All Forum Posts by: Michele Velazquez

@Michele Velazquez to give you even more to think about, your vacancy/nonpayment rate should depend on the Class of property you are buying.

Class A - can get away with the 5% you are using

Class B - recommend 10%

Class C - recommend 15-20%

Class D - recommend staying away unless you are VERY experienced.

@Michele Velazquez

4 townhouses??  a package of 4 or are you offering sequentially somehow?

You could put it anywhere. If rent is $1,200 and the leasing fee is one month of rent, divide that by 12 and you'll see that adds another 10% to your monthly cost.

PM Fee: 8%

Leasing fee: $1,200 / 12 = 10% per month

Total management = 18% per month

Assuming everything else is accurate, this would put you at a $700 loss per year.

@Michele Velazquez

This is why carrying 12-15% vacancy is typically more accurate on single family - 4 unit properties.

There isn't a 'best'.  Like @Dan H. said, we have a pretty efficient market.  That leads to higher cash flow being demanded when there is more risk or less appreciation.  On areas with higher (perceived) future appreciation, or less risk, you'll have lower cash flow.  Same reason a 10 year treasury pays less than a BBB rated bond.

Unless you live in a VERY pricy area, I'd strongly suggest trading a higher return for being closer to home.  For example, I'm in San Diego so I wouldn't start here, but there are cities just outside of San Diego I could make a bit of return.  East county.  North county, etc. 

All that said (and I get nothing from you doing it) -- if you insist on going OOS, I'd go Houston Texas.  It's BOOMING and there are still deals.

 I'll say this - you are usually going to have either appreciation OR cashflow

Very unlikely (or lucky) that you will have both high appreciation and high cashflow

Why not look locally?

I don't think there is a "best market" for cash flow and appreciate. I don't think it's a binary choice like one versus another. I look at this question like someone asking, what's the best burger joint in town. There are several that are great, several that are ok, and more that are not so good. A lot is going to depend on your experience level, risk tolerance, proximity to the property, access to resources, etc. 

 I will do it.  OOS is full of risks.  Building and maintains a team is tough enough to do local.  It is much more difficult from OOS.  Add in costs of travel and PM and profits shrink.  Reality is long term maintenance and cap expense is significant versus rents in the cheap markets.  If the deals are so good why are they not being purchased by the more knowledgeable locals?

Contrary to the posts here, independent site NeighborhoodScout shows every singe Ohio city below average for appreciation this century.  

I believe RE markets are efficient.  The more expensive markets typically reflect a perceive appreciation (property and rent).  In contrast the less expensive markets reflect either a lower perceived appreciation and/or a higher perceived risk.  Assuming that markets are efficient and priced appropriately and that you cannot afford to purchase in your own outstanding market, I recommend a market where you have trusted friends or family that may be able to provide some insight and potentially some help if necessary.  Bonus if they are people you want to go visit on occasion.  

Good luck

LoL, people gotta eat and make a living. Newbie looking for a place to invest her money OOS? All the same usual suspects are gonna make their pitch for why their city is best. 

@Michele Velazquez I'd go with someone who isnt beholden to a single location.....say a TK provider like @Mike D'Arrigo (Pinnacle) who also lives in CA and understands the dilemma we face. 

@Michele Velazquez

just curious, did you just get under contract on a primary or an investment?