All Forum Posts by: Edward Dean

If permitted status is important to you, then you'll want to vet that the ADU was done to code and with permits. Not everyone cares about this but if you do, then check with the City or whatever building authority in your area that would have jurisdiction over that property. That said, ADU's can be a great way to offset your carrying costs and help you house hack.

Start researching rents and prices for areas semi-close by like Sacramento, Fresno, etc. Out of state works great for some people but if the numbers make sense you may find having something within driving distance that you can check on makes sense for you. With a $500k budget there should be areas within an hour or two of you where that could work. Then compare those numbers with rents and prices in the other areas you mentioned and see what looks more appealing.

If you are in the DC area, I would recommend listening to the podcast episode 356 with the guy who BRRRR's in DC with the goal of getting Section 8 tenants in. Not the out of state strategy you are looking for but food for thought if that's an area you are already in.

Vet your realtor and make sure they know the area you want to be in really well. I lived in the Tampa Bay area for years and some streets/areas flood like crazy with the heavy rains while others are fine so you want someone you trust to give you good info on location.

Also remember you can invest in some assets like a Delaware Statutory Trust as well using a 1031 if you are having trouble identifying properties that make sense, but there are pros and cons to that product as well.

Take insurance into consideration and vet whichever plan/company you go with carefully. A quick google shows the average elevation of Cape Coral is about 3ft above sea level. I'm sure there are higher elevation or less risky parts so just make sure to look at flood maps, storm surge areas, etc., in your due diligence phase so you are not plunking money down on a property/area that exposes you to an outsized insurance risk due to flooding and hurricanes. Or at least try to price that in the best you can.

If you are just looking to rent it you may be better off just posting it yourself if you do not have a property manager. Get professional photos done ($100-150) and post on the usual places (Zillow, rent.com, etc.). Most of those allow you to post a rental listing for free and that is usually where renters are looking.

It will depend a lot on the market you are looking to get into. If it is higher cost of living area, like CA, then you likely will not cashflow after you leave for a bit of time. The good news is you can likely expect better appreciation, debt paydown from higher rent, etc., but you may need to be prepared financially to float a slight negative cashflow for a few years. You may be able to increase your odds of cash flowing through a value add opportunity, like building an ADU, converting space, etc., but that can be more capital intensive up front.

Look at your goals long term and assess if a quick scale, ie, trying to buy a property every year is best, or just getting yourself into a good house hack situation now and building some capital up is a better play.

Best of luck!

Like most others have said, Delaware Statutory Trust is probably going to be your best best. I have not done one yet myself but my understanding is they lock you in for 5-7 years on average with spelled out expected returns and at the end there is a disposition of the property, trust is dissolved and you'll need to 1031 again to avoid gains tax. Buy in can be as low as $100k. There are brokers for this type of product with access to several dozen options at any given time.

Best of luck!

Pad your budget as things will generally go "wrong" on just about any project. Things will take longer than expected, a shortage in material may up the cost or cause you to go with different finishes that cost more, etc.