All Forum Posts by: Andrew Johnson

@Jake Walroth This is from the perspective of being married to a surgeon (former med student), don't discount the reduced issues that might come along with med students.  Noses in books, on campus cramming for tests, writing papers, applying for rotations after graduation, likely no raging keggers, etc.  I know I'm overgeneralizing but there is 1.) value is tenants that have been paying on time, 2.) value in tenants that already want to renew until 2018, and 3.) potential lifestyle value in having "easy" tenants that you'll be sharing a wall with. 

As for your fear, yes, students sign leases for a year.  What I don't know is how the timing works assuming you're renting in a college town to college students.  Sometimes PMs are marketing properties in January for July leases.  Other times in the spring, it just depends on the cadence of the particular town.  College markets can be quirky and they aren't all the same.     

@Tim O'Brien I think what you have is a situation where you can test the waters on out-of-state real estate investment easily.  You know the local market, property, etc. because you lived there.  More than with any other property you can probably guess what repairs or capex expenses might be needed over the next 12 months.  Assuming you're not worried about a market collapse, it's as close to a risk-free way for you to learn how passive out-of-state investing is (or isn't).  Yes, you can invest the $51K and that's great but at the very least you have a way to test how you like managing a property manager.  Not to mention you get to postpone the inherent costs, realtor fees, etc. if you sell your property.  If it works out well for you, add more properties.  If you find that you hate it, sell the property (you've at least come close to break-even during the learning curve). 

@Brian Goodwin Unfortunately, I don't think you'll really be able to get certainty on the topic if you want to look at things after the "first few years".  The reason being I'm sure if looked at any PM or turnkey company they're going to have some huge fans and someone, somewhere, is going to say they're horrible.  If you ask the PM or turnkey company for references I'm sure they each have owners that they've kept happy for years and years.  Is that a result of the company?  The property?  A combination of both?  It's really impossible to know.  I'm sure Mussolini could have found you 3 great references if you asked him.

What I would suggest is that you try to tour a few properties with the PM and realtor at the same time.  You can ask questions like "Could I get a higher rent if I took out there laminate countertops and put in granite?"  The truthful answer is almost certainly "yes".  The better answer is something like: "Yes, but you'll spend $4,000 on the countertops and only be able to raise the rent $40 per month which is a 100 month payback period and not a prudent decision for a rental property."  Whether I agree with them or not is immaterial, what I'm looking for is how do they assess a situation and give me a recommendation when I'm out of state.  If I agree with their (displayed) thought process it gives me a lot more comfort that they can be my "boots on the ground".

@Tim O'Brien I suppose the first question would be: do you want to be a property manager?  With your basic numbers there I don't think you'd have any real cushion (maintenance is needed, vacancies do happen, etc.).  And if you tack on having 10% of your gross rents go to a PM because you don't want to do that (which is what I do) you'll end up cash-flow negative.

However, it might not be that simple as you'd probably have to look at the tax implications of selling which vary based on how long you've owned the property, etc.  If you bought it in 2010  for $150K and it's $300K now you're going to pay a pretty penny in capital gains.  If you bought it 9 months ago the story changes (potentially less added value and a higher tax rate).  

Accounting and tax issues aside I still thing the biggest question to answer is: Do I want to a landlord?  If the answer is any variation on "no" then sell.

Chinmay J. I've never submitted an offer without an expiration date. Usually it's 48-72 hours but the listing agent will often relay if their owner is traveling or otherwise unable to review offers. Caveat, I've never offered in anything bank owned, in foreclosure, etc.

William S. I think I'd be looking in a market where you already have a documented successful rental property (turn key or not). At least then you have some concrete data on vacancies, time to re-rent, etc. If you're going to consciously choose a lower return it better be offset by less risk.

Richard Vetter My perspective is that "quality" can vary no matter what the title is on the business card. I'd find 10 properties you're interested in and call all of those agents about those properties. Some will call you have in 5 minutes, some will take 5 days, some never will because your phone prefix is different, and sometimes someone else will call you back. Some will have T12s for a multifamily and some will tell you how the owner used to play professional football (and not have the T12s). The net result is that inside of 10 minutes you'll probably have a good gauge on competence and urgency. While this isn't a definitive broker vs. agent answer, if you do a little legwork I think you'll (at the very least) figure out who you don't want to work with!

Catherine Lacey You might be surprised and find that making it a vacation rental doesn't make you more money. Peak seasons are shorter than beach rentals, management fees can be 40% instead of 10% (standard) or 20% in beach markets, and you have to now pay for cable, internet, etc. because short-term tenants expect that. Fun stuff like periodic towel and bed sheet replacement too. On top of that you might get a lot of 4 day rentals (Friday - Monday) instead of 7 day rentals on borderline peak periods. Consequently you might end up with 50% occupancy throughout the year. If you're really curious, contact a couple of property management company and ask for (anonymous) T12's in similar sized properties with the same bedroom/bathroom count. Whatever they supply will be better than what you can expect because that property likely has annual visitors that book that property every year (yours won't). But keep in mind this is the perspective of someone who vetted vacation rental property in beach and ski communities and never pulled the trigger. And my numbers always showed it was far more challenging for ski communities because of the shorter ski season. Others might have some success stories but I was shocked at the T12s even when you didn't factor in paying a PM 40%.

Dominic Rodriguez So it's roughly $3K per unit? Like others have said it sounds a little (or a lot) off. Better make sure it's not uninsurable or any kind of traditional lender financing will be brutal/impossible. Only bringing up it being potential uninsurable as it could factor into the low price. Either that or there are massive issues with repairs and deferred maintenance. If that's the case, securing funding for the $1MM purchase will be the least of your challenges. Basics like carpet and paint don't sound like they would cost much...until you multiple by 325 units.

Mike C. I haven't heard of it but if they did it would make me think their investments are as solid as time shares... 😬