All Forum Posts by: Lance Robinson

Hey @Steven Chang , welcome!

Few things:

1) Zillow isn't an accurate gauge for house sales. You really need to look at comparables.

2)  Why would your friend want to sell you these properties? I would be suspect if they are all great, just my opinion (I don't know them, not a knock at them.)

3) For your first property + considering you are going to rehab out of state, I wouldn't want to take on a $50K rehab, very risky! 

4) Of the options above, I highly recommend option 1 that is more turnkey. Much better way to tip toe into real estate without the stress of a rehab and the struggles that come with it that could turn you off from real estate.

5) 5% down is only for an owner occupied unit. An investment property will require 20% down in your case. Also there will be an appraisal as part of the mortgage process to ensure you aren't overpaying.

Good luck!

@Steve A. to add to this. I think the feet on the street are more important than the market, generally speaking.

I have purchased turnkey out of state as well as properties my own that needed rehabs.  Turnkey is so much less stress and much easier. I think it's a good segway into out of state investing before looking at other options. Unless you had a bunch of money to just pay cash to buy and rehab to go through the experience. I don't want you ending up bankrupt on the ordeal.

For rehab teams, etc. BP is a great place to find people and get references. Let me know if I can help with anything else, good luck!

@Derek Okahashi I would look at turnkey. You seem like a perfect candidate for it. Have you looked or thought about buying turnkey at all? The key here is to focus on feet on the street and good references to have a low hassle investment. DM me if you want more details, I've purchased a bunch of TK out of state, as well as other properties out of state (I own more units out of state now that are not turnkey than that are, but I started my out of state investing with TK.)

@Andres Giraldo If I was in your shoes, I would leverage that money to buy local. I love the idea of all cash. Multi family would be a bit harder, but SFR's could be in your wheelhouse. I'd look for something that you could get a deal on that needs maybe $10K of work at most (not too much of a project, but enough to have good equity in it after.) You may be able to pick up a couple of properties this way (not too familiar with the Florida market and how close to you to find properties like this.) But I would take full advantage of all cash to get a deal!

Good luck!

@Amit Kumar I started out of state with turnkey - I loved Indianapolis as a market and own 4 turnkeys there. I've bought turnkeys in a couple other markets as well and tried to get better returns. What I learned was that the feet on the street mattered more than the market (within reason.) Most of the markets are similar with some having better CoC returns and some having better appreciation.

I like turnkey as an intro to out of state investing because you get a lot of hand holding and can see if you love real estate enough to deal with it, so to speak. This can be everything from tenant issues, to reporting. There is a lot of great advice on here, but I would reference check on BP both the TK company and the PM. I would call other PMs in the area for advice on the property to see if it matches what the TK and PM company say, and of course all of the other standard due diligence that would match your criteria. If you need more help on the DD, let me know or message me, more than happy to help.

@Adam Adams paying cash "increases his risk significantly?" Huh? Last I checked, 100% of foreclosures happened to houses with a mortgage. When he pays cash he owns the property out right, no bank or anyone to take it away from him. 

Regarding lawsuit liability, he can beef up his umbrella policy and utilize an llc. If you act or do something fraudulent, then the LLC won't protect you anyway.

2 I agree with. 

4 is true when it goes up, but when it goes down, that hedge only lasts until you end up owing more than the house is worth and have to fork out a few hundred bucks every month to make that Payment but you own 10 properties and that oe text storm causes you to foreclose on the property. You may have weathered the last downturn well with al of the added risk, but we all saw how many people lost everything they had. 

It's hard to give advice like this to a new investor that is looking to pay cash and tell them to take out a mortgage as a blanket statement when it wasn't even asked like this. I personally leverage SOME debt, but I understand how to, I don't think anything is wrong with him playing it safe. Also - it's obviously a never ending debate. 

@Jeff Martin - Since you're paying cash...

I bought an apartment in Ohio and it made sense for me to create the LLC there instead of elsewhere. Either way you'll have the liability protection, I would consider the state the property is in (assuming no yearly fees or filing fees) if you're buying in say california with a lot of LLC filing and fee requirements, then I would look to another state. Although CA still require all taxes and fees to be paid anyway if the property is in the state.

Long answer to say, the state the property is in is usually the best llc choice, but it depends. Hope this helps. 

Hey @Jeff Martin - First off, you can't buy a rental property in an LLC with a normal bank mortgage on it. There may be options where you can but the interest rates will be much higher. If you go commercial 5+ units, then you can put them in an LLC with a commercial loan - those will require personal guarantees.

You should look into just beefing up your liability insurance, maybe with an umbrella policy as you grow.

 I definitely agree with this! I had multiple deals under my belt including up to a 4plex (in a rough-ish part of town) before I bought my 22 unit.  I already learned the lesson of paper cash flow in a rough area and the value of starting small and working your way up.

@Terrill Clark

I didn't read through this whole thread but wanted to add some commentary of my own.  I own a 22 unit apartment, and here is what I wish I had known:

1) make sure you definitely have a big reserve of funds after closing.

2) The initial tenants will probably not be up to standard and will need evictions or trash the place.

3) The turns cost A LOT more money than I had expected (I'm talking turns / rehabbing units) This ties into #1.

4) Unless it's a remodeled and fully "turnkey" apartment building - it will take a while for it to start really cash flowing well.

5) Numbers on paper go out the window when you are focused on stabilization over the first couple years.

6) It is worth it in the long run and you will learn a lot!

Good luck!
Lance