go, be sure to paper yourself! Detailed agreements make for happy partners.

Chris Lopez · Answer

@John A vanecko First, the standard disclaimer that I'm not tax professional....

The best answer is that I'm not entirely sure. I know from previous businesses that I've run, that if I traveled somewhere (regardless of the outcome) I could write off the mileage and other expenses.  My guess, is that you probably can because you are legitimately looking at properties and doing your due diligence.

Perhaps someone with more knowledge can chime in.

Definitely, keep track of everything.

If you have the time, read a book or do some research. Years ago I read Sandy Botkin's "Lower Your Taxes Big Time." It's more geared towards the business owner. I can't remember how much overlap there is (if any) for real estate investing.

There are some great apps for smartphones that track mileage as well. Way better than paper tracking.

Bo A Vanecko · Answer

@Chris Lopez  Saw you mentioned "writing off the mileage" etc.  I know that once I am actively investing all these types of trips are tax deductible, but if I do not currently have any, can I still write it off?  Or is a better way to look at it that I simply keep all tabs on a trip down there and if I do end up purchasing, I can then use all this for a write off on my taxes?

I guess I had not considered that even though I don't own yet, when I do, this could actually be something I place on my taxes.  I will begin some good book keeping and also keeping all receipts etc just in case.

Thanks for making me think of this :)

Thoughts on OOS Investment With a Mentor From DFW area?

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