All Forum Posts by: Mike D'Arrigo

@Luke Maas Kansas City is an extremely popular investment market. We've been active in KC for over 10 years and have had a lot of success. Whether it's a good market for you depends on your goals and objective. If your goal is cash flow and long term income and equity, then I would say it's a great market. These are the the factors that make it good:
1. Affordable housing
2. Growing population
3. Job growth
4. Modern/diverse economy
5. Strong, growing rents
6. Landlord friendly
7. Reasonable property taxes and insurance rates

I'd be happy to share my insights and experiences in the KC market if you want to reach out. 

@Corey Lawson this depends on a lot of factors. 1br will certainly limit the tenant pool, but as some others have mentioned, if you get a good one, they often stay longer. Location is going to be a big factor. We sell a lot of small and medium sized apartments in the Quad Cities--primarily Davenport, IA. Alot of them are 6 units with 4 of the units being 2Br and 2 of the units are 1Br. This gives the best of both worlds and creates an opportunity to appeal to a broader range of potential renters. Personally, I think 1Br only is a risk. 

 Shane, that being the case, I don't see how you can pass up that much equity,

@Shane Craig Normally I would say that you should have a combination of cash flow and equity but that is an awful lot of equity. The concern that comes to mind is what your exit strategy options are. Whenever you decide to sell, who is your end buyer? If there is little to no cash flow, how much can you sell these properties for? You may not be able to sell them to an investor at market value. If that's the case, how much equity will you really have. The other concern that comes to mind is that there doesn't seem to be a lot of opportunity to increase cash flow through increased rents. The data that I see shows rents fairly flat in your market. Just some things to consider but I don't think you can ignore the potential for that kind of equity if it's real.

@Tanner Pettet FHA loans are technically assumable but FHA would have to approve the assumption by the buyer. I've never done it so I can't speak to how easy it is to do. It sure would make your deal attractive to a buyer at a 4.65% interest rate. Good luck!

@Jared Swiecicki You've asked a lot of good questions. I'll try to respond to your points in the order you made them.

1. Personally, I would not invest in your local market. Illinois has very high property taxes and is not a landlord friendly state at all. These are deal breakers in my opinion.
2. Unless you get lucky and find a great deal, you're generally going to have to do a fiar amount of rehab to add value. A paint job and carpeting won't add a lot of value.
3. You could consider the BRRRR strategy but that is difficult and risky from out of state. You might want to consider short term rentals which can double your cash flow if done smartly and in the right areas. Don't think that you have to do STR's in vacation or resort towns. Any market that has a high number of visitors can be a good potential. I like Kansas City for that reason. KC has over 30 million visitors a year.
4. This is probably the most important question. Define your goals and strategies. Real estate wealth doesn't come from cash flow alone so looking at cash on cash doesn't give you the full picture. You want to look at total income and equity return and not just short term. Look at long term returns over at least 5-10 years. Having said that, markets that have strong economic and demographic trends such as population growth and job growth in addition to good cash flow will give the best long term returns. 

Hope this helps.

@Priti Gupta being that you live in Denver which has become a preetty expensive market, I think you'll have no choice but to go ooout of state if your goal is cash flow. I don't want to discourage you but I have to warn you that doing a BRRRR out of state can be pretty difficult and risky. Here are the challenges that you will find that are particularly challenging doing it out of state:

1. Knowing neighborhoods well enough to quickly evaluate deals. You're generally not going to have a lot of time to evaluate good deals so doing proper due diligence quickly enough to respond can be tough.
2. Being able to determine the value of potential properties. Accurately estimating ARV up front is key to getting your money out. That's hard to do when you don't know the area well.
3. Determining a scope of work and estimating the cost of the renovations. Like the ARV, you have to get this right upfront. 
4. Managing contractors when you're local can be challenging but is particulalry challenging when you're not there on top of things. Finding good workers is a real challenge in the current labor market. 
5. Having the time to manage the project. Does your job and homelife leave you with the time to manage a renovation?

Be sure to understand all the moving parts and make sure that you can manage them all before jumping in. 

@Jonathan Davis several people have already said to learn as much as you can first which is good advice. The only thing I would add to that is to work on getting your credit score up as high as you can while you're taking the time to learn and save. Your interest rate will be dependent on your credit score. To get the best rate and terms, you'll want to get it over 740.

@Sherril Coonfield congratulations. That looks like a home run! What market was this in?