My experience buying a turnkey cash flowing (kinda) turnkey rental outside Huntsville

[Elan Adler]

It’s 2024, and you hear it all the time now: “You can’t buy turnkey, cash-flowing properties anymore.” With the COVID-era surge in home prices, rapid increases in mortgage rates, and rents not keeping pace, it really has gotten harder to make these deals work. That said, I wanted to share my story about how I found an out-of-state property, got it rented, and set it on autopilot.

Background

I’m in my late 20s, living in a very high cost of living city and working in tech. Out-of-state investing makes the most sense for me—it’s impossible to cash flow anywhere near me, and moving wouldn’t make sense because I wouldn’t be able to earn the same wages or find the same kind of jobs.

Before this purchase, I already owned two properties: a long-term rental outside Houston, Texas, and a short-term rental in the Sierras in California. Since I work pretty hard at my day job and don’t have much renovation experience, I wanted something simple—a rental I could put a tenant in and at least break even. I wasn’t looking to add value or find something off-market because the time and effort just didn’t seem worth it compared to focusing on my career. If you want to think about it as a math problem, it’s all about where you put your time to maximize returns while also factoring in what you enjoy doing.

Picking the Market

I’m the kind of person who gets analysis paralysis. I hear about all these different markets and get excited, but I knew I needed to pick one. Ideally, I’d stick with a single market, but the numbers in Houston didn’t make sense anymore, and I didn’t want to buy another short-term rental. So, I went hunting.

Huntsville, Alabama, caught my attention because it’s a highly educated city with growing industries and a stable, diverse economy, as well as a really high quality of life compared to the surrounding areas. It seemed like a long-term play with less price or industry volatility. There were honestly about five markets I liked, but at some point, you just have to “send it” and commit.

Picking the Agent

This is one part of the process I wish I could redo. I didn’t know anyone in Alabama, so I called a few agents I found online and ended up picking one from BiggerPockets. He seemed like a big-time agent who works with a lot of long-term investors. But after working with him, I realized he was very systematic and mostly cared about closing deals without much care for the client's long term needs.

Here’s an example: I had a $10K escrow with the seller—$5K due upfront and $5K after the inspection. I paid the first $5K but started having second thoughts because of high vacancy rates in the area. When I asked my agent about options to back out, he didn’t really offer any advice. Instead, he just told me, “Tough luck.” He wasn’t interested in brainstorming solutions, like using the inspection as an out. It felt super dismissive, and it became clear he just wanted me to sign the papers.

If I were to do this again, I’d reach out to more agents and have more conversations to find someone who is more empathetic. 

The Property and The Numbers

The property I ended up buying is in Athens, Alabama, about 40 minutes from Huntsville. Ideally, I would’ve bought closer to Huntsville or Madison, but the rent-to-price ratios just didn’t work for cash flow in those areas.

This property is a 2,100-square-foot, 4-bedroom, 2-bath new build in a really good school district, which is what sold me on it. Huntsville is growing, and families are always going to prioritize good schools. Since it’s a new build, I was able to negotiate some great perks, like a 5.875% interest rate, no closing costs, a fridge, blinds, and even a backyard firepit.

Pros:

• Good school district
• Low interest rate
• Minimal CapEx and repairs (because it's a new build)
• Low insurance
• High-quality tenants (due to the school district and being a new build)

Cons:

• Lots of new builds in the area, which could drive down prices and increase vacancies

The Numbers:

• Price: $290K
• Interest Rate: 5.875%
• Down Payment: 25%
• Monthly Mortgage + Insurance + Taxes + HOA: $1,480 (I got really low insurance since it’s a new build and Alabama’s property taxes are low)
• Property Management: 10%
• Rent: $1,800 (this is under market because I wanted to rent it quickly—most units in the area were sitting vacant for 100+ days. Mine rented in less than 15 days.)

All in all, that gives me $140 a month for vacancy, CapEx, and repairs. Now I know what you all are thinking -- that place is not going to cash flow! Well the bet I'm making here is that CapEx and repairs will be very low the first few years (honestly event he first decade), and once all the construction ends I will be able to increase my rent closer to market rent at $2k which will give me a better cushion. This will put me at cash flow neutral and I'll let appreciation and long term rent appreciation do it's work. So far I've owned the place for 4 months and have not had any issues with my tenant yet.

