All Forum Posts by: Ralph R.

Russ
I have Rentals in Pueblo and Penrose Colorado. We usually Raise rent at Lease time. $25-$50 dollars is about all you can do in these areas. Our leases are 1 year. We tell them a couple months before the lease is up.

I'M not sure how long your tenants have been in place, nor am I familiar with your 4plex. I urge you to be cautious about breaking the $900 dollar mark. In Canon city, Penrose and Pueblo these are pretty high rents and could cost you tenants. I know the springs is a little better market, but the army is also down sizing. (Fort Carson is one of the targeted Bases) and this may hurt your market a bit. Be careful here.

How about the fires? seems like we have had a bunch in the last few years. My wife and I live in Bethel Alaska, and her boss is from Woodland Park. Small world huh?

RR

The inventory in my current investment area is drying up!

I have heard this several times recently now its happening to me. I have been given a tip from a friend, about the Tuscon AZ. area. I will be looking to buy again in Sept. I always take my time and do lots of research, but in MY area. This is the first time I have had biggerpockets as a source of information, as well as had to leave my comfort zone.

I have looked at several listings, and spoken with a realitor. He like many realtors hasn't worked with a lot of investors, and while he had listings he dosn't handle rentals. I am looking for information about the rental market in Tuscon. Who rents there? (students, military etc?) how much CAP can I look for, what is the resale market like? since I'm out of state, does anybody know a good PM? Any thoughts/advice where to check?

Thanks for your input. Biggerpockets Rocks!!

RR

Annette Hibbler What a great topic. As an older person, and having been both poor, and later in life successful, I find that possibly the level of greed is disspursed evenly among the classes. There are many greedy investors, corporations, and small buissnesses. There are many greedy poor people as well. This analogy lies in ones personal definition of greed. To ME a greedy person puts his/her interests before that of any body else. Self centered would be another description.

The difference between a "Wealthy greedy person", and a "Poor greedy person", would then be the skill set, intellect, ambition, and very important METHOD used, of the two people, not the amount of greed. A man once told me this: " Poor thinking= Poor ways= poor results. The opposite must then be true. Out of this poor thinking comes the idea that all rich people are greedy.

I live in a place (Alaska) that has 2 basic classes of people. They are very poor and by most standards very wealthy. (There are many millionaires in Alaska wearing carhearts, and driving beat up cars). Greedy people abound in both classes. Also there are many people in both classes who are simply happy with whatever they have,(or don't have) as the case may be.

Rebecca Chapa says it when she refers to the "giver's and the takers". un fortunatly a common behavor flaw is to blame rather than accept responsibility for our situation. Its easier for many of the takers to blame the givers for not giving enough than it is to accept that they are soley responsible for their individual situation. Hence the givers (providers) are "Greedy"

I don't normally quote my father, but he used to tell me..."You don't get big by being (behaveing) small." This applies to all things in life, money, family, work and play. When I look at where I am financially, who I am personally, what examples I set, I try to remember this. Often I find when I am doing poorly at something it is because I am "being small."

In my view 'Greed" is just one form of small behavior.

Ralph

Its Always best to remember the first rule of Investing, Gambling, and buying stocks. That rule is: NEVER risk what you can"t afford to loose. Your headache here isn't the out of state location, but rather the affordability of the rental. If it goes vacant it doesn't matter if its in another state or right next door, your in trouble. Look for other ways to finance, a partner, etc.

Another tip... I make it a steadfast policy, ALL yes, every one of my bills is paid 3 months ahead. Personal bills as well as mortgage payments on rentals. The only bills I pay every month and don't pay ahead is any type of rent. (storage unit, office space etc.) and Credit cards. These are paid off each and every month. That gives you a very good cushion when something does happen. If your out of work, or the rental goes vacant, you have 3 months to figure it out. It also eliminates the need to have short term disability insurance. We have LONG term disability in case of a major injury/ illness. It takes time to establish this cushion, but its not as painful as you might think. We started by simply over paying the lights, water, phone a bit each month. It wasn't long and we were 3 months ahead on all bills. Now we have to watch or we will have a huge credit some place.

Mortgages, car payments, snow machines and the like are a bit different. These loans usually give you a 30 day grace period before the first payment is due. sometimes even more. I make the first payment the first day the loan is closed and you know where to send the money. I don't borrow any money unless I am sure I can make that first payment a double payment. That way I have made 2 payments, but I am 3 months ahead.

One more thing then I'll get off my soap box.....I was a meat cutter for many years. A wise old timer taught me early on the first rule to making a butcher shop pay. He said this.....All markets will make money if you plug the holes. What he was saying is cut your losses (in this case mark down meat or over cutting for the amount of business). I try to apply this to my personal finances as well.

Ralph Ramey

Lynn Z.

Lynn I wanted to pre-approve for a loan prior to buying another Rental. I contacted the loan originator and told her I was looking for another rental in Co. A few weeks later she sent me an e-mail saying she knew of a realtor who had found some propertys for her son. He had a good deal on some houses, was I interested? I said yes and it went from there. I ended up with a house, a 2 year tennant, and she got another loan. The realtor got a commission, and as he was a PM. he got another rental to manage. (He didnt work out as the PM and I learned a valuable lesson from him. pm me for more info.)

