All Forum Posts by: Craig I.

@Craig I. first thing to do is pick a market and learn it!

Second, pick a Class of properties to target in that market:

Our OPINION for the Metro Detroit market (always verify each area for yourself!):

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

My first ever Buy&Holds were out of state.. You mentioned that you live in Cali and the house you are looking at has a basement... Midwest perhaps? If so, I did the same thing. I live in WA state and bought my first 4 properties in Ohio.

Word to the wise, it can look good on paper but the old saying "you get what you pay for" holds very true in a lot of those markets. Be careful where spending your money over there. You can strike Gold or be dead in the water. I recommend visiting the area first. A $500 plane ticket could just save your bank account.

@Craig I. I would recommend you connect with a fellow investor/realtor in the specific market you are interested in. I work in the Dallas/Ft. Worth area. My focus is helping fellow investors buy and sell investment properties. My contacts become my clients contacts. This includes lenders, insurance carriers, contractors, and preferred property management companies. Regarding your questions on utilities make sure the multifamily property has separate utilities for each unit. Here in the DFW area tenants pay their own rents. Owners are paying the utilities and separating them because there isn't separate meters. Regarding A/C it isn't optional here in Texas. But watch out for window units. I recommend central A/C for each unit. Regarding existing tenants you want to know what the current rents are and when leases expire. If month-to-month make sure you know the rents for the unit in question. Give them notice of rent increase. Because odds are they are paying below market rents. I look forward to meeting you if you plan to add Dallas/Ft. Worth area to your custom search. I will be happy to share my experience to help you avoid potential pitfalls. 

@Craig I.

OK.  your questions were all good, but that's all information you need to know before you even offer.

and 2 visits probably won't be enough because you'll sell yourself on something you see and try to make it work.

@Craig I.

are you going to go to your chosen market in person and and put some time, legwork and networking in?

if you're not - i am not sure what to tell you.  the market is unforgiving right now and no one is going to look out for you the way you will look out for you.

One other challenge with LLC's is that you will have to pay annual filing fees in both the state you live in and the state where the properties are.

@Craig I.

read this thread:

https://www.biggerpockets.com/forums/48/topics/1159104-overl...

then at least consider investing in a local or closer market.

also strongly recommend house hacking.