Am I Happy With My Purchase?

I know this is going to be anticlimactic, but to be honest I am unsure how I feel about my purchase and don't know if I would do it again. The process went smoothly, and I’m happy I got a tenant so fast, but the high supply of new builds in the area makes me nervous. There’s a lot of construction, which could hurt both prices and vacancy rates. That said, the construction is slowing, and I believe Huntsville’s population growth will make this a good investment over 10+ years. The area’s affordability and Huntsville’s overall growth leave me optimistic, but time will tell.

For my next investment, I’m thinking about buying a single-family home or duplex in the Midwest—Cincinnati is at the top of my list. I want to diversify since I’ve already bought in the Gulf Coast and California. The Midwest offers good cash flow potential, and Cincinnati stands out for its diverse economy and solid quality of life in an affordable market.

I just wanted to share my experience to show that turnkey deals are still possible. Hopefully, this is a useful example of what’s achievable with out-of-state investing, even with no local connections.

[Matt Schwendeman]

Given the relatively slow population growth in the Midwest, do you see potential for long-term appreciation in the region?

[Denise Evans]

Are the new builds for owner/occupants or build to rent?

[Sam McCormack]

Quote from @Elan Adler:

It’s 2024, and you hear it all the time now: “You can’t buy turnkey, cash-flowing properties anymore.” With the COVID-era surge in home prices, rapid increases in mortgage rates, and rents not keeping pace, it really has gotten harder to make these deals work. That said, I wanted to share my story about how I found an out-of-state property, got it rented, and set it on autopilot.

Background

I’m in my late 20s, living in a very high cost of living city and working in tech. Out-of-state investing makes the most sense for me—it’s impossible to cash flow anywhere near me, and moving wouldn’t make sense because I wouldn’t be able to earn the same wages or find the same kind of jobs.

Before this purchase, I already owned two properties: a long-term rental outside Houston, Texas, and a short-term rental in the Sierras in California. Since I work pretty hard at my day job and don’t have much renovation experience, I wanted something simple—a rental I could put a tenant in and at least break even. I wasn’t looking to add value or find something off-market because the time and effort just didn’t seem worth it compared to focusing on my career. If you want to think about it as a math problem, it’s all about where you put your time to maximize returns while also factoring in what you enjoy doing.

Picking the Market

I’m the kind of person who gets analysis paralysis. I hear about all these different markets and get excited, but I knew I needed to pick one. Ideally, I’d stick with a single market, but the numbers in Houston didn’t make sense anymore, and I didn’t want to buy another short-term rental. So, I went hunting.

Huntsville, Alabama, caught my attention because it’s a highly educated city with growing industries and a stable, diverse economy, as well as a really high quality of life compared to the surrounding areas. It seemed like a long-term play with less price or industry volatility. There were honestly about five markets I liked, but at some point, you just have to “send it” and commit.

Picking the Agent

This is one part of the process I wish I could redo. I didn’t know anyone in Alabama, so I called a few agents I found online and ended up picking one from BiggerPockets. He seemed like a big-time agent who works with a lot of long-term investors. But after working with him, I realized he was very systematic and mostly cared about closing deals without much care for the client's long term needs.

Here’s an example: I had a $10K escrow with the seller—$5K due upfront and $5K after the inspection. I paid the first $5K but started having second thoughts because of high vacancy rates in the area. When I asked my agent about options to back out, he didn’t really offer any advice. Instead, he just told me, “Tough luck.” He wasn’t interested in brainstorming solutions, like using the inspection as an out. It felt super dismissive, and it became clear he just wanted me to sign the papers.

If I were to do this again, I’d reach out to more agents and have more conversations to find someone who is more empathetic. 

The Property and The Numbers

The property I ended up buying is in Athens, Alabama, about 40 minutes from Huntsville. Ideally, I would’ve bought closer to Huntsville or Madison, but the rent-to-price ratios just didn’t work for cash flow in those areas.

This property is a 2,100-square-foot, 4-bedroom, 2-bath new build in a really good school district, which is what sold me on it. Huntsville is growing, and families are always going to prioritize good schools. Since it’s a new build, I was able to negotiate some great perks, like a 5.875% interest rate, no closing costs, a fridge, blinds, and even a backyard firepit.

Pros:

• Good school district
• Low interest rate
• Minimal CapEx and repairs (because it's a new build)
• Low insurance
• High-quality tenants (due to the school district and being a new build)

Cons:

• Lots of new builds in the area, which could drive down prices and increase vacancies

The Numbers:

• Price: $290K
• Interest Rate: 5.875%
• Down Payment: 25%
• Monthly Mortgage + Insurance + Taxes + HOA: $1,480 (I got really low insurance since it’s a new build and Alabama’s property taxes are low)
• Property Management: 10%
• Rent: $1,800 (this is under market because I wanted to rent it quickly—most units in the area were sitting vacant for 100+ days. Mine rented in less than 15 days.)

All in all, that gives me $140 a month for vacancy, CapEx, and repairs. Now I know what you all are thinking -- that place is not going to cash flow! Well the bet I'm making here is that CapEx and repairs will be very low the first few years (honestly event he first decade), and once all the construction ends I will be able to increase my rent closer to market rent at $2k which will give me a better cushion. This will put me at cash flow neutral and I'll let appreciation and long term rent appreciation do it's work. So far I've owned the place for 4 months and have not had any issues with my tenant yet.

Am I Happy With My Purchase?

I know this is going to be anticlimactic, but to be honest I am unsure how I feel about my purchase and don't know if I would do it again. The process went smoothly, and I’m happy I got a tenant so fast, but the high supply of new builds in the area makes me nervous. There’s a lot of construction, which could hurt both prices and vacancy rates. That said, the construction is slowing, and I believe Huntsville’s population growth will make this a good investment over 10+ years. The area’s affordability and Huntsville’s overall growth leave me optimistic, but time will tell.

For my next investment, I’m thinking about buying a single-family home or duplex in the Midwest—Cincinnati is at the top of my list. I want to diversify since I’ve already bought in the Gulf Coast and California. The Midwest offers good cash flow potential, and Cincinnati stands out for its diverse economy and solid quality of life in an affordable market.

I just wanted to share my experience to show that turnkey deals are still possible. Hopefully, this is a useful example of what’s achievable with out-of-state investing, even with no local connections.

 You definitely did your homework on quite literally everything, so that is great to see! I can tell you are very analytical, which I wish I was more of sometimes. We would make a good team, lol. I am shooting you a message now so we can talk some more. Not only about Cincinnati, but how you run numbers, analyze properties/areas, etc. I love what you got going on here

[Dan H.]

Am i the only one that sees this as having negative cash flow (not cash flowing)?   The first indication is you spent $290k for $1800 cash flow or a 0.62% monthly ratio.

Rent $1800 - PITIH $1480 - $180 (pm) - $90 (vacancy at 5% which is lowest i ever allocate in my underwriting and likely low per the OP description of a lot of new development) = $50 for all other expenses.

Maintenance/cap ex on 4/2, 2100’ will exceed $300/month even in cheap labor markets on sustaining basis.  Just because the costs might be in the furture does not warrant not budgeting for those known expenses

Then there is the misc costs of asset protection, bookkeeping, unexpected utilities (such as between tenants (tenant turn over) or failure not attributable to the tenant such as slab leak).  You are likely a sustained negative of at least $350/month. 

NeighbothoodScout shows appreciation for this century at 3.64% or ~$10.5k/year plus there will be equity pay down of -$2.7k. 

~$13200  (forecast equity increase) -$4200 (cash flow) = $9k First year profit ideally that will increase annually.  Note when i do underwriting for my purchases, i run significantly more conservative underwriting (since 2022 i have been depiction $0 near term (5 years) appreciation for one example.   In that market i would likely use 7.5% vacancy.).  

$9k/$72500=12.4% Rate of return (not including any closing costs which would reduce this return).   At least the return is beating historical S&P by a couple of percentage points.  But residential re is not passive.  It should be producing far better return than the passive s&p to justify the effort.

Good luck

[Mark S.]

Quote from @Elan Adler:

It’s 2024, and you hear it all the time now: “You can’t buy turnkey, cash-flowing properties anymore.” With the COVID-era surge in home prices, rapid increases in mortgage rates, and rents not keeping pace, it really has gotten harder to make these deals work. That said, I wanted to share my story about how I found an out-of-state property, got it rented, and set it on autopilot.

Background

I’m in my late 20s, living in a very high cost of living city and working in tech. Out-of-state investing makes the most sense for me—it’s impossible to cash flow anywhere near me, and moving wouldn’t make sense because I wouldn’t be able to earn the same wages or find the same kind of jobs.

Before this purchase, I already owned two properties: a long-term rental outside Houston, Texas, and a short-term rental in the Sierras in California. Since I work pretty hard at my day job and don’t have much renovation experience, I wanted something simple—a rental I could put a tenant in and at least break even. I wasn’t looking to add value or find something off-market because the time and effort just didn’t seem worth it compared to focusing on my career. If you want to think about it as a math problem, it’s all about where you put your time to maximize returns while also factoring in what you enjoy doing.

Picking the Market

I’m the kind of person who gets analysis paralysis. I hear about all these different markets and get excited, but I knew I needed to pick one. Ideally, I’d stick with a single market, but the numbers in Houston didn’t make sense anymore, and I didn’t want to buy another short-term rental. So, I went hunting.

Huntsville, Alabama, caught my attention because it’s a highly educated city with growing industries and a stable, diverse economy, as well as a really high quality of life compared to the surrounding areas. It seemed like a long-term play with less price or industry volatility. There were honestly about five markets I liked, but at some point, you just have to “send it” and commit.

Picking the Agent

This is one part of the process I wish I could redo. I didn’t know anyone in Alabama, so I called a few agents I found online and ended up picking one from BiggerPockets. He seemed like a big-time agent who works with a lot of long-term investors. But after working with him, I realized he was very systematic and mostly cared about closing deals without much care for the client's long term needs.

Here’s an example: I had a $10K escrow with the seller—$5K due upfront and $5K after the inspection. I paid the first $5K but started having second thoughts because of high vacancy rates in the area. When I asked my agent about options to back out, he didn’t really offer any advice. Instead, he just told me, “Tough luck.” He wasn’t interested in brainstorming solutions, like using the inspection as an out. It felt super dismissive, and it became clear he just wanted me to sign the papers.

If I were to do this again, I’d reach out to more agents and have more conversations to find someone who is more empathetic. 

The Property and The Numbers

The property I ended up buying is in Athens, Alabama, about 40 minutes from Huntsville. Ideally, I would’ve bought closer to Huntsville or Madison, but the rent-to-price ratios just didn’t work for cash flow in those areas.

This property is a 2,100-square-foot, 4-bedroom, 2-bath new build in a really good school district, which is what sold me on it. Huntsville is growing, and families are always going to prioritize good schools. Since it’s a new build, I was able to negotiate some great perks, like a 5.875% interest rate, no closing costs, a fridge, blinds, and even a backyard firepit.

Pros:

• Good school district
• Low interest rate
• Minimal CapEx and repairs (because it's a new build)
• Low insurance
• High-quality tenants (due to the school district and being a new build)

Cons:

• Lots of new builds in the area, which could drive down prices and increase vacancies

The Numbers:

• Price: $290K
• Interest Rate: 5.875%
• Down Payment: 25%
• Monthly Mortgage + Insurance + Taxes + HOA: $1,480 (I got really low insurance since it’s a new build and Alabama’s property taxes are low)
• Property Management: 10%
• Rent: $1,800 (this is under market because I wanted to rent it quickly—most units in the area were sitting vacant for 100+ days. Mine rented in less than 15 days.)

All in all, that gives me $140 a month for vacancy, CapEx, and repairs. Now I know what you all are thinking -- that place is not going to cash flow! Well the bet I'm making here is that CapEx and repairs will be very low the first few years (honestly event he first decade), and once all the construction ends I will be able to increase my rent closer to market rent at $2k which will give me a better cushion. This will put me at cash flow neutral and I'll let appreciation and long term rent appreciation do it's work. So far I've owned the place for 4 months and have not had any issues with my tenant yet.

Am I Happy With My Purchase?

I know this is going to be anticlimactic, but to be honest I am unsure how I feel about my purchase and don't know if I would do it again. The process went smoothly, and I’m happy I got a tenant so fast, but the high supply of new builds in the area makes me nervous. There’s a lot of construction, which could hurt both prices and vacancy rates. That said, the construction is slowing, and I believe Huntsville’s population growth will make this a good investment over 10+ years. The area’s affordability and Huntsville’s overall growth leave me optimistic, but time will tell.

For my next investment, I’m thinking about buying a single-family home or duplex in the Midwest—Cincinnati is at the top of my list. I want to diversify since I’ve already bought in the Gulf Coast and California. The Midwest offers good cash flow potential, and Cincinnati stands out for its diverse economy and solid quality of life in an affordable market.

I just wanted to share my experience to show that turnkey deals are still possible. Hopefully, this is a useful example of what’s achievable with out-of-state investing, even with no local connections.

 I hope you contacted BP directly about your experience with what sounds like a 🫏 agent.  

[Michael S.]

@Elan Adler - great post.  I like that you pointed out all the positives and negatives for a fair balanced post that will help other investors evaluate future options.

I have been posting for a while on how hard the North Alabama market has become, and this post shows a good example of it. We bought only one residential property in North Alabama for a flip in 2024 - that's it. It's been so bad here, that I bought an STR in Indiana with another business partner in 2024 because there are minimal opportunities here - unless you have the ability and budget to extensively source off market properties here.

A few comments from my perspective (and after reading @Dan H. comments):

I agree with Dan, and view this as a negative cash flow property as well, given that more than 20% down was necessary to make it work with what I suspect is a non-commercial 30 year note given the interest rate.  Essentially it was necessary to "buy" cash flow with a higher down payment.  But that's typical with new builds here.

I think Elan was smart to list at 1800/month, but I do not agree it was under market - the fact that his rented quickly and there are others sitting for more than 100+ days tells you that 1800/month is exactly market value.

"Low insurance" is concerning to me, as Athens gets a LOT of high wind / weather / tornado activity for unknown reasons - they just got hit again last weekend.  I would caution on having a high deductible / inadequate coverage policy with a property in Athens.

Dan, a comment you made that I don't concur with is the cap ex on a new build of 300/month, unless it was a low quality builder (I have no idea who the builder on this property is).  We bought a new build years ago (and sold it 3 years later when the market turned up) and our TOTAL cap ex was $550 over the 3 years.  The house had a warranty the first year that covered anything that came up, and we only had one issue with HVAC over those 3 years.  So my limited experience with a new build did not yield cap ex expenses with what you are proposing.  Maybe we got lucky in that department, or maybe it was just a quality built property.

Happy New Year and best of luck in 2025.

[Dan H.]

Quote from @Michael S.:

@Elan Adler - great post.  I like that you pointed out all the positives and negatives for a fair balanced post that will help other investors evaluate future options.

I have been posting for a while on how hard the North Alabama market has become, and this post shows a good example of it. We bought only one residential property in North Alabama for a flip in 2024 - that's it. It's been so bad here, that I bought an STR in Indiana with another business partner in 2024 because there are minimal opportunities here - unless you have the ability and budget to extensively source off market properties here.

A few comments from my perspective (and after reading @Dan H. comments):

I agree with Dan, and view this as a negative cash flow property as well, given that more than 20% down was necessary to make it work with what I suspect is a non-commercial 30 year note given the interest rate.  Essentially it was necessary to "buy" cash flow with a higher down payment.  But that's typical with new builds here.

I think Elan was smart to list at 1800/month, but I do not agree it was under market - the fact that his rented quickly and there are others sitting for more than 100+ days tells you that 1800/month is exactly market value.

"Low insurance" is concerning to me, as Athens gets a LOT of high wind / weather / tornado activity for unknown reasons - they just got hit again last weekend.  I would caution on having a high deductible / inadequate coverage policy with a property in Athens.

Dan, a comment you made that I don't concur with is the cap ex on a new build of 300/month, unless it was a low quality builder (I have no idea who the builder on this property is).  We bought a new build years ago (and sold it 3 years later when the market turned up) and our TOTAL cap ex was $550 over the 3 years.  The house had a warranty the first year that covered anything that came up, and we only had one issue with HVAC over those 3 years.  So my limited experience with a new build did not yield cap ex expenses with what you are proposing.  Maybe we got lucky in that department, or maybe it was just a quality built property.

Happy New Year and best of luck in 2025.

