Let me provide some thoughts from a lender perspective. I provide capital for a company that provides a 30 year non-recourse loan product for SF properties. I also work with a large number of investors who invest in TK properties as part of their investment strategy. Overall, its a great investment class if its approached from the right perspective and the investor is well informed, has the right skills for the investment class. I particularly liked @Account Closed stated, property management is the key.
Its not uncommon for investors to approach me and ask me to help them liquidate some or all of their SF investment properties that they acquired through other channels (I dont market or sell SF investment properties unless I am doing it as a client service, and even then its rare). There are two common themes why these investors want to sell: 1. They were not fully educated and understood all the aspects related to SF investment or turnkey properties (they were usually out of town properties), and 2. They did not understand what they were buying - inadequate due diligence was performed.
The location of the property has such a huge bearing on the performance of the property (location, location, location!). The capital I provide to my lending clients is at-risk capital, and I have a fiduciary responsiblity to my investor clients, almost all of them common everyday people like us. So I am very particular of the underwriting process of the lenders. I utilze a tool that is available to everyone called RentFax. It allows you to enter the address of the property anywhere in the USA, and provides you and index score that encapsulates the relative risk of that property location. So if you are considering properties in areas that you are unfamiliar with, this is a tool that you want to use. It considers the same variables that you and I consider when we are looking to personally live somewhere - schools, crime, services, transportaion systems, etc. The better these variables are, the higher the index score. The score is presented on a spectrum, whereby a low score (denoting a highly volatile location) is represented in the red zone, and a high score (representing a relatively stable location) is represented in the green zone. So you know very quickly what you are dealing with regarding the location of the property. I call it "The Truth".
I do want to mention that a low RentFax score does not mean it is a bad investment. It just means its in a challanging location, and is likely to attract less desireable renters, incur higher vacancy, property damage, non-pay, etc. There are many investors who are very successful with properties in undesireable locations. But most investors are not, and that is usually the properties that I get requests to liquidate.
RentFax has been thoroughly tested and has proven to be very accurate. A leading insurance company now uses RentFax to underwrite their insurance policies on SF investment properties. All my SF investment funds require it's use. You can access it through my website (www.TheCapitalMan.com). Look for the tab at the top right corner called RentFax. I make no revenue from it, but feel its a such a valuable tool for my investors.
I recently conducted a seminar in San Jose, and had many questions from investors on turnkey or SF rentals, which was not the direct topic of the seminar. The discussion reaffirmed my belief that investors in this asset class need to be better informed. Therefore, I will soon be conducting webinars on the considerations of SF investments and how they should be evaluated and managed. If there is interest, just simply register on my website (name and email is all that is needed) and let me know that you are interested in finding out about this webinar when it is offered.
Thanks, Dan
