New and need advice about out of state rentals

[Mercedes Falber]

Hi there- 

I am interested to become a landlord.  Has anyone considered properties outside of your state?  I am in NY and rentals here are insane but also very expensive to get into.  I am interested in properties in FL, New Orleans, NC.  Am I crazy for considering hiring a management company for maintenance and being an off site landlord?  I appreciate any and all comments! Thanks 

[Michael Swan]

Hi all,

I love this conversation!! I have 86 front doors and rising right now. I invest in a statistically low growth area of NE Ohio. I have 1031 exchanged all my pricey San Diego rental properties from solid "c" class neighborhoods to solid C class neighborhoods in NE Ohio. I live in San Diego and always will!! I currently have $120,000 in tax deferred cash flow and will be selling my last single family rental property here in San Diego in August.

I have lived in San Diego since 1978 and have seen this rerun before. The key for me was to do a calculation of return on equity. When I owned 10 single family, cash flowing an average of $450.00 each door, my ROE or Return on Equity was barely over 3%. That was not acceptable in 2015 and 2016 when debt could be used at such low fixed rates.

Let me say, I am a reading teacher and a P.E. Teacher at a Catholic School and a part time adjunct professor at a small community college here in San Diego. I decided to research and see what affluent, financially free, and wildly successful RE investors have already done for decades upon decades. You know what I found?

These people 1031 exchanged their $60,000 a year cash flow like mine for Multifamily (5 units or more in one complex). I read Multifamily Millions by David Lindahl, I went to Lifestyles Unlimited two day workshop in Houston, I read Loopholes of RE by Garrett Sutton, and I started 1031 exchanging my pricey San Diego single family (10 condos with HOA fees that were clearly out of my control) for a 10 unit in Cleveland Heights, 8 unit in Shaker Heights, 12 unit in Euclid, 12 unit in Painesville, 15 unit in Painesville, 21 unit in Painesville.

Many people look at the area I invested in and ask why? If you study and learn, I am finding apartment complexes that I can raise rents at least $75.00-$150.00 a unit in a 3 to 4 year maximum. All my 86 front doors at this very moment are occupied. I have on eviction coming up and one move-out scheduled end of June.

I do have 7 single family in Euclid too at about $30,000 all in for each single family that I purchased in 2015 that are now worth about $45,000 each. That is a 50% increase in value in a little over a 2 year period. I just sold one that I purchased in 2015 for $33,000 and I sold it for $48,000.

Personally, if I were anyone that has a lot of equity sitting dead and not using that equity and arbitrage like the banks do for more cash flow is setting themselves up for the inevitable. When flippers are out everywhere, it is not too far from the downfall.

I can't talk my wife into selling our personal residence and taking the proceeds tax free to rent where ever we want and invest in more cash flow or store up cash for more opportunities. Bad habits die hard. When everybody says that you have to buy now or you will never be able to afford a house again, I want out. Also, when everybody says the sky is falling and RE will never come back, that is when I want to buy!!

People in NE Ohio felt that way, like RE will never come back when I first started to buy in 2015. Vacancy rate is extraordinarily low on all my complexes and we are increasing NOI dramatically by buying right. Don't overthink it guys!! Ready!! Fire!! Aim!! Paralysis by analysis keeps all your dreams at bay!!

Do you know that 9 out of 10 people I talk to and tell them to read David Lindahl's Multifamily Millions book, listen to LUI podcasts with founder Del Walmsley in Houston and read Loopholes of RE by Garrett Sutton don't do so and then ask me opinions about deals they have found on loopnet. I cringe everytime and ask if they have done what I told them to do. Or, they just ask me for my contacts and proceed to destroy my reputation with the players in my market.

All people want is something for nothing, instantaneous gratification, basically a diseased mentality. Remember the Pareto Principal, 20% that follow proven methods and do it the right way succeed and the other 80% too bad so sad. I believe it is more like 10%. Like I said, 9 out of 10 don't do what I say.

Last, a very successful person that has 15 million in net worth when I was first starting out investing in RE told me, "I never take financial or business advice from somebody that has less than me." John Wittman owner of Protell Communications etc... Based here in San Diego. That's when I figured out my financial planner makes less than I do and I was floundering, deworsifying my funds in various mutual funds etc.... I cashed that stuff in and am now financially free!! I am on my way to $750,000-$1,000,000 in cash flow per year!! If a lowly paid teacher with a combined family gross w2 earned income of $80,000 can do this with a $2000,00 personal residence mortgage in a pricey area of the U.S. can do this, imagine what you could do!!

Three rules.

1. It must cash flow.

2. It can't lose money.

3. No more becoming financially free slowly through 401k, IRA, Pensions, waiting for som imaginary date in the future. I want to live now.

Are you with me? Let's retire financially free before the age of 33? 43? 53? I turn 52 in August. I just started to figure this stuff out at 46 years old.  

If any of you reading this are in the San Diego area, I am starting to get together a list of people to network with to create financially free RE Investors one person at a time.  Contact me by personal message or look at my profile and give me a call.  Even if you are not in the San Diego area contact me.  I truly believe that if I help enough people in this world get what they want, I will get way more than I can ever want!! 

"If you change the way you look at things, the things you look at change right before your eyes."

Swanny