All Forum Posts by: Jeff Roth

Hi Shane-

This is a great question as I am currently looking to develop similar relationships with local property managers to help manage STRs and MTRs.

I too have found reluctance from traditional property managers to take this on.

I prefer to work with someone locally that knows the area and can handle issues directly themselves rather than an out of state property manager.

Short of incentivizing the property manager with a management fee premium for taking on the extra work, some form of self management is likely until you find the right person or company.

To your success!

Hi My-

Congratulations on moving the ball on your real estate investing goals.

If I were investing out of state, I would start with finding the right property management company first. They are an important part of the team and make real estate investing as "passive" as it gets. Also, a good property manager will keep tenants happy which reduces turnover in tenants and means more return overall for your investment. The property manager will also likely know good real estate agents to work with in the area and if any of the property owners they manage properties for are thinking of selling. They also should have a team of contractors to keep you from getting scammed and should be able to get your property rehabbed if needed after purchasing. 

Even in the areas I invest in Michigan within an hours drive of Ann Arbor, I use property managers and don't buy a new property without the property manager weighing in on market rent and the area the property is located.

Basically, a good property manager is worth their weight in gold and you can find them by asking on Facebook groups for real estate investors in the area or asking local real estate investment groups.

To Your Success! 

Hi Jacqueline-

Great questions and I also help investors as an agent in Michigan.

Typically, I work with investors that like a particular area I have written content about and have shared on Facebook real estate investor groups in those areas or posted on my website.

Then, I work with them to define their investing goals and specific buyer criteria so we are only looking at properties that fit that.

It has not been a problem working with investors after defining their buying criteria because only a few properties will meet that criteria.

To your success!

Hi Jaxx-

Congratulations on starting your real estate investing journey.

I would recommend buying near where you live to start out for many reasons most of them you can probably come up with on your own.

That being said, if what you are saying is true about your area, I would look to house hack to get started.

This would be you buying a single family home that has a separate entrance to the basement where you can turn the basement into an apartment and also rent out the other rooms. 

Think about buying near a hospital or college where you could attract short and mid-term stays more than just in a typical neighborhood.

Before buying anything, I would find the best property manager in the area and tell them what you are looking to do then ask if any property they manage is like that and if the owner would consider selling to you. If not, ask for a referral to a Realtor the property manager recommends and have the Realtor find you a property that fits your house hacking criteria. Before buying, you should have the property manager weigh in on market rents so you know the numbers will work from day one renting by the room and/or the basement having them manage the tenants for you. 

Starting off using a property manager while you house hack will allow you to make your investment more passive while learning to work with a property manager and the local leasing requirements. They will also help you keep your rental compliant. You can act like you are just another tenant in the house.

To your success!

Hi Anirudh-

Congratulations on deciding to invest in your first rental property.

The thing to do when investing remotely is to find the best property manager in the area by asking around on local investing group forums and talking to local real estate agents. 

Patterns will emerge and you will hear the same names and companies.

Call each and find out if they can give you feedback on properties you are interested in purchasing, the soundness of the area and market rents. Make sure they can handle the rehab with their crew and you are comfortable with their fees. A good property manager will understand what you are trying to do with the BRRRR strategy.

Ideally, they will work with an investor friendly Realtor or have one on staff.

To your success!

Hi Kelly-

Great question!

I recommend buying a Short Term Rental (STR) so the Long Term Rental (LTR) numbers work too as a fall back position and so you do not overpay.

Regulations change for STRs and the market can become saturated.

Personally, I like Ann Arbor, Lansing and Grand Rapids, Michigan for STRs and LTRs.

You have to know the local restrictions and regulations on STRs in those locations but you are much more likely to be able to buy a property that will cashflow as a long term rental and cashflow much better as a short term rental even using property managers.

To your success!

Hi Alan-

Congratulations on starting your real estate investment journey.

To answer your questions:

1. What should you know PRIOR to purchasing a second home as an investment? Make sure whatever you buy cashflows as a long term rental even if it starts out as a short term or mid-term rental so you have a fallback cashflow position should regulations change or the market for short term or mid-term rentals change in your area. Whatever you buy, make sure you have cash reserves or cash equivalent reserves for unforeseen events after buying. Finally, whatever you buy, strongly think about using a property manager to make your investment as passive as possible.

2. What is something I wish I knew before purchasing the second home? Markets do not always go up. If you can, wait for the market in your area to bottom or close to where you think the bottom is before purchasing. Remember, increases in interests rates take time to fully have an effect on the overall market.

3. Anything I would do differently? Yes, never sell anything if you can. Hard to find good deals or deals with low mortgage interest rates. Right now, the mortgage is an asset if it is low and will stay low for the life of the mortgage.

To your success!

Hi Josh-

Great question!

If you go to the city or county tax assessor online and put in the address, the owner's name should appear and if there is a separate address where the taxes went it might be the new place the owner lives and you can send a letter or try to look up a phone number.

To your success!

Hi John-

Great question and congratulations on getting closer to purchasing your first investment property.

To answer your question, it is always preferable to use other people's money which includes the bank. This gives you a greater or infinite return as you essentially create money from other people's money. This is a skill to practice and build up your tolerance for doing.

That being said, whatever you use the money for has to cash flow and pay back the borrowed money for you.

I don't think the HELOC you arranged is necessary bad. It forces you to pay on the principal while the money is being used. It is very common for investors to use a HELOC to get started investing in properties. Another option is to see if they will convert the balance used to a Home Equity Loan instead of a Home Equity Line of Credit to fix the interest rate but your current HELOC may be just fine.

Anyway, you want to find a property that needs a little work so that when you buy it and fix it to rent you can refinance the equity back out that you put into it as much as possible so you can keep your money moving to the next property. Also, ideally, the property will have strong cashflow after using a property manager to help manage the property. This is still possible in areas of the Midwest like Michigan where I am from.

Some lenders will give you a HELOC on the equity in an investment property or you can do a cash out refinance to get your money out. There are pros and cons to both. If you have a low interest rate on the purchase of the property you may want to use a HELOC to get the equity out to keep the low fixed mortgage rate on the primary loan. If the difference between the rate on your cash out refinance and exiting long term mortgage is similar than a cash out refinance makes sense.

You will want to establish lender relationships for the purchase and refinance before buying explaining what you are trying to do and understanding the lending terms available. This is the BRRRR Method of investing for your reference.

As far as paying down the original HELOC on your primary house you can use the cash flow from the property you invest in. This is the best way to do it and if you need to, down the road, you can always pull additional equity out of your investment property to pay off the HELOC on your primary house if you need or want to.

Bottom line, you will need to get comfortable managing other people's money, including the banks, well and using other people's money investing in real estate.

One last word of advice, make sure you have plenty of reserve in your cash on hand or equity funds for each property for the unforeseen repair. You will sleep better at night and something always comes up. Maybe some of your monthly play money could become your investment property emergency fund.

I guess one more. :) Think about getting your HELOCs from credit unions as they are less likely to freeze or cut your line of credit if the economy gets shaky. No guarantee it won't happen but less likely with credit unions.

To your success!

Hi Melanie-

A great question and a great position to be in, congratulations!

Someone once said, who was a member of this community, that owning 1 paid off property that yielded cashflow similar to four properties is much preferable because you only have the maintenance and management of one property.

I heard that and found a lot of wisdom in it.

Thus, like Occam's razor theory, the solution with the least moving parts with similar outcomes is preferable.

One last thing I would consider is using a property manager even if you are staying in the multiunit. You can act like just another tenant and it makes your investment more passive which should be your ultimate goal.

To your success!