All Forum Posts by: Ken Siew

Alex, I agree with @Jonathan Twombly on getting educated first, either through meeting experienced and successful investors or going to legitimate courses and seminars. I would not hesitate spending hundreds or thousands taking out someone I admire to lunch or paying them for their time. The key for me personally is to first build a strong team before you buy anything (whether local or remote), it's just like any other business, you can't win without the right players (even if it's in your own backyard).

To give you a more concrete picture of what is possible in rental market in the Midwest, I'll cite one of the properties we are currently rehabbing in Kansas City, MO:

Turnkey price including rehab = $68,500 ($69,423 including closing costs)

Rent = $900

Net = $597 (after deducting taxes, insurance, management, and maintenance reserve of $70)

Straight Cash ROI: 10.46%

Loan Payment @ 20% down 5.5% over 20: $377/mo

Cash on Cash ROI @ 20% Down: 19.27%

And if anyone else has a better deal for sale, please let me know :-)

Yes the all-in price includes the rehab - $20k rehab is pretty standard over there. It ranges from $8k to $30k based on what I've seen.

Welcome Mark!

What are you looking to accomplish in the next 3 months?

Welcome David!

Depending on the area in Lawrence, many of the properties revolve around student housing, and so timing is especially critical because there's a small delivery window before the new semester starts.

Just to give you rough idea, we just got a 3-br SFH under contract in Lawrence near KU, all-in $106k (comps at $135k) and $1,175 in rent. Or we could flip for $11k profit (not terribly exciting though).

What's your goal? 

Thanks for the helpful links - both are great resources.

Trevor, I live in Astoria (technically your neighbor!) and I run my real estate investment company in the Midwest (KC, St. Louis, QC) - follow the money!

I feel like gross yield is not exactly the best measure since taxes could very much affect the ROI. Would have loved a net yield comparison but it would have probably been a little more challenging from a statistical standpoint.

One very important trend is the unemployment rate - I'd usually like to see a declining trend over the years, and ideally not too high compared to the national average.

Mike, I'm curious about your market analysis process - could you share more about your methodology? I agree with you and I have the same doubts about Detroit especially when it comes to being able to collect the rent. One of my properties is located about half hour away from Detroit in the suburb - rented for $900 bought at $50,000, so about 22% gross yield and 13% net yield.

Richard, I agree with you that it's easier to grow your RE portfolio if you accumulate a sizable amount of capital in the beginning.

Here are a few things I would consider for a flip in your situation:

1) Low end area - are most of the properties rentals in the area? Lower price range usually indicates rental neighborhood (not always), but we usually look for pride of ownership (mostly homeowners with few rentals).

2) Sold comps vs For Sale properties - are there enough recent comps for your property? What about properties for sale? The point is that if you only had 1 comp in the last 6 months that is not a very good sign. Or if you have 3 comps but 15 similar properties for sale, that is a bad sign too.

3) Timing is crucial for you. If you drag the rehab for too long you might run into the colder weather and then you'll have less showings. 

4) What's your breakdown of the expenses if you have to rent it out? At first glance the cash on cash seems decent (at least double digit I suppose), but again it depends on the area.

Please keep us posted on your progress!

Count me in would love to chat and exchange ideas with fellow investors.

Chris, I own some rentals but we primarily wholesale turnkey rental properties to investors all over the country. We just went in to the cities we had interest on and started building a power team. Finding an A-player realtor is going to be the key because the realtor will have contacts to contractors, property managers, title company, real estate attorney, and insurance agent. But when it comes down to it, you'd just have to go through the hard way of hiring and firing people to find the best players.

As a side note, I'm also working on the investment summary for a real estate fund I'm creating but that's a totally different ball game.

Ryan, the best way for other local investors to give you specific neighborhood advice is to provide the approximate address of the property. Then we may be able to tell you whether to avoid that block or not.

I know investors in St. Louis who own investment property at that price range and rent, with mostly Section 8 tenants.

I wouldn't bet on any appreciation or even "instant equity" in your case because the only potential buyer in the future would most likely be another investor. So your pool of buyers is going to be limited.

You also didn't mention about the condition of the property, whether it needs work at the price of $12k. The plumbing, electrical, HVAC, and roof will be the major items you need to consider.

Especially in these areas, you will need a GREAT property manager. And think about if you can absorb the loss if you have a 3-month vacancy (or 6?).

Try sticking to at least 3/1 for your first few deals as an investor, once you're more seasoned then you can break the rules.

P/S: If you know other seasoned landlord in the area, you may be able to wholesale it for a quick profit if the numbers work out.

Good luck!

Welcome Chris! Glad to have you here.

Regarding the markets you're considering, I happen to know investors in all the market except Cincinnati, and I personally invest in St. Louis and Kansas City. Time to get a power team set up so you can get your first deal done :-)

What are your biggest sticking points now and how have you been dealing with them?