All Forum Posts by: Erik Hitzelberger

@Kyle Schlosser - The zip codes you mentioned are low-income areas. Certainly, there are many good people who live there and rent homes. That being said, being a successful investor requires a strong knowledge of the area (street by street) and of resources available to prospective tenants. I know several investors who do well in these neighborhoods on a cash-flow basis. That being said, they have dedicated themselves to being experts in everything to do with the neighborhoods and with low-income housing. The people I know who dabble in it (especially beginning investors) usually end up regretting the decision. 

Based on your stated goals, I'd invest in the zip codes I described as B-C. The real long-term numbers in these areas will stand up against anything.  

@Brianne H. Your analysis of the macro trends in Louisville is spot on! Besides the obvious benefits of investing in a growing market, the rest of the factors mean that you get consistent returns when investing here. The risk of wild variations in performance is often overlooked by many new investors. I'm glad to see that you accounted for it.

I'm certain the video @Clay Smith posted is a great source of info.  I'll add some ballpark numbers here as well. There will obviously be variance, but these should be readily achievable. 

C-) Cash Flow Areas (Fringe, but not war zone) - 40215, 40208

Price $60-100, Rents $700-1000, Cash Flow - $250-300 Appreciation - 1-2%

B-C) Cash Flow Areas (Solid Neighborhoods) 40216, 40258, 40272, 40214

Price $90-$140, Rents $900-$1300, Cash Flow $200-250, Appreciation - 3+%

B) Mixed Cash Flow and Appreciation  40228, 40229, 40291 

Price $120-$160, Rents $1000-$1500, Cash Flow $200-250, Appreciation 4+%

A) Appreciation 40299, 40241

Price: $130-$180, Rents $1200-1600, Cash Flow $100-$250, Appreciation 4+%

As far as ROI, we still see double-digit returns on leveraged investments.

I hope this helps and feel free to reach out if you have any additional questions.

@Tyler H. - Part of the Dodd-Frank law imposed certain restrictions on seller-financing to owner-occupants. Kentucky has guidelines that must be followed especially if you are an investor who wants to do multiple deals in this manner. I strongly advise you to contact a local real estate attorney who can give you guidance. During the conversation, make sure you find out the difference between lease-options and seller-financing. 

@Matthew Vallandingham

As you mentioned, it's important to factor the cost of the flood insurance into your numbers. You will find that you need a pretty significant discount to offset this expense when you do the math. You will also have to contend with the flood zone issue when selling the house at some point in the future. Personally, I avoid homes in flood zones because I don't need the hassle and the numbers aren't that appealing.

As far as 40213 goes, the zip code encompasses a diverse area. Audubon Park is much different than the area off Indian Trail. Drive the neighborhood and decide whether you want to invest your money there.

I couldn't agree with @Ed Emmons more. Until someone can understand what you want and need, it's impossible to advise you how to achieve it. What's more is that any investment that doesn't support your goals is a bad investment. So, the only recommendation I can make is to sit on the $100k until you know what it is you are trying to achieve.  

@Allen Jones This is a difficult question to answer as we do not know your goals, your experience level or your time constraints. I will tell you that you are kidding yourself if you think that west end homes don't require significantly more time and management than east end homes. Also, vacancy rate is one of the most significant factors in determining your actual profitability. An annual turnover can easily wipe out all of your profit.

Here's a few questions..

1) Why are you buying the house? Are you planning to sell it at some point in the future to pay for some life event (college, a wedding, a vacation home) or do you want the income to live off of in retirement? 

2) What's the long-term exit strategy? If you are leaving it as a legacy, do you want to leave something easy to manage or difficult? If you sell (voluntarily or out of necessity), which home(s) give you alternatives you are happy with?

3) Do you care about wealth-building, cash-flow or both?

4) How much time and effort do you have and are you willing to spend dealing with the property(ies)? 

 Any investment that doesn't support your goals is a bad investment.  Answering these questions should help make the purchase decision obvious.

Good luck!

Welcome @Lacey Adkins and congratulations on getting started! I encourage you to join KREIA. It is a great place to network and learn from like-minded people here in Louisville. 

@Natalie Allen - Thank you for the recommendation

@keith 

@Keith Brown I couldn't agree with @Chris Bodden more. All of your investment activity should support your personal, financial and lifestyle goals. I strongly suggest you figure out these goals prior to purchasing anything if you haven't done so already.  Here's a few sample questions to ask yourself...

• 1) Do I want to be a passive investor or an active investor
• 2) If active, do I have the time, knowledge and resources to do so
• 3) If not, how do I get them
• 4) Real estate offers the potential for wealth accumulation and/or income. Which (wealth, both, income) do I want/need
• 5) What is my exit strategy 

Once you have your goals laid out, your path forward will be relatively obvious. For example, if it is really important to you to get a strong equity position and you are willing to trade your time for this, than active investing may be your path.  Just remember that buying, rehabbing and managing homes is not investing; it is a job. Owning the home is the investing part.  If your time is more valuable because of existing family, lifestyle or work requirements, passive investing is the right choice.

Similarly, if you want to maximize short-term cash flow from a 'disposable' house (one that you will sell to another investor at or below the same price you paid), look for those types of houses, neighborhoods or markets.  Homes in nicer neighborhoods that produce consistent (albeit lower) cashflow, appreciate and are able to be left as a legacy will be in different neighborhoods and/or markets.

I'll finish with a comment on turnkey providers.  While there is a physical asset and a real estate transaction, you are really buying a rate of return that you want to meet or exceed on a consistent basis. Vacancy and turnover will really limit your success in this category. Make sure your provider is excellent at providing service to not only you as the investor, but also to your residents.

Good luck!!

Please send me the details 

@Joanna Dennis - You are welcome.  If you need any contact info, let me know. I can't remember if BP allows sharing in the general post, but you can (or anyone) is welcome to send me a DM