All Forum Posts by: Jacob Elbe

Selling a turnkey 3 bedroom, 1 bath single family home in the South Village neighborhood of Indianapolis, IN.  No repairs needed, we've done more work than planned since we bought it last year.  New gravel driveway, new kitchen cabinets and counter, new furnace and gas lines, and more.  This property is rented at $700 a month and the property management is already in place.  They have a great relationship with the tenant and stay in constant contact and communication with us as out-of-state owners and investors! 

Cash price: $42,500!?!?

Comps are all over $55k and in the $70k range!

Rent: $700

Lease ends: 31 Dec 16

Monthly Expenses

Taxes: $103

Insurance: $51

Property Management (10%): $70

Maintenance/Capex (10%): $70

Vacancy (5%): $35

Net income: $375

CAP Rate: 10.6

Property Presentation Link

We need to sell this one fast!  Contact me at [email protected]!

Visit us at www.truenorthpropertysolutions.com and follow us on Facebook!

@Stephen Lofthus

Up front: I'm not a lawyer and am simply speaking from my opinion as an out of state investor in buy and holds and flips in Indianapolis.  

The great thing about real estate is it's completely up to you how to structure it.  It will end up depending on how much risk you're each willing to accept.  You can structure it as an equity partnership where you decide how much of the profits you each keep at the end, or a debt partnership where your investor is simply your lender and you pay him back whether your flip makes money or not.  Or any combination of the two.  I've used both and it is situation dependent.  Your experience will also come into play.  As an out of state investor myself, I know I can find an agent, a wholesaler, a GC, and a property manager in Indy.  (I already have these members on my team, but I'm saying anyone can find these people.)  So what do you bring to the partnership if you don't bring experience?  I don't mean offense by that, but that would be my argument as the investor.  A professional business plan helps overcome some of that though.  And the better the deal you find, the safer the investor's money is.  So pick a structure that you're comfortable with and make a proposal to him.  Don't be too aggressive, especially on your first deal.  If it works out well, you'll build trust and likely have a partner ready to do more deals.  I also recommend using a lawyer!  

I hope this helps and good luck!  

@Matthew Eisenman

Sorry I didn't see this sooner, be sure to add the @ symbol to people's names so they get the notifications. 

You're correct.  I started investing in OH while I was stationed in the Netherlands and now I continue to invest in OH and Indianapolis while living in the DC area.  I've never been to Ohio or Indianapolis but do plan to make it to the markets I'm buying in this year.  I'm happy to discuss anytime or grab a coffee.  I hope that helps!

@Matthew Eisenman

^^^What he said.  The first market I studied was JMU because I graduated there back in 2007.  I was looking at the condos in Hunter's Ridge because they were in my price range and I assumed there was still strong demand to live there because it's so close to campus.  But that wasn't reality.  Almost all of the units I looked at had vacancies or were aggressively marketed by an owner that self managed in the local area.  Even if you managed to keep all four bedrooms rented, and at decent rent prices, the condo fees will kill you too.  Just last year when I looked at them again, the fees had increased to $275 (almost one bedroom's rent) and each owner had a $5-6k special assessment to pay as well.  That assessment wasn't going to fund the entire project though, so I don't know if that assessment increased or if fees have increased again.  Bottom line, there was no way they were going to have positive cashflow at the end of the day.  I invest in some lower class areas in the mid-west, but I wouldn't touch these condos even though I used to spend a lot of time in them myself!  Talk to a few of the property managers in town and the good ones will be honest with you.  I hope that helps!

I'm also happy to discuss my experience with @Engelo Rumora and the OH Cashflow team if anyone wants to speak to me directly.  The Dingo can take some getting used to, haha, but they've been a great team to work with. 

Good Morning!

I'm wondering what experience some of you have with different solutions for moisture in basements.  One of my properties in Euclid, OH received a violation from the city during the inspection last year:

"The cellar/basement walls show signs of leakage and/or accumulation of moisture.  This defect must be corrected."

We received a quote from a Cleveland company that would install a  basement system for $2950 to install a french drain, and pump along the wall in question.  This seems excessive to me based on the note from the city inspection.  They're a specialty company that I'm sure will always recommend their solution.

What approaches have some of you taken to resolve moisture on basement walls?  I would think some type of sealant on the inside walls and a good de-humidifier along with double checking the downspouts on the house would be sufficient. 

Have some of you dealt with this issue?  If you did install a basement drainage system, what was the result?  Did it work as planned? 

Thanks for your help!

- Jacob

@Stuart Grazier, Welcome to BP!

I noticed the same thing when I was stationed in the Netherlands in 2011.  Anywhere I bought was going to become an out of state rental as soon as I PCSd again.  So I spent some time researching cash flow markets and made the decision to invest where the cash flow worked instead of focusing on areas I was familiar with.  Some more research revealed there were a number of investors having success investing completely out of state and I figured I could do it too!  So I started with a couple of turnkey properties out of state and have grown from there. 

