All Forum Posts by: Patrick Murphy

@Mariah Porter

I would go for it. I'm assuming that you are inexperienced with having tenants or attracting them, so this will give you great practice in finding individuals that are quality tenants. Regarding finding tenants, you could go the traditional route, through roommates.com, or through a travel nurse site to leverage a couple different strategies.

In my opinion, I think househacking is very different than a traditional RE investment. Househacking is your home as well, so the numbers don't need to be perfect initially considering there is the opportunity cost that exists with what YOU would have to pay to live elsewhere. I'm currently househacking a duplex. My side, I haven't rented out the excess rooms just yet, considering I didn't want to run before I could walk. But, I know that I'm way ahead if I rent just one room and am in a solid position when I move out and rent the entire duplex.

The big question that you need to ask yourself is, do you need all three tenants immediately? That question is based on your financial flexibility through your current job or cash reserves. I say that to give you plenty of time to build up experience of being a home owner and a landlord. But based on the sliver of numbers provided already though CapEx a challenge to know without pictures, I would pull the trigger especially while interest rates are still low and appreciation is still expected to be above the normal rate this upcoming year to create instant equity.

@Jacob O'Malley

I was in a similar boat as you. I bought my duplex in Jacksonville, Florida. I chose it based on needing to live in the SE for my job for a manufacturer in Milwaukee, which requires me to live anywhere within my SE territory.

My suggestion, I'd start pulling metrics based on median home prices (can you afford the house), rent prices (can it meet a 1% rule), median income in the local area (can your renters afford the rent and ensuing rent appreciation), crime (will you get shot), and any other metrics that matter to you (potentially leverage alltrails.com based on top mountain biking areas or best places to snowboard from Google to find distance from a city X). Then create a ranking system from 1 to however many cities you pull. Then add all the metrics for a particular city together to create the more desirable list based on your preferences. I parsed down from 50 to 5 based on different things I valued. Now, I had found some spreadsheet on the pro side of bigger pockets with all cities that helped spring board me with some of these numbers.

The big thing is to potentially leverage your flexibility and the priorities you place on certain metrics. For me, I got to live in a non-income tax state, landlord friendly, and warm place near most of the major cities I could simply drive to vs. fly. Everybody will have different priorities so it's best to write a list of the ones that matter to you and start parsing through the noise to find the optimal location.

@Jayