All Forum Posts by: George Pauley

You are correct, this all boils down to understanding your market before you invest. Not doing so was the biggest mistake I made early in my REI journey.

These days, I look at several things when entering a market.  First, what is the local economy like?  Why do people live there and what do they do for a living.  Are jobs and population growing or shrinking and why.  University of Google can usually help me answer these questions.

Next I try to figure out what types of properties, and locations, people (specifically likely renters) in the area want.  I usually take a short cut at this point and start searching for a property manager.  The property manager is THE MOST IMPORTANT part of your team, so might as well start searching early.  (And if I can't find a good one in the area, I don't invest there.)  I look for years in business, reviews and BBB ratings etc.  I also look at their volume.  A property manager managing a large number of properties likely knows "a thing or two" about their market.  Finally I interview them to make sure they see their job as a combination of looking after my financial investments, and keeping the renters (aka customers) happy.  Once I find such a property manager, they can usually answer questions about property types and locations.

Hope this helps.  Good Luck!

Before I buy an investment property...

Understand that the market is strongest at the "median".  For example, a 1600 sf 3/2 is much more likely to rent than a 3000 sf 5/4.  And then to further understand that the "median" changes from market to market.  Again for example that 1600 sf 3/2 does well here in Phoenix, but a 1300 sf 3/1 will be the norm in Memphis.

It really feels like it doesn't... :)

Of course, on paper, you do indeed flow more cash with time.  But, property taxes, insurance, and cost of maintenance will also be going up.  Basically that same inflation that is rising the rent is also decreasing the value of the cash flow.

Sure, MidSouth Home Buyers is who we've been using.

Coincidentally, we were in Memphis this last week meeting with a 2nd provider.  Were you at the Memphis Investment Properties investors event this last weekend with us?  :)

George

My Memphis experience has been pretty solid.  I've used a turnkey provider, bought 1 a year for last 4 years, and the returns have been pretty good (not great, but not bad either), and in line with what the provider predicted.

(And, yes we did indeed go visit the provider, checked out their operation, and walked a few homes, before we bought!)

But does the "average" college degree offer a 50% ROI? I don't believe so. I read somewhere that only 20% of college degrees offer jobs above the national average?

@Chad Hale No I haven't asked.  Primarily because I've never thought I needed separate deposits like that.  And yes, I do get a report on each property individually.

I'll start by reminding all that I am not a lawyer.  :)
The LLC does NOT protect you from liability for your own actions (or negligence). If you do something, or fail to do something you should have, that results in injury you can still get personally sued. That said, the LLC still offers a lot of protection. There are a lot of things that can go wrong that the LLC protects you from. For example, house is struck by lightning and burns down in the middle of the night. The very existence of the LLC will likely prevent the lawsuit from even being filed in this case.

In Frank's shovel the snow example, it's hard to imagine that the lease doesn't specify that the tenant is responsible for normal and customary maintenance, (e.g. shovel snow off the walk, change furnace filters, etc.)  

That said, I have both LLCs and umbrella policies.  Both are inexpensive and protect you in different ways.

I couldn't figure out why everyone was saying YES loudly to banking account for each property.  Then I realized that folks are probably flipping those properties.  And in those cases it likely makes sense to have separate accounts.  I'm a buy-and-hold-and-rent-forever sort of investor.  Most months my properties have exactly 2 transactions associated with them.  Rent check and mortgage payment.  So I only have one business account for all my rentals.

Actually, it's worse than I said.  I have 3 property managers covering 8 properties (in 3 different cities).  Each property manager aggragates all the rents for the properties they manage and only makes one deposit.  I suspect my PMs would charge me a bit more to make separate deposits to separate acounts?

Just piling on to the idea that you need a new PM.  I've went through almost a dozen before I found a good one.  Gone PMs are actually kind of hard to find.  And they are the most important part of your team.  Focus on finding a good one.
Believe it or not, "for rent" signs are highly effective.  This surprised me.  But many folks in your neighborhood know a friend or family looking for a place, and most of them want that friend or family to move in next door.  They will work fairly hard to make that happen for you.  :)

Finally, if the market is down and you have to make concessions (lower rent, etc) to get a renter in do it sooner rather than later.  Vacant properties are very costly.  Its much better to lose $100-$200 a month on a property because rent is low, than it is to lose your entire mortgage payment, insurance, tax, maintenance, etc because the property is vacant.  Make sense?