All Forum Posts by: Dustin Cook

Hi David.  I see you advocate staying in California a lot.  I currently invest out of state because I see safe looking deals that cashflow, but they do lack appreciation upside.  I would like to invest in California, but I don't see deals here that I would know how to make work.  I'm about to take a heloc for about $60K.  I'm in Los Angeles, what would you do with a leveraged $60K in LA that is either cashflow positive, or cashflow neutral as an appreciation play?

Plenty of great deals on the MLS deals in Indianapolis right now! Summer is over.

Be careful with the turnkey guys patrolling these forums. Visit the operation first and foremost! I got back from Indianapolis a couple of weeks ago and good thing I saw it for myself. If I would have bought site unseen I would have been out tens of thousands of dollars underwater. Terrible rehabs, sales comps completely unjustified ($10-20K+ overvalued), rental comps way out of whack ($200+ greater than anything else in the neighborhood). You are looking at things right. Verify sales and rental comps. Also visit the operation and see how they do their rehabs. In my experience I almost got scammed by a big player, oftened recommended on these forums. In my opinion, you'll get a better deal finding a great agent and using the MLS. If you buy turnkey you are at a conflict of interest with the seller as they are trying to max out their profit, and you have no one in your corner, especially if you are new to the game. If you have a good agent, you have someone looking out for you.

You can use hotpads.com and type in the address you are looking at, and it will give you comps for the immediate area.  You can also use Zillow's rent estimate taken with a grain of salt.  Which market are you looking in?  Some markets that I've heard are good are Kansas City, Memphis, Indianapolis, Dallas, Houston, Birmingham, and Little Rock among others.  For a single family home you would typically want to get 1% or higher rent compared to the purchase price, but this all depends on the market and the neighborhood class.  For multifamily you would want a greater rate of return.  You will get greater returns on properties in bad neighborhoods, but will have a lot more turnover and headache.  

I agree with Tony.  If you finance a rental in a good cashflow market, your tenant will pay your mortgage and all of your expenses and you will have money leftover going into your bank account.  I wouldn't worry about if your kids go to college there or your husband travels to the location.  I would just find to a stable market that has good cashflow and steady jobs and hire a professional property manager to manage it for you.

Glad to hear you are flying out rather than buying site unseen, that's a well worthwhile investment of your time and money.  What market are you leaning towards?  

I did not make any offers before flying out. Generally you shouldn't have multiple MLS offers out at the same time, because what happens when you get more than one offer accepted? I wouldn't worry too much about the markets being too hot at least in the 100K+ price range. In Indianapolis there are lots of homes that have numbers that make great sense that have been on the market for months. Turnkey providers will generally reserve a property for you though and let you take a look at it before you decide.

Hi Stephen, Welcome to the forums. If you do decide to buy from a turnkey provider, you absolutely must go out and visit their operation and see the rehabs and the neighborhoods they are selling in. Also check sales and rent comps. A lot of the turnkeys that hang around the forum have a very good reputation. In my experience though, with one company I visited, the rehabs were terrible, the sales prices were way higher than anything else in the neighborhood and the rents they were saying they can get were totally unjustified by the comps. There is a conflict of interest when you are buying directly from the seller and don't have a buyers agent on your side looking out for you. This is especially true when you are a new investor. I decided to ultimately buy off the MLS using a buyers agent and have a deal under contract. It wasn't very difficult to do, it only took one day and I am confident that it is a solid deal. If I had bought with this turnkey site unseen I would have been underwater with a bad investment. Many will come and respond that turnkeys are great. I just wanted to share with you my experience and offer some words of caution one new investor to another.

Thanks so much for sharing your experience Christine!

If you are going to buy turnkey I suggest that you actually make the trip out and visit them first.  You will definitely want to see the neighborhoods they are operating in and the quality of their rehabs.  If you visit these properties in person you may be horrified at the quality of their "turnkey" rehabs.  I would also suggest that you look at sales and rental comps of any property that you are considering.  Don't ask them for the comps, actually look for yourself.  Look at Zillow for sales prices in the neighborhood and look at hotpads for rental comps.  You may also want to subscribe to Neighborhood Scout and see about the quality of the neighborhoods.  

Some of these guys are advertising properties as A neighborhoods, in places where I would be scared to go into.  From what I have seen the rental comps are way higher than neighborhoods seem to support.  If they are going to try justify a 1.0+ price to rent ratio they will tend to market it at the very high end of what is possible to rent at and if they can get a tenant at that high rent, they then sell it to you as if this is what you should expect going forward.  Which is a misleading expectation.  Sales prices also tend to be way higher than the comps in the neighborhood.  There may be turnkey providers that offer a better product than what I just saw this weekend in Indianapolis, but this is just my experience from what I saw from a highly recommended, big provider.

In my opinion, it's worth visiting the market you are interested in and have an investor friendly agent show you around the MLS. Most likely you will find a better deal. With sales and rental comps that are in line with what the market justifies. Also you can find independent PM that doesn't have the turnkey sellers agenda ahead of your interest if you do your research. My trip out to Indianapolis was well worth the couple of thousand dollars I spent. Most likely it has saved me tens of thousands of dollars in the long run. I am a pretty new investor, so you can take it for what it is worth. Definitely visit your team before investing though!

I'll pm you Joshua