All Forum Posts by: Jared Garfield

I can’t tell you much about the worst companies, but I will tell you that the best insurance company I have found for investment properties is The Norton Agency.  They insure in most states, and I’ve done over 300 homes with them.  They have a product called Real Protect that is was developed for large hedge funds buying single family properties.  I’ve used Foremost, All State, State Farm and USAA and Real Protect has had the best rates.  I’m glad to get anyone contact info if anyone is interested in major savings.  The best part is they can insure the property when it’s vacant at tenant move out.  Many policies lapse or won’t honor coverage after 30 or 60 days of vacancy.  Always check on that!

@Ian, What's the ROI and how much equity are you gaining these need to be strong enough that they offset the storm drain. How big is the back yard, could you plant Leyland Cypress trees to cover the negative aspects, of put up a privacy fence? It is a negative for resale and especially if it's an eyesore. Make sure to get an elevation certificate of a creek is involved to make sure you aren't in a flood plane. If you can mitigate the cosmetics and safety items I wouldn't lose a good deal.

@Anna Felka, you've already had some wonderful advice, but I would add two points.  First, if you have family members that have been really successful, I would ask for their mentorship, they care more about you than anyone else and will feel honored to share the information they have spent a lifetime acquiring.  I used to coach for Robert Kiyosaki, have conducted all kinds of bus tours for the various personalities from HGTV and owned a real estate brokerage and yet I have family members and friends who go and try it on their own and then call me after they get in a bind.  That always hurts my feelings.  Often they tell me they thought my time was too valuable and they didn't want to bother me.  I would have felt honored to have been recognized for my abilities and would have helped them at no charge.  So please talk to your family and tell them your interests.  The second thing is that you need to become an expert at market cycles, at the stage we are in it's very important to invest in the right market at the right time.  You'll need to decide whether you want to do single family or multifamily, or commercial.   Probably single family is the smartest way to start because you can't make a real big mistake, but you might want to do your first deal partnering with one of your family members?  They might contribute money to match yours and might bring valuable lending relationships.  Hope that helps, Merry Christmas!

@JaNae Anderson Real Wealth Network is a bay area investment group that hosts investment events on a regular basis, Kathy Fetke has a great podcast that does a lot of education on different markets and they have 12 to 15 turn key providers that they have vetted and have all agreed to meet fairly rigorous standards.  They hold free events regularly and fly in providers of properties from across the country.  NORADA is another credible group that hosts events and specializes in out of state turn key properties.  Marco Santarelli is very technical and does a great job doing the same thing Real Wealth Network does.  I'm not sure if he has live events in the area.  There probably will be a lot of forum posts here on BiggerPockets with people discussing their experiences with both of these companies.  I've had a lot of experience in Atlanta, Huntsville, Birmingham, Montgomery, St. Louis, Kansas City, Oklahoma City, Tulsa, Detroit, Milwaukee, and Cleveland, so if you want to inbox me I can tell you more about those markets.  I've also done some in Salt Lake City and Ogden, UT but those markets don't cash flow well now.

I would carefully consider property taxes in each state because if you go off of the 1% rule (the property renting for 1% of the purchase price) only, the property taxes in some states can be tripple that of others and really eat into the cash flow.  Also, be very careful as people describe the neighborhood or asset class as A, B, C , D or F, this is so subjective and there is a lot of dishonesty or miscommunication on this.  Check demographics very closely at a site like OnboardNavigator.com or similar (NeighborhoodScout is amazing but is a fee based service).  

Making sure to check poverty levels, income levels, education levels, vacancy rates, crime etc are very helpful, and you'll want to know the average age of home in the area and avoid investing in really old housing stock if there is a lot of newer homes.  Having excellent property management is so important because n o matter how good the deal, bad management can kill it.  Find someone who is NARPM certified if possible, and find out their eviction rates, how long it takes to lease up, what the lease up fees are and what their vacancy rate is on the portfolio they manage.

Make sure that when buying turn key that you get a complete rehab scope list with a total cost of what went into the house, this allows you to compare apples to apples.  I hope this gives you a huge jump on what you are trying to accomplish in the new year!

@David Carte I'd be glad to talk, I'm a real estate broker here, and have bought and renovated over 150 properties in Montgomery from C+ to A class over the last three years.  I have multiple renovation crews that are at cost plus 10% and property management companies that I can recommend.  I regularly come to California several times a year on speaking engagements so we can connect there when I'm in town, or if you are going to be coming to Montgomery I'd be glad to show you around.  There is a lot to learn, you have to avoid prairie soil, you'll want to stay away from the Coliseum  Plume  (an area that experienced soil contamination) as well as sections of town that have a lot of violence but look like cheap deals (so many out of state investors get really burned).  This podcast is a good overview of the market:  http://roiwealthwatch.libsyn.com/montgomery-youll-....

I would avoid Regency Park, Highland Gardens, the area by the Montgomery Zoo, as many of these areas have high crime.  If you like high quality areas with good schools Dalraida is a really good area with reasonable pricing.  Inbox me and I'm glad to provide resources such as demographic and school information and which neighborhoods we have had the best success in.

@Peter Philando, If you are going to be in Montgomery, I'd be glad to meet up and show you around the market a little.  I've done over 150 investment properties in Montgomery, Prattville and Millbrook.  I can introduce you to a really good property manager and a great construction team.  There are some rough areas crime wise, and there is an area that you'll want to avoid affected by the "Collesium Plume" chemical spill area.  Regency Park and Highland Gardens are areas of high crime, as well as areas West of Norman Bridge Rd and North of the Northern Bypass by the Zoo.  You'll also want to be careful of any subdivisions on prairie soil as that can cause a lot of foundation problems that can be very expensive!  You'll want to have contractors, property managers,  a great realtor team, insurance agency that specializes in investment property and a closing attorney/title insurance agency and I'm glad to introduce you to helpful connections.  Send me a colleague request and I'll inbox my cell.