 >Dan, a comment you made that I don't concur with is the cap ex on a new build of 300/month, unless it was a low quality builder (I have no idea who the builder on this property is). We bought a new build years ago (and sold it 3 years later when the market turned up) and our TOTAL cap ex was $550 over the 3 years

Question: have you ever filled out a spreadsheet of cost and lifespan of each product of a property?  I will predict you have not.  At 3 years none of the costly items have hit their end of life.  Ideally you have not replaced roof, hvac, flooring, kitchen, bathroom, fencing, windows, foundation repairs, hard scape repairs, electrical, plumbing, etc.  everything has a lifespan and if you do not evenly allocate for those expenditures, you have not allocated for all expenses.  I will tell you that the $300 i used in the above is far less than i allocate in my market.   I took into account a likely cheaper labor rate but will say when we owned units in gulf shores that i was not encountering that low of a labor rate.  A underwriting that i recently completed on an offer we made i used $600/month maintenance/cap ex and believe it to be as accurate an allocation as i could predict (4/3/1, 3100’, class a finishes).

I use $300/month in my market on an attached 2/1/0, ~700’.  Again i believe it is my best estimate of actual sustained maintenance/cap ex in my market.

I did an estimate about 1,5 years ago on a emerald coast 3/2 condo with class a interior finishes and came up with $300 for just the interior (class a finishes cost more).  This spreadsheet was reviewed by our RE agent and his input was used on costs in that market.  So multiple eyes and local expert providing local cost and input on lifespan.

Here is an example that has a part that is more expensive in my market than other markets (unlike most parts that are the same everywhere, so in this case your cost should be significantly less due to both cheaper part and cheaper labor): $1600 40 gal water heater installed (this is good price for a plumber, a little high for a handyman) with expected life of 12 years (i have some that go 20 years and some that die in less that 10 years (mostly rheem die in less than 10 years), 12 years is fair life expectation.  $1600/12 years/12 months/year is $11.12/month.   Make a spreadsheet of items and life span and see what you calculate.  Also class of tenant plays a role.  In class c if rug is over 5 years old it probably needs replacing.  Same carpet in b+ area will get 10 years plus.

i stand by my sustaining maintenance/cap ex estimate and hope my response indicates why.  I invite you to perform the exercise and find what your cap ex allocation should be.

certainly $50/month for maintenance/cap ex and misc is not enough and this property is definitely cash negative when properly allocating for expenses.  

By the way the recent underwriting that i referenced above showed the purchase would be cash negative first year and sustaining for extended duration, but i still made a competitive offer. I have never done that before.   I am finding the market challenging especially as it relates to cash flow.  I do not do flips, so I am finding the market is more challenging than any time since 2008.

 Good luck

[V.G Jason]

Your original agent is the average. Just trying to close, good job veering from them. Call them out here on BP, people can see what they're actually dealing with.  @Elan Adler do it as a token of appreciation and a pay ahead for other folks that search  BP agents and realize this.

The decision to pursue this property isn't terrible, but I think it's for different reasons. Great schools, suburb, etc., sure, from Huntsville that's solid not great or ideal. You really target that in major metros as saturation has not picked up--Huntsville is not one.  Your cash flow calculation is totally off. That's a BP calc way of doing things, and you being so set on cash flow positive is kind of a farce given your calc of it. 

Keep the property, keep more reserves than you think. If I am wrong, that's a good problem.

[Michael S.]

@Dan H. 

"Question: have you ever filled out a spreadsheet of cost and lifespan of each product of a property? I will predict you have not."

You are absolutely correct - I have never done this exercise.  We do not necessarily plan to keep each of our properties indefinitely, which makes this exercise not as relevant for some of our ventures. 

We never planned to keep our new build for 30 years, which is why we would have never used your cap ex valuation.  Our plan was to rent it for 3-7 years, and then sell it, before a roof, HVAC, plumbing, or even much flooring was in need of replacement.  We sold it after 3 years as the appreciation was so significant, it would have been foolish to hold it longer and roll the dice.  

But I do appreciate you taking the time to explain your thought process. And your calculation makes sense for a property that you plan to keep forever so to speak.

[Dan H.]

Quote from @Michael S.:

@Dan H. 

"Question: have you ever filled out a spreadsheet of cost and lifespan of each product of a property? I will predict you have not."

You are absolutely correct - I have never done this exercise.  We do not necessarily plan to keep each of our properties indefinitely, which makes this exercise not as relevant for some of our ventures. 

We never planned to keep our new build for 30 years, which is why we would have never used your cap ex valuation.  Our plan was to rent it for 3-7 years, and then sell it, before a roof, HVAC, plumbing, or even much flooring was in need of replacement.  We sold it after 3 years as the appreciation was so significant, it would have been foolish to hold it longer and roll the dice.  

But I do appreciate you taking the time to explain your thought process. And your calculation makes sense for a property that you plan to keep forever so to speak.

 That is a successful approach.   Most residential syndicators value add and exit to maximize return.  I think in most markets this approach maximizes return but can be a bit labor intensive. 

In my market there are 2 reasons that keeping is smart.  1) the historical long term appreciation is on going, going back to when records started tracking the appreciation 2) the property tax is near fixed cost.   This implies if you sold and bought the exact same house your current property tax would increase substantially.  

A reason in all markets to potential keep at this time is that you may have significantly lower interest rates if the purchase was done no later than q1 of 2022.  The residential syndicators that are most hurting are those that did not have favorable financing locked up for a potential later exit than planned.

So there is sustained cap ex allocation, which is what i use and calculate, which is appropriate for long holds.   Then there can be cap ex allocation for a certain hold period.  For example if you were to exit a new build in 5 years there may be no cap ex cost (i can think of few cap ex items that does not last 5 years - maybe carpet in class c and lower), just maintenance costs which would be fairly small.

Best wishes

[Nicholas L.]

@Elan Adler

I appreciate the post and the transparency. Setting aside the whole "cash flow" thing for a second... if you add up your down payment, closing costs, and any rent ready and commission costs... it seems like you are probably around $80-85K out of pocket total. Is that about right? It sounds like a solid property, that's just a pretty major investment. I'm also curious why you didn't want another STR.

[Kristian Sexton]

I truly feel for you because finding the right agent can make all the difference, especially when you’re investing out of state. It’s such a big leap of trust, and unfortunately, there are agents who don’t always live up to what you need in this process.

An out-of-state investment can be daunting, and it’s so important to have someone in your corner who truly understands your financial goals and is committed to building a relationship beyond just getting to the closing table. Finding an agent who is knowledgeable about investment properties and willing to dive into research, even beyond their local market, is rare—but it’s definitely possible.

I’m genuinely happy that you found a property that works for you. Turnkey deals can be done here in Huntsville, and it’s always great to see someone succeed in their investment journey. Wishing you all the best with this property and your future investments!

[Andrew Kubik]

Wish you luck on this property. I hope the tenants stay for awhile, and you keep the vacancy rate down. The new build will have lower maintenance costs in the near term, but that will eventually catch up you with you. You have to get started somewhere though!

[Samuel Coronado]

Quote from @Denise Evans:

Are the new builds for owner/occupants or build to rent?

 Either one. The builders in Huntsville don't mind. haha. 

[Samuel Coronado]

This is a great story. I wish we could have had a talk before you pulled the trigger on this one. If you are looking for cashflow, I have a good lock on some of these places around Huntsville. I am a mainly cashflow person. 

[Denise Evans]

@Samuel Coronado, @Elan Adler Entire subdivisions of build to rent put more pressure on local landlords because the big institutional investors can afford to buy tenants with low rents and free initial rent period. That is because they are looking at the long term view. Subdivisions of build to sell are favorable to local SFR landlords because more rooftops means more retail and dining, which makes a more desirable rental area. People will rent homes in that area because they cannot yet afford to buy, but hope to buy a newer home in the future and keep the kids in the same school system and around their same friends.

[Todd Anderson]

@Elan Adler,

Thanks for the story of your experience.  Over the long hold I would expect that you will find a good appreciation.  When I talk with investors about the build to rent opportunities in the sunbelt we talk about finding areas of growth like you have found.  Nation wide we are still a long way behind on numbers of homes needed.  When you find a good market that shows steady growth, you get in the way of obvious appreciation.  

I would agree that the Cap Ex numbers for new construction are far lower than other homes.  most of the investors that I work with are planning on moving the investment before most of that Cap Ex would be needed.  

This type of investment works well for the investor that is not looking for another job. As others have said, no REI is totally passive, if you find the right group with all venders in place, the investors that I work with find it can be a pleasant transaction.

Best of luck with the investment