All Forum Posts by: Account Closed

I don't think turnkey providers or any providers have so much risk- the risk lies in how effectively an investor performs their own due diligence. Learn to do that remotely, and build a relationship with a good local property manager. That should cover it, especially at the entry-level investment stage. 

If you don't have a ton of cash to invest, partnership takes an already small pie and splits it into smaller slices. If you're new to this game, you need to get to the point where you're actually making real money before you can make serious investment moves.

@Jay Hinrichs if you keep mentioning your plane in every conversation we have I'm gonna go buy a damn plane so I can talk about mine too.. LOL

Neenah/Menasha/Oshkosh have a stable tenant class with low priced property- you just have to be careful of student rentals & their weird unit turn cycle in oshkosh, and properties with high tax assessments. Appleton is pretty sweet, high rents and that county has a lower tax rate & a very consistent tenant demographich... just has very dirty owner data (which affects me as an acquisitions business, but not my customers or other traditional buyers so they don't care lol). 

@Michinori Kaneko maybe I did my research incorrectly- I just didn't find strong cap rates with a pro forma considering all the trimmings- including a mortgage and future reserves. Although there is reality to the fact that a recently rehabbed property won't incur significant expenses- reserves are designed to account for the lifespan of the property's components.. so I always include them.

What kind of rents does this 90k property generate? Is 90k the market value of the property? Or a discounted purchase price? 

I like the following markets quite a bit, with deliberate ambiguity because the reason I don't want everyone on the forums to like them: Suburbs of Chicago that happen to be in Indiana. Select markets surrounding Lake Winnebago WI. Tertiary markets in KY with an abundance of brick 4plexes built in the 70's, for which I had to hire a software engineer to forcibly extract property data from county sites because the records are not available on any batch data services, just one off searches on county records. 

Hope this helps! Sorry for the scavenger hunt-esque answer.

I would recommend this approach if you don't mind hunting for the deal and doing the preliminary due diligence yourself. There's a good amount of work that goes into finding said property, collecting and reviewing all financial/tenant/condition info, and negotiating.  It's a lot less work than rehabbing a property yourself, though- and it's work that can be done remotely. 

I use this approach every day! Give it a shot. I'm glad to tell you how I do it from out of state, and efficiently, if you end up trying this out.
 

@Kenneth Biason

Get a little craftier in your market search. Indianapolis is very saturated, and fort wayne doesn't cash flow well. Trust me, I've tried to enter both and it's nothing but beneficial to me for a market to work lol. I've noticed as a rule of thumb that if you can find C+ neighborhoods with 100k duplexes, 140-160k triplexes, and 170k-200k fourplexes, you may have the potential for acceptable cash flow provided rents are solid and expense ratios are reasonable. 

A rehab can be a headache, but can be worthwhile if you find a good deal at well below market, estimate rehab costs well, and are able to manage the project well from afar. All of those things are challenging, and take some skill & the right approach. If you rehab a property, please please please don't BRRR it. Sell it and take the profit to roll into more revenue generating activities, or a stable high cash flow buy and hold. Flipping can be very profitable if you're good at it, just remember it's VERY hands on.

If you want to be hands off, you don't have to go turnkey. You can be property that's occupied and in good enough condition without paying the turnkey premium. If you've got a good property management company, they'll perform maintenance as necessary, rather than you paying someone else to fix a bunch of things that don't quite need to be fixed in advance. 

TK is a very EASY experience, but IMO, if you don't mind being a tiny bit involved you can find a sweet spot between stability and cash flow.

@Chas Noren I own some units in pretty rough areas (with adequate rental demand and very landlord friendly laws). I keep them in really good shape and my property manager prices them right. They rent pretty quickly, and even though the neighborhood brings some incidentals with it- the property cash flows quite beautifully.

Moral of the story is, unless you made a very poor purchase decision, you'll be fine to fill units. Now I can't quite speak for your rate of return, etc... but that's a whole different subject anyways.

@Phil Clark 

Honestly, unless this property is such a crazy deal you'd be missing out on an opportunity that would not easily be found in the future, I wouldn't bother partnering up on a 4plex in a market where cash flowing 4plexes go for 150k-200k. 

For such a small deal, I would only partner if you were purchasing the property at a substantial discount from market value (30%-50%). There just isn't enough cash flow on these to split two ways and be significant. In fact, if you found this at such a discount, I'd flip it at market so you can have the cash to get more deals.

Seeking out a seller-fi deal with low money down is another option. Quality properties that cash flow are not really going via seller financing in '19 like they would be during crash times, though. You're also over leveraging by putting less down, so you'd have to look for a cash cow for me to recommend this.

My honest recommendation is to go get money to invest. If partnership is how you plan to do it, make sure your plan scales. My preferred method is generating revenue by buying and selling real estate. I don't like partnering up and splitting profits. 

@Robert Collins not all areas with an abundance of section 8 candidates to choose from are warzones, and although they are both "affordable housing", there is a big difference between a D neighborhood and a C+ neighborhood.

I find that for the out of state investor, the C+ area is the sweet spot between cash flow and manageability. In these neighborhoods, provided rental demand and landlord tenant law are favorable, you have an adequate pool of tenants to choose from, and the property can perform near " pro-forma"with a quality property management company. You can still be relatively hands off & simply follow up with your management company periodically as little issues arise. The key for me has been identifying markets where the C+ asset is a strong one. Once again, rental demand here is big. Don't expect a market with an oversupply of working class SFR rentals to be a good place to own a working class duplex and have a painless experience.

@Benjamin Hunt of course it is! 

Just have a process. Answer the following questions and you'll be good to go.

1. Where do you get your deals? From a realtor? From a wholesaler/property provider? Will you market for them yourself?

2. What's your due diligence process? How do you plan to gather info on neighborhood, financials, tenants, and condition? How will you verify it during escrow?

3. Who's gonna manage it? I recommend professional management from the start, so find a good one. They will help you make well informed purchase decisions as well.

I invest exclusively in the midwest from CA, and have never seen a property prior to purchase in over 100 deals! You can do it too.

@Yosef Katz

1. BRRR is rarely the highest and best use of your net equity position. The equity position in most smaller BRRR projects (ie SFR's, the most popular version of BRRR mentioned on these threads) often has a better use. BRRR assumes you also know how to find discounted deals and rehab them well- a valuable skill set that if had, I would strongly recommend you sell properties instead and use the (much higher) profits to reinvest at a 20% cash on cash ROI on stable property (if you really want to own rentals).

2. The 1% is supposed to be just a rule of thumb indicator- but it's usually a very poor indicator of cash flow in realistic situations. Cash flow should be measured in a real pro forma with actual operating expenses + cash reserves. It's so easy to plug numbers into a spreadsheet and get actuals. I've created one I would gladly share with you through DM, or you can use the BP calculator.