I have a PM. in Pueblo. I was looking for a multifamily or SFH in Co. and told her so. A month or so later she said she had a landlord looking to sell a property, but it wasn't listed yet. She didn't want to loose the property as a rental. I got the man's name from her, and sent him an e-mail. I was not sure about closing without a realtor, so I asked her for a referal. It worked perfect. I hired the refered realtor as a buyers agent, and we just closed last month. The realtor got a commission and is lookig for another property for me, the PM got to keep her rental, I got a rented property and was secure about the property's vacancy rate, and condition as the PM. had been managing it for several years. Everybody wins. I believe it important that EVERYBODY involved gets something out of the deal, (besides money) This makes for better team work in the future. (oh I almost forgot, the same loan originator got another loan)

RR

Sorry posted before I was done

What I was trying to say was you have to start some place. Work your deal much the same as you would at home. Look for ethical people you can trust. How do you decide that in your home area? I make a trip or two to Colorado every year. I visit Realtors in different citys, and try to see propertys in different areas. I spend 1 or 2 days looking, and time vacationing also.

At home I look up information on different areas online. Interestingly enough I bought 1 property from a tip through my loan originator, and 1 through my PM. I don't try to work fast, and make sure what I am buying is going to work for me.

To begin with don't buy what you haven't seen, you need to go check it out. If you are uncomfortable then DON'T buy it!! In the begining I looked every time I bought, but now I have used the same people long enough that I trust their judgement. They know I will use them again, and can't/won't use them if I get a lemon. Part of their future success is dependant on my success as well. I would now buy based on their judgement, without a trip to verify the purchase.

When I buy in a new area I go look! The rules are still the same as when you buy at home. I research several propertys, and realtors as much as I can at home, then I make a trip to go Look.

hope this helps
rr

I currently have 3 rental propertys, and some vacant land in Colorado, as well as a piece of property in Texas, but I live in Alaska. I did live in Colorado and know many people there. Undeniably this does help. My rental propertys are split up into 3 different citys/ towns. I can buy, get loans, and insure all with the same people state wide. It has taken a couple years, but I have found and use the same people to locate, finance, and insure my propertys.

When you have property out of state the real estate part is the same. Is the house worth what I have to pay? Is the roof good? Can I make money on it? Will it rent easily? Does it need repairs? How did you answer these questions when you bought your first property in your current area?? You use the same ways and means in another state. Research the market, talk to realtors, etc. You have to use the same methods here you are comfortable with at home.
Most Realtors provide the same services....listings, prices, etc. Commissions in a given area are going to be close to the same.

Nick

I live in Alaska, and invest in rentals in the lower 48. I can tell you, you definatley don't need to live where you invest. I always use a PM, and have rentals in 3 seperate citys.

That being said I will say you need to have a good team with you. I always use the same loan originator, and the same PM's when possible. I use the same agent when I buy or sell. That way I know what to expect, from everybody. Did it cost me to learn who I wanted on the team....yes it did. did it cost me anymore than if I would have been living there? I doubt it. (I have used 3 different PM's, 3 different Realtors, and 2 different loan originators.) The PM,s are what cost me the most. They usualy find repair / maintenance people, and have different ideas about who gets fees for late rents. They advertise your rental when its vacant. (poor advertisement= longer vacancys) They also screen the tennants. They are controling a large part of your cash flow. I have had better luck with real estate companys in larger citys, that manage many rentals. They are more professional, and have better screening.

My PM found my last purchase, which I bought thru an agent, direct from the seller. She approached me with the property because she wanted to continue managing it. We work well together, and she knew I was looking for another rental. It never went on the market. Saved me 3% commission, plus I trusted the PM's judgement on the condition and vacancy rate of the property as she had been renting it for 8 years already. It made the whole process feel a lot safer. I made a trip to look at the property, and bought it. (trip was tax deductable)

Proceed with caution weather you live there or not. Always leave yourself an alternate route until you have established connections, don't get in over your head, Keep a cash reserve and you should be ok.
RR

Beau

I agree with David your numbers are ok, but not great. You need AT LEAST 1% per month rent.

I am using the same B&H stratagy. I have found you get a better interest rate with a 15 yr note, But you better keep some extra cash around for maintenance, as you won't have as much left after P&I payments. You must weigh the cheaper interest againt the higher interest 30 year note that you can make extra payments on. This means extra caution when buying. Look for the big ticket items. Make sure the roof, furnace, etc is going to make the long haul. I am older so my goal is to get them paid for quick. I am extra cautous about big ticket repairs and use a 15 year note.

Your tennant here is very important. I taget a specific type of tennant when I buy. The house you have described is for a good sized family. (5 or more people.) Your most likley tennants will be a family with children and possibly pets. Be prepared to paint etc between tennants, as familys tend to "use" a property pretty hard. Screen your tennants carefully as they have your retirement in their hands.

One last thing. Dont forget you will have closing cost, and they will add signifigantly to your purchase.

RR

Thanks Kelly. I have another duplex in the same area, and when I researched it I was not able to find any better numbers. Its hard to find rents in the rural areas of Colorado that are much over 1%. If you get into the tourist areas the vacation rents are higher, but the also afford longer terms of vacancy. Purchase prices are high as well.