All Forum Posts by: Jeff Petsche

@Roey Marom Thank you for the comment Roey. I'd love to connect with you offline at some point and talk to you more about what you do when finding properties, why you chose your five markets, how you vetted the team on the ground, etc.

Real estate is my full-time thing, so jumping on a plane once a month to other areas and spending some time in markets to purchase is something I can do and not opposed to doing.

My girlfriend travels for business all the time, so we've had this discussion and she supports me looking for properties we can invest in as well.

Let me know if you would be up for a phone call sometime.

@David Faulkner Thank you for the comment. Have not really looked into REITs, but it's always an option. I don't mind be active with my investments and because I'm in the RE business here in Orange County and real estate is my full-time profession and passion, I'm okay with the idea of traveling to buy property  in other areas.

We are both in OC and should meet up sometime. I live in Yorba Linda.

@Account Closed HAHAHA Yes you are correct, and Texas was on my radar back in 2004-2005 (The Woodlands), but due to my credit being CRAPPY due to my ex-wife making some BAD financial decisions, I never bought.

I know the DFW area is "HOT" (not because of the weather) due to large companies moving into the area. Toyota for one and I have a friend who is a KW agent in DFW, so she updates me a lot about what is going on.

She needs to find me the off market properties or I'll miss out. Plus it may get to a point where the numbers don't work there much longer due to high property taxes and price appreciation.

@Sidney S. Thank you for the comment Sidney. Sounds like things are working out well for your out of state investments.

You make a good point about being in different markets in the event there is a market shift and not all your properties are affected by it. Had not really given that much thought. I've been looking at markets with sold population growth, low poverty, high graduation percentages and in areas of good schools, so that will eliminate the D (War zone areas) and even many C- neighborhoods.

I do feel I am making the contacts through my real estate connections, so it's just about feeling comfortable with the area, the values, etc.

@Caleb Heimsoth Thank you for your comment Caleb and Memphis is a market I'm considering to invest in.

I would prefer investing in my own market, but as I indicated, being in Southern California (Orange County) the average sales price is $675,000 and with prices so high, the numbers don't work. At least not for what I want.

My criteria is a minimum 10% ConC, but would really like to look for 12%+ ConC. Those numbers are not working here. I've been analyzing a lot of properties and CAP Rates are between 3-4% and ConC is below 8%.

I have yet to see a 1% rule. Usually .06 to .07 is pretty accurate. I sold my primary residence for $420,000 in December and if I had kept it as a rental, the best rent would have been $2,100, so only a .05 Rent/Value ratio.

I've talked to a few investors here who invest in Indianapolis, Jacksonville and Memphis, and they have never even visited the properties. They have connected with the right people on the ground in the those markets and so far it has worked. One person owns 26 rentals in Indianapolis over the past 2-3 years and has never set foot in Indiana.

Hello BP Community.

I will admit that I am a NEWBIE to the real estate investing game, and sometimes I fell I'm late to the party, but then I change my mindset and say it's never too late.

Quick Back Story:

I've been in real estate since 2003, but as a retail real estate Broker, so I'm not completely foreign to the investing game. I just have not yet purchased any investment properties. I tried back in 2004-2005, but due to some "marriage issues", my credit got jacked up and I was unable to get financing. At that time I was not really educated on other finance options, so I never pulled the trigger.

Currently I've been doing everything I can to gain more knowledge about RE investing options by reading books, listening to podcast, attending local investing groups, talking to other investors, etc.

This brings me to the current subject: "Investing Outside Your Own Market".

I've decided that my focus is going to be Buy-and-Hold SFR and up to 4 plexes.

I live in the Southern California market, so it's very very hard to make buy-and-hold properties cash flow, so I'm looking outside my market. I know some say they will only invest where they can drive to their properties, but so far none of those people have been CA investors, at least none I've talked to.

As a Broker for Keller Williams Realty, I have a lot of contacts with agents across the country who could help me assemble a team on the ground in an area I'd like to invest.

I'd really like to hear from other BP community investors who invest OUTSIDE THEIR MARKET and the pros, cons, types of systems in place to make it effective, etc.

Again, always wanting to learn from those who have walked before me.

Great job @Kyle Mack. Looks like you took a system (BRRR) and applied all the concepts you learned. You're a DOER and that's what separates you from the herd.

I'm new to investing, but have been a licensed Realtor in California for 14 years on the RETAIL side of the game, but that's about to change. My focus locally (California, Arizona and Nevada) will be wholesaling for NOW MONEY, which is not investing because wholesaling is a transaction based business, but then I'll be looking at buying buy and hold properties in out of state locations where the cash flow makes sense.

I unfortunately can't really invest in my own backyard here in Southern California because the numbers just don't pencil, for MY CRITERIA anyway.

Your summary of the deal you took down is EXACTLY what I will be focusing on moving forward with the buy and hold game.

Good luck with your other deals in the pipeline.

@Hau N.

I love when I get an opportunity to analyze a deal because there are some "basic foundational rules" almost everybody follows, but also many perspectives with regards to figuring out "basic expenses, CAP EX", etc.

Based on your rent/value ratio you are at .07, which is not uncommon in CA. Which is also why most CA properties today don't work at the current inflated market prices. It's rare to hit the 1% rule here or the HOLLY TRINITY rule of 2%..

One thing I'd want to know about this property is: Is this an value add property? Is there the possibility for forced appreciation through rehab? Are rents under performing for the area? Is there room for cutting expenses? Etc.

Also, they NEVER manage their own properties. Most new investors jump over dollars to save a penny by managing themselves, thinking they are cutting costs, but in the end they spend more of their valuable time managing tenants when they should be managing the asset and the management companies. What's your hourly time worth is the question I'd be asking because I don't want the 10pm phone call that the garbage disposal is not working.

With that said, based on the information you provided, and after running your information through our software analyzer, this doesn't even come CLOSE to hitting our numbers. Again, this is solely based on YOUR INFORMATION and without doing more due diligence.

Would there be loan points for this loan? I factored in 1% to be safe, which puts your total initial investment at $61,642.00, not the amount you mentioned.

We factor 10% vacancy (as did you) and an additional 30% of the Gross Scheduled Income for expenses (Taxes, Insurance, R&M, Property Management, etc.).

All said and done this comes out to a CAP Rate of 5%; COC of 1.8% and not that it matters for financial underwriting with a residential loan, but the DCR (Debt Coverage Ratio) is only 1.08. If this were looked at in the commercial world, lenders want a minimum of 1.2, we shoot for 1.65 to be safe.

All said and done, you are planning on managing yourself and cutting your own yard, which means you are working for your investment instead of your investment working for you AND you only have a $35/month cash flow to boot??? 

No thank you!!

Offer a LOI of $168,000 and see if you have a motivated seller. Otherwise, PASS!