So now we (TNPS = my brother and I) own 15 units in MS, OH, and IN that are all buy and hold rentals.  Our focus is on OH and IN where we have a professional team on the ground that manages the properties and handles most of the headaches.  These markets also provide solid cash flow and better returns than we've found elsewhere so far.  As long as we continue to find deals in these markets we'll likely continue to invest here now that we have established teams on the ground.  We started with turnkey because it was the easiest way to get started in a market.  Now we buy a mix of turnkey and rehabs and are even doing full out of state flips.  It's all in an effort to grow our personal portfolios and hit the highest returns we can while we're still in a growth phase.  It's also because this is now the area I'm familiar with. 

A lot of military folks preach buying a property everywhere you're stationed, but I think that's a dangerous formula in many markets.  If a property won't cash flow as a rental next time you PCS, then it may not be a good place to buy.  Too many folks get stuck with a negative cashflowing property or have to take a huge loss on a sale because they followed that advice.  So instead we recommend investing where it makes sense and forget about whether it's local or not. 

@Matt Motil

Great buy!  How was the financing structured?  Looks like the financing covered your purchase and almost all of the rehab.  Is that because it was priced so low below appraised value?  What kind of loan was that?  We're looking for a lender that would do deals like yours so it's great to hear it worked well for you!  Thanks!

@Sam Regan

Welcome to BP!  Sounds like you've done a great job of diving into the information available here and getting started.  I was in your shoes about 5 years ago and wasn't sure how to get started either.  I'm active duty military and was stationed overseas but determined to pick up my first true investment property.  (I had one rental property already,  that was originally purchased as a primary residence, but it wasn't making any money.)  So I took a year or two to learn about a few of the cash flow markets that often get mentioned here on BP.  Though nervous, I bought my first true rental in 2013, and another in 2014.  The beginning of 2015, my brother and I decided to ramp up our investing and started our company.  Last year we went from 3 units to 15 by the end of the year and started helping new investors follow the same path.  So it's possible!

As far as your questions:

-How to best find deals out of state? Should I contact a local real estate agent using the MLS? Should I be searching around on RedFin myself?

I tried this and you'll have a hard time finding an agent that's investor focused and knows what they're talking about.  There are definitely some here on BP though.  Another option is to talk to folks that are investing where you are interested and ask for referrals or help finding the right contacts on the ground. 
-How best to analyze out of state deals?

Everyone does it differently, but the basics are the same.  Check out the BP Rental Property Calculator for a good start.  Again, you can also ask for some help in this area by reaching out to those with experience.  Try it on your own and then ask what you missed.

-How did you select a market to invest? Should I just select some growing cities and start doing some research on Redfin? For instance, can I just start looking in Austin/Dallas/Phoenix/Etc?

I chose markets based on referrals and recommendations and where the numbers made sense. The price point for entry and solid cash flow options were the biggest factors for me. You may be better off focusing your research on this site then just openly on the MLS.

-Will these SFR's/multi families cash flow well even if using a property manager?

If you choose the right market in the right property, yes!  All of ours are with property managers and I definitely wouldn't recommend self managing out of state in an area you don't know. 
-How did you select a property manager? (There is a ton of info in the forums, just throwing this in as it is a concern of mine)

There is a lot here on BP that goes way more in depth than I could put here.  I also used references and referrals from other investors in combination with questions I found here on BP.
-Did you buy sight unseen? I most likely will not be able to travel out to see properties before buying.

All of mine have been sight unseen.  I was very nervous on the first one, but I now trust my teams on the ground.  If you can make the trip, certainly do that.  I plan to visit our markets this year, but it doesn't have to keep you from investing if your schedule or budget won't let you visit up front.

-Are “boots on the ground” really that crucial?

YES.  But that can be your property manager, an agent, or someone else you trust.  It just takes time to develop that relationship.  In the mean time, rely on references from other investors.
-How to finance the early deals? How difficult is bank financing when it is out of state?

In your price range/budget, conventional loans are likely your best bet.  Being out of state isn't really a factor but your income/credit/cash for down payment/etc will be.  You'll have to talk to a lender to know how qualified you are personally, but you'd probably be surprised what you qualify for. You probably don't have to pay off all your debt to get a mortgage.

-Should I buy turnkey?

This one's definitely a personal call. I've bought turnkey, MLS, and full rehabs out of state, and I still love turnkey options. Especially for out of state investors. Just make sure you do your due diligence on the turnkey provider.

I hope that helps point you in the right direction!  Let me know if we can help answer further questions for you.

@Patrick Edelin

Welcome to BP!

Everyone has made some great points. I think the move makes sense if your savings will more than make up for the negative cash flow. I invest in the Midwest, but live in Springfield, VA so I know the area well. I also rent my personal residence so I'm familiar with the rental market. You and I both know that the top end rents in Burke are based on new carpet, hardwood floors, granite counters, and new appliances. But there's also demand for the lower end rents. I personally rent a place with Formica countertops and older carpet (needs to be stretched) because it saved us at least $400 a month on rent compared to the places that have been updated more recently. So you can probably rent it as is, but know that you will get the lower end of rents in your neighborhood. This can also mean a lower quality tenant depending on how low the rent ends up being. I'm not a real estate agent, but I'm also happy to take a look at pictures/details and let you know my opinion if you'd like. Best of luck and good job reaching out to the community! You'll find this is a great resource.