All Forum Posts by: Jeremiah B.

Tom Goans Your point about the personal nature of being acceptable is a good one. With that said, personal taste can be the kiss of death in investing - especially real estate investing. Just because I 'like' it doesn't make that it will rent well or resell at a good price. Now - in my local market, I can make the determination of a 'good' or 'bad' property/investment, but short of being an expert in another market, that other perspective is probably more well informed than my own.

Mehran Kamari Thank you for the words of encouragement! That's good to hear. I'm an Andriod user so listening to the podcasts takes a few steps, and I've been a bit behind (and frankly, stuck on Jason the Hartman podcasts), but I just downloaded this and will listen today. Though based on your posts and profile - I had assumed that you were buying locally.

Andy Chu - thank you. I agree that there are many many questions that can be asked; I have a working list of around 40 - most of which could be answered by decent online research.

Tom Goans - Adding the RE Agent as a partner is an interesting idea, and one with a lot of merit. But I can all-but promise that my wife would shoot down this idea due to the complexity and equity of the approach.

Greg Hall - The cash of a visit is not a concern; frankly, spending a night away from my family is simply a no-go right now... and probably the case for another year or two.

Another option that we have considered is hiring a local expert to help, and play them a flat fee per house to avoid a conflict. Their interests would be short-term, but I'd wager we could find a few people on BP in most markets that could do this.

Marco Santarelli I know that we will not find a place that meets all of those criteria, and that's probably OK. But, I actually don't think age would be one of our first compromises.

Dan Buck Indeed. We own some places locally, and they are not bad 'investments' but do not cash flow well.

Actually - we are not sure where we will invest... we are just starting look into that. Atlanta? Memphis? Indy? Somewhere in Texas? Columbus?

Due diligence on the city is easy enough; the research depts on Trulia and Zillow do decent work, and wiki/census/housing searches, google fill in the rest. The more difficult stuff is zip-code specific, but I think city-search is a good resource (if I'm remembering correctly).

Jack Richards - it depends on what you value. What do you think will appreciate? What are your goals? Do you want a big city? Are old houses OK? How long will you hold?

I'm just starting a similar search, and here's my criteria:

Cash Flow
1. 10% cash-on-cash return, after additional capital expenses.
2. Clean/decent condition of interior (note that I might be willing to invest in modest cosmetic fixes such as new appliances, paint, carpet, etc. But no remodels or major repairs needed in year 1.)
3. Newer construction. 2000+ is great, 1990 is OK. 1980 would take some convincing.
4. Reasonable commute to large centers for employment
5. 3+ beds; 2+ baths. I would say that 4/2.1 would be ideal.
6. Modern features such as a functional 2-person master bath, social kitchen, attached 2+ car garage, central heat and/or AC, non-gold features, etc.
7. Clean, decent, functional yard (low cost of upkeep, so no pool and probably no water feature)
8. B neighborhood or better, and on a decent or better street.
9. Attractive curb appeal.

Appreciation
1. Stable-or-better outlook for the economy (this one is complicated)
2. Low $/sqr ft (<$50 is ideal)
3. Low cost of living in the city
4. Larger lot in a neighborhood with larger lots
5. Diversified economy
6. Non-Extreme climate
7. Property doesn’t have any significant negatives (high road noise, power lines, hills, odor, etc.)
8. Housing market trends must make sense
9. Decent or better city to live in.
10. A decent sized city or larger (maybe one of the biggest 75 MSA in the US. Note that this is due to both appreciation and feasibility)
11. Ideally, the real estate market for the city would be in pretty poor shape for the recent/near-term. We are not selling any time soon, so falling prices, foreclosures, vacant homes, etc. for the city-at-large are not a huge concern.

Diversification
1. Not in the Pacific NW.
2. Not in an economy largely driven by Nike or Intel.

Other
1. SFR.
2. Within the US.
3. Not primarily a college rental or specialty rental (section 8, elderly, etc.).
4. Non-offensive political views of the state? No joke, but I think that there are some states that we may not want to invest in due to their political stance. I’ll ignore this point for now; if we get to the point where one of our finalists is in one of these cities – we’ll take it from there.

So, my wife and I have run into an investing dilemma that we'd like to ask for some help on.

What are your thoughts on buying a house where we 1) have never seen the house and 2) have never been to the city? We would rely on the perspective of our Realtor and property manager, and do as much due diligence as possible online.a

Our local market (and any market that we are familiar with/close to) has a bad rent-to-value ratio making local investments have sluggish cashflow. However, we have a young family and are not willing to travel.

Has anyone done this? Anyone have any thoughts? Is the cash flow worth the risk?

Paul Cox

First - a $250/month range is waaaaay too big! Before doing anything, I think you need to fine-tune this number. The numbers obviously look different at $1000 than $1250, but they also look very different listed for $1250 but vacant.

With that said, assuming 1100 rent:

AT 67,500, 25% down, 4.25% interest, 249 P/I (cool)
At 3829 taxes/year, you're at $319/ taxes (wow - high taxes)
$75/month in insurance

$110; 10% vacancy
$88; 8% repairs (I'm estimating high as it sounds like the place has deferred issues)
12% in property management (if you use it):

=$865 in monthly expense, or ~$250/month income or 3k income/year.

With $17K principle, $10K rehab and $3K closing = $30K capital.

That's a 10% cash-on-cash.

Looks respectable to me.

Greg Fend

I should preface this by saying I'm not a expert, and have never done deals as complex as you are now in. But, you seem to be genuinely looking for opinions, so I wanted to add mine.

A CPA is good to have, but until you are running a business with lots of ins-and-outs or a huge bankroll, a CPA is largely a reactive tax person... and not even a strategic tax person. They will do your taxes, answer questions for you, and maybe give you some general advice. I don't know that a HR Block will do it, but the next step up might work just fine.

Skip the financial planner. Get personal finance for dummies (no joke) and you are set. Most CFP's rely on traditional tools like stocks and bonds, and are both uneasy, and unqualified to provide meaningful real estate advice. And all will impose some type of bias to their advice. If you can find a CFP who works with landlords - that might change things - but you are still facing some sort of bias.

An estate planning lawyer is a must, but you probably don't need an ongoing relationship with him/her. Set up your will or trust, advanced directive, power of attorney, etc. and call it good. I think everyone worth anything should do this - real estate or otherwise.

A real estate lawyer is the one person you mentioned who I think you need to have a good ongoing strategic relationship with. If you're doing out-of-state work, RE loans, partnering on deals, etc - you must must must have a real estate lawyer!

Marco Santarelli - thank you for jumping into these discussions. I dig your insight! I also dig your website, though I wish your business worked with newer homes :)

Following up on the premium question above: Comparing renovated houses in the same neighborhood, what is the premium paid for the convenience of a turnkey property. To say it another way, if a house would sell for 100K on the open market/MLS, what would that house's likely turnkey cost be? 103K? 108K?

I don't mean to knock the premium - having a (good) tenant/PM in-place is a real value and one worth a cost. I just don't know what cost the buyer is paying.

Craig Montesano So all-in, you put in around 100k capital?