All Forum Posts by: Joel Florek

 One of the things I have heard again and again from managing my units in Iron Mountain MI is that people are moving back to the area once they retire or decide they want to have kids. So part of me wonders that as more baby boomers retire, will there be a larger transition from this cohort moving from cities back to rural areas... Interesting thought and one which I will try to find some research on. Clearly not going to be a huge wave, but even a slow trickle into these small markets adds a lot of pressure to the limited supplies. 

Most often the MLS or other listing sites work just fine in my opinion. The larger assets in the small towns dont seem to move very quickly which gives you some time to do an analysis and make a jump.

 Thanks for your input! I have been finding regular opportunities in other towns which means I can build a portfolio but unfortunately it will be spread out... I have been able to push rents a lot on my rural portfolio. A lot more then people said I could do when I bought in. When supply is so low and rents are also low, I tend to think the local operators just aren't testing how high they can go, simply accepting the rents as is. I have gone up $150/month on some of my units without upgrading... Those certainly are an exception but I think it's telling of non aggressive management you can find.

My question is simple. Who is investing in rural America, why are you doing it and what is your experience? Is it your longterm goal or is it a temporary goal to achieve cash flow?

Lets define rural America as towns of less than 20k population without a major metro within 15 miles. 

I will start by saying that I am one of these investors. I have 23 units (a 3, 4, and 16 unit) in a rural town of 15k population. Overall, my experience has been fantastic from the perspective of stability, modest rent growth and long-term tenants. It amazed me how many people thought I was crazy for buying into the small town, but the cash flow and ability to find sellers who are willing to get creative on closing has offered the ability to scale with minimal funds available. 

I have also found that the lack of other options in many of these towns has positioned me to easily be viewed as one of the more or most professional management companies. Its common to only have a few available rental units on the market in the entire town for rent at a given time. 

My preference is to expand to larger markets, and I have added an 8 unit into a larger market which has also been a very positive experience.

My frustration has been getting more opportunities in larger markets that offer decent cash flow via purchasing around an 8cap. My ideal property is $1m to $2m right now. There seems to be a regular flow of opportunities in these smaller towns that I can get a 10cap or 12cap on, solid properties that I can depend on longterm, and provide me with cashflow. 

The biggest con is obviously the microeconomic risks are more acutely affected by changes in employment by one of the local major employers and the issue of lack of opportunity for appreciation since there arent tons of buyers on the market for these assets. 

Would love to get others feedback on their opinion of these smaller towns a long term or short term strategy. 

 Honestly, don't know much about it. Would love to tag up on a call if you know more details Stephen. 

 Looks like I will have to plan for a vacation to Orlando in October! Looking forward to it Gino!

Take care,

Joel

 Thanks for the clarification. And you are 100% correct on being careful. I focus on buying stuff that cashflows well to start and has a lot of room to improve the property simply through better management. That being said by the time my notes are coming do for refinance the financial picture looks a lot better than when I first picked up the properties. This way I can afford a higher rate should that happen, and of course, it has been slowly happening. 

@Gino Barbaro Love seeing you guys make it happen. Looking forward to tackling a deal with investment partners for the first time in 2019. So far its been building a portfolio on my own shoulders but that can only get you so far. Keep it up and keep inspiring the community. 

Goal is to make it to the next event. When are you holding another summit? 

The biggest thing was competing every loan. All my bankers know that I have a few banks quoting me for any loan that is being provided. Has helped them sharpen their pencils and get me better deals. These are small or regional banks which are more aggressive on their commercial loan terms than the larger national players or smaller conservative banks. I usually talk to a dozen or so banks to understand which will be a good fit to get me the best deal and be flexible on the terms. Closing costs on my $270k loan last fall were about $2k and on my $550k loan they were only $1.5k. 

What is the difference between APR and the annual rate Jay?

 Still getting quoted at the low 5% range on my properties for recent refinances and my upcoming refinance in a few months.