@Leon, we put it under contract the first day it hit the market.  The buyer found another property we were selling that he liked better and decided to buy that one instead. The property became available last night at 10:00 P.M. but I wasn't able to place the ad until this morning.

We have not advertised the property for rent yet with a property manager.  We haven't been fully satisfied with the one we were using in Huntsville and have just found two other companies we are going to give a shot.  

Rents in Alabama are lower than many other states, but the cost of living is also much lower.  The rents on this one should be $950 which isn't too bad.  In an A area of town this one might bring $1,100 but it would cost $170,000, so the rents don't go up at the same ratio as you climb in asset class.

@Leo Koonan, That's a great question that I'll provide a detailed answer to.  I think you are referring to the 1% rule here, meaning that something is a "good deal if the rents are 1% of the purchase price."  

First off I would say that the 1% rule is getting extremely hard to get in today's strong sellers market unless you resort to C-, D and F neighborhoods (which I would never recommend).  It is possible to buy C+ and B- homes at the 1% rule if you source the property yourself and do all of the work, but that's hard to do for out of state investors, and if they were to find a dishonest contractor or a realtor that didn't really know what they were doing, that could be a disaster.  I've seen investors try it and loose $35,000 in monies paid for work that didn't get done.

Secondly, Numbers are not always what they seem.  Property taxes on this property are $292 per year for owner occupants (homestead exemption) and $584 per year for investors.  In many markets (I invest in several) like Wisconsin, Illinois, Ohio, Pennsylvania and Texas this same house might cost $1,500 per year in taxes, so while the rent might be $1,075 per month instead of $950 (and be really close to the 1% rule, meaning this one should rent for $1,090) the taxes would actually eat up the higher rent and so the cash flow wouldn't be any better.  Alabama taxes (#48 in the nation) make the $58 month tax burden a lot easier to deal with than $125 month if the property were in a higher tax state.  

These Numbers Are Pretty Good:  11.21% ROI, Total ROI With Financing 15.73% and 1.65 Debt Coverage Ratio. The Debt Coverage Ratio is what the bank looks at to determine whether or not they should lend on it. Banks like the DCR to be at least 1 and this is 65% better than most banks would require.

Next, Not All Properties Are Renovated The Same, and it's better to pay $10,000 more for a property that had a $35,000 renovation scope performed than to pay $10,000 less for one that had a $15,000 scope performed. As an investor I care most about my net cash flow and true ROI. I don't want maintenance happening every other month that eats my cash flow. If an investor has to replace a roof two years in, that eats both years of cash flow. A furnace in year four eats another year of cash flow. This house has all new kitchen cabinets, granite, appliances, hot water heater, furnace, condensing unit, roof, plumbing valves, faucets and trim kits, so there is a lot less that can go wrong. Paying a $10,000 premium for having that renovation level done might cost an extra $20 per month, but it's much better than having major CAP X expenditures later that kill returns and require massive cash outlays at timing that might not be ideal. All of our properties have the full renovation scopes so you can see what was done to the property.  I hope you appreciate that level of transparency.

Demographics Must Be Compared to Make Sure Apples are Compared to Apples:  Many times investors that I coach bring deals to me that they think are awesome. They have been told that the property which beats the 1% rule is in a B+ area, yet when we compare demographics it's in an area that has crime rates 5x the national average, a median income of $26,000, vacancy rates of 17%, in a zip with 9% unemployment and in a city that has lost population for the last 30 years.  Our website lists the demographics so you can compare deals we have to others you might analyze.  This property is in a zip that has 6% vacancy, 63% Owner Occupancy, 27% College Graduates (strong for a high cash flow zip), and the most frequent income distribution is $65,000-$75,000.  

The Direction of The Market Must Be A Factor: Most cash flow markets today are in areas that haven't grown a lot, but have actually lost a lot of population, many times the long term appreciation will be affected by this lack of demand and the over abundance of supply.  Huntsville is a market that is experiencing a great deal of job and population growth, so it may perform much better than Detroit, Cleveland, Milwaukee, Tulsa or Pittsburgh in the long term.

This fantastic 4/2 home was built in 1963 but it's been totally renovated with new kitchen cabinets, granite countertops, new appliances, refinished hardwood floors, new lighting, new roof, totally gutted and renovated bathrooms with high end tile, new vanities and luxury vinyl plank. The furnace and condensing units, roof and hot water heater are all new so the systems should be solid for a long time. Vinyl and brick make the exterior low maintenance.  Tax records show 1,407 square feet, but this likely doesn’t count the finished areas on the lower level. Huntsville deals are really hard to find, and this property will likely rent from $900-$950 providing a very high return.  For a proforma, home inspection report, demographics, 3D Tour and tons of pictures please visit this property by clicking here! I'm glad to talk to you about Huntsville, we have done over 100 properties here and also have properties in Montgomery, and Birmingham!

I recorded a podcast on Huntsville that you might enjoy:  Huntsville: Investments Take Off In Rocket City!

@Charles Mitchell, I have asked Doyle to send you a link with a proforma and other information on this property.  We have a few other opportunities you might like as well as multifamily options.  Send me a connection request with a phone number and we can answer additional questions.  Also, here is a podcast I did on Montgomery that will help you learn more about the market: http://roiwealthwatch.libsyn.com/montgomery-youll-love-investing-in-the-heart-of-dixie