All Forum Posts by: Allen Tackett

Unpopular answer - we don't have a team.  We have over a dozen properties, in 6 states, and we do just fine self managing them.  We get maybe an email or phone call once a month, and it's usually asking for permission to call a plumber.  We take 5 minutes to reply and say, "sure, go for it. Find anyone you want on google.  Look for 4 stars.  Please call me if it's going to cost over $100 to diagnose or over $300 to repair.  If not, just deduct it from next month's rent".  That's it.  Pretty simple.

We tried a few property managers and they were a nightmare.  They charge too much, do too little, and approve exorbitant and unnecessary repairs.  We later found out that most PM firms have a maintenance team so they are usually hiring themselves - a potential conflict of interest.  Plus, most are simply unresponsive and rude to the tenants - our clients.  Be nice to folks and they'll be good to you most the time.

It sounds so great to have a "team".  Makes me and others feel good?  But is the the plumber I found online and call once per year (or two) really part of my team?  I mean, I don't need him more often than that, and most investors doing their first few deals won't either.  So, if you have a "team"..that's great.  But don't let these types of articles pressure you or make you feel like you're doing it wrong if you don't.  

People will shout "But what about all the evictions!?  Who are you going to call?"  Thankfully, that's never been needed in 17 years.  If you're buying in a C or D class neighborhood, homes for under $150k, your situation is clearly different and your calculus should be as well, but be mindful that good advice "in general" or for another investor, may or may not be good advice for you.

Great post.  So true in my experience.  Thanks for sharing.  We only buy newer homes for this exact reason, and self manage because in my experience property managers approve loads of unnecessary expenses, and they pay their own maintenance teams (which is not an arm's length transaction and potentially a conflict of interest).  Now, because interest rates are high, and cash on cash returns are down, all the gurus (who used to preach "cash flow cash flow!") are not preaching "break even and hold for appreciation!".  Don't believe that hype.  Your cash flow is your margin of safety and critical.  

Hi Wyatt!  Thanks for posting.  I'm always hunting for deals.  If you come across something that is in an A or B neighborhood, easy to rent to a long-term tenant, has a relatively new roof/HVAC/major systems and would generate a 6% cash on cash return (or higher) with 20% down, please feel free to reach out.  I've found that at 7-8% interest rates, it's pretty hard to find deals for the passive, out of state investor, and would welcome any leads you come across.  Cheers, Allen

I realize this is dated, but did you ever end up working with ABL1?  I'm thinking about using them, but am a bit surprised that there is so little about them out there on the internet.  I'd welcome any suggestions for a lender who offers 30 fixed based on the asset being purchased.  Thank you, Allen

Hi Yinglu,

I calculate vacancy three ways:

- "Placeholder" estimates: 0% for self managed SFH if in A neighborhood; 5% for pretty much all other SFH and Duplex and 10% for FourPlex with property manager. Take the % x the gross rent for the year and then deduct that number from your estimated total. I use this for my pro forma initial estimates

- When I get serious about a specific property, I'll pull average vacancy rates for the city as a sanity check, but averages can be meaningless if you're buying a specific property, the results can fluctuate a ton.  I then call a local Property Manager to ask them about the current market conditions, and ask my real estate agent for their judgement.  I think there's nothing like "ground truth" and there's only so much you can find on the internet.

- Lastly, and perhaps most importantly, before making an offer, I ask to see the rental history (where vacancies appear as missing income).  This is the most important number because it's real, not estimated or a projection or an average.  Most duplexes and fourplexes will have a rental history over many years that you can verify.  It's more challenging for a single family home that has never been rented, or for new construction, or for rehabs when the product being rented out has changed.  For example, if you buy a cheap place in a bad part of town with low rents, but then remodel it to the nicest place on the block, how much can you increase rent?  Will someone who normally can pay more want to move to that neighborhood?

There are lots of other theories and approaches, but I hope this helps give you some ideas to get started.

I'd be very careful with turnkey as a first time investor.  Real estate agents are the best resource you have, and with turnkey, you don't have a buyer's agent with a legal obligation to represent your interests.  In my mind, the primary value add for turnkey is finding potential deals, which is important for scale, but not so much if you just need to find a single property to invest in.  I've also found many turnkey companies to be unresponsive, unprofessional, and even downright rude.  I have tried to make several offers with properties listed by turnkey companies, but the best deals they advertise always seem to have "just sold" when it's time to write an offer.  In fairness, I am still considering one turnkey company that has stood out above the rest.  I won't mention them here because I don't want anyone to think I'm promoting one of them.  When it's all said and done though, I do most of my deals with traditional brokers.

I looked at numerous properties on Roofstock (and with many other well known turn key companies) and I just didn't like the vast majority of the deals. The numbers looked great, but the properties just weren't what I was looking for. I like quality, and low risk, and I'm willing to give up a few points of yield for it. If you have the stomach for struggling cities, somewhat undesirable neighborhoods, and hit-and-miss property managers, there are big cap rates and COC returns to be had.

One tip about roofstock though - they do have a filter by (3%+ appreciation).  I think this can be useful for broad market analysis (although there are many other factors to consider and other data sources).  If you're looking for markets, use their research to find the cities, then just go to a traditional broker or Zillow to find your own specific properties.

If you do buy through them, let us know how it goes!  New data = new perspective.

Hi Brynton, welcome to BP!  I'm based in Lisbon at the moment (but spent some time in Coronado back in the day).  I've a small investor who has done 7 deals and purchased and sold a few small businesses...all have gone well thankfully.  I self manage. I'm looking to buy a few more properties this year.  Not getting rich quick, but it's been great to steadily build up my assets.  Hit me up sometime if you want to chat numbers, market analysis etc.  I'm not selling anything :)

I think the first decision you'll need to make is: are you looking for active (flip, BRRRR, etc.) or passive investments (cash flow, appreciation)? I also recommend you get a good pro forma template in Excel to analyze deals. A good template will force you to think through the numbers and issues you'll want to learn about, like depreciation, equity build up, cash return, CAP rates etc. Podcasts and articles are okay, but looking at a specific deal and forcing yourself to analyze it is one of the best ways to learn in my opinion. There are a lot of good books out there too. Pick a few markets, find a few great real estate agents who will make time for you, and have some fun. Be careful with the turnkey companies.

If you're ever in Portugal, hit me up.  Good luck!

Hi Lazaro,

Sounds like you have a great plan!  If you are refinancing and have some equity, you might be able to do a cash-out refi.  Talk to your lender.  Conventional lenders usually want to keep the loan-to-value ratio at 75% or better.

Why do you think Miami is a good place to purchase another investment?  How's the market doing?  What do you think about the Wynwood area?

Good luck!

Thanks for the great post topic and for sharing.  Here are my thoughts:

1. What markets are you currently looking in?

FL, AZ, VA, TX, OR, AL, PA, OH

As most others are dealing with I'm sure, all the markets I want to be in with high job and wage growth are too expensive to cash flow.  And the great cash flow markets tend to be neighborhoods in dying cities or in rougher neighborhoods.  It's tough to thread the needle and find that perfect balance of appreciation, cash flow and desirability!  

2. What types of properties are you looking for? SFH and 2-4 unit MF

3. Has the way you evaluate markets or properties changed since COVID began? How so?

A little. I'm looking for slightly bigger properties in more suburban areas.  It's not the main criteria, but it's something I think about.  That bonus room for a home office can't hurt.

4. If you currently own property, how have you collections and/or tenants been effected?

No challenges in VA or DC. However, in OR (with lower income tenants), I had some trouble and some other PMs and investors I know said that tenants stopped paying on some of their properties. The Governor of the state sets the tone.

Hi Yinglu

1. What are the factors should I consider when choosing properties in a state / market I'm not living in?

I'd recommend you consider the following: 

  - How do the numbers look (both appreciation prospects and cash flow)?  Property taxes will affect this.

  - How much risk does the market pose? (What's the worst that could go wrong?  how stable/volatile is the market)?

  - Do you have any ties at all to that state, or is it close by?  All other things being equal, a city where you can travel once in awhile (perhaps as a tax deductible business expense) to keep an eye on the place is nice.

2. Generally speaking, is rental investment still a good option when the property is out of state?

Yes, it's worth looking at for sure. I live overseas and have out-of-state properties in Oregon, VA and DC. I'm currently looking to buy a few more.

3. What are the challenges should I expect if I don't live in the property?

Vacancy and property management are the big ones that jump to mind.

4. When I'm not very familiar with a neighborhood, what's the best way to find comps?

- You can look on Zillow to get a rough idea, but given Zillow is not always accurate, at some point, I strongly recommend you work with a real estate broker who is an expert in that market.  They will help you understand the best locations (and it's all about location, right?).  They will know the property managers and lenders.  Remember, hiring a real estate agent does not cost you anything and there's nothing quite as valuable as a great agent (but there are a lot of bad agents out there too, so you  might need to try a few to find the right fit).