CA investor / out of state rental

[Jeff Johnson]

Hey all, need some guidance....

Looking at a SFH in Indiana, great schools, high demand area, with a reasonable sale price $130,000. I'm stuck in the analysis paralysis stage with this deal...

I am looking at this property not needing much maintenance, however am looking at it renting for $1250 per month. Really wanted to put myself in a stronger equity position since appreciation will be minimal over the next few years (again I'm guessing).

Going in with 10% down and estimating cash flow of approx $238 per month net.

Property taxes are 2% and factoring $160 monthly misc maintenance expense.

Please send me some thoughts.

[Jon Holdman]

Sounds like she favors nicer areas while you're willing to go a little downscale. Generally, "nice" properties don't make profitable rentals. I don't mean go to warzones or "ghettos", but you often have to be a step of two below nice. You're not living there. Your tenants are. People who rent in these not-so-nice neighborhoods are going to rent there regardless of who owns the properties. Those areas are what fits their budgets. Often, they have friends and relatives in the same area. I've found that many not-so-nice areas have undeservedly bad reputations and that's they're actually OK areas.

Far away you have little choice but to use a PM. PM's are expensive, accounting for about a third of your total expenses/capital/vacancy budget. I'd suggest you work on finding a PM before you buy anything. Then find out what areas they are willing to manage.

I assume you've spent some time in Indiana looking around and meeting some people. If not, that should certainly come before buying anything.