All Forum Posts by: Colby Fryar

@Tayvion Payton   -  my guess is that you are still too far off the price, at least in the interim but it is always good to put in an offer, because they may come back to you down the road.  Yup, property condition, vintage, neighborhood, tenant base, property management are all very important considerations. 

@Greg P.  I want to commend you for looking to get a mentor as you get started.  I think too many people get into this and struggle for too long before realizing that they not been properly trained and potentially could have dramatically shortened the learning curve.   I would love to share my experience and what to look for in a good mentor/coach.  Colby

Great question!   Check out the chart showing the fast rent growth and declining rent growth cities, which could help inform your decision on growth markets.  Nashville, Dallas and the south are being the hardest right now because of the new construction, but in my opinion, these could be some of the best opportunities for investing in the coming years. I do not know Nashville very well, but I would not underestimate the Dallas market over the next 3-5 years, as the new deliveries start to slow.

@John Friendas  it's close to the 1% rule which is good, but I would still run the financials on it.  What is the cash flow/ cash on cash return. 

I would definitely factor in some substantial capex/ maintenance and repair costs which could lower your returns.  

It varies a lot and depends on the vintage of the property and your tenant base.  Typically, we see anywhere from $600 to over $1000 per unit (maintenance and turn costs)  depending on these factors.  If you are not building in sufficient capex, then these costs could be higher, if not much higher.

@Kyle Carter  We love renting to Section 8, however depending on the size of the property you may not be able to realistically rent to 100% section 8. I would count on having at least half market rate tenants, in the event Section 8 rents are higher than market, which they are in our market (granted you will need to subtract the utilities from the rent).  

As for valuing the property, keep in mind that the properties are valued based on NOI, just like any business. Therefore, if you are getting more income from section 8 tenants, then theoretically your value will be higher, but you will be restricted to buyers that are only looking for Section 8, which could restrict your buyer pool.

@Allen Masry Congrats that is a heck of a gift!  Just a heads up, there is really no turn-key in real estate. I have purchased turnkeys over the years and have had mixed results. Long story short, the properties were far from turn-key and required that I find an out-of-state contractor and property manager to complete renovations and find new tenants.  There are reputable companies out there, however, but I would shy away from any company that mentions turn-key.

Long story short, real estate is very forgiving over time and these properties cash flow well and I was able to build a great team for future deals.  The returns can be superior to the stock market, but will require more patience and hands- on effort.  

There are more passive ways to invest in real estate than "turn-key" real estate and achieve those types of returns, but you will need vet the operators and get educated before jumping in. My opinion is to invest in the S&P unless you are willing to spend a substantial amount of time learning the space.  

There are many ways to find a multifamily deal but you can really get stuck in the time trap.  I still think developing good relationships with brokers is the best way and will get you the best results quicker than going direct to seller.  If you have the time to devote to it, direct to seller methods can be very effective, but will take ultra-patience and intensive work.  If you are willing to do this over a long period of time, this can be a great strategy, especially in a low-inventory market.

@Lorenzo L 

There are many reasons that investors buy properties like this.  Some buy to park money, others do 1031 exchanges or they simply buy them for a tax write-off.  The important thing is that you do not get caught up in the frenzy and stick to your numbers.   The numbers have to work for your business plan or you will end up with a money pit.

Selling a business.  I hope it wasn't a good cash flowing business, because cash flow in real estate can be elusive, especially when you are starting out.  Assuming you have another stream of income when you move there and I hope you do, I would recommend using the smallest amount of capital possible and invest in the most doors (1-4 units) that you can.  Small multi are great investments but typically you will not have a home run out of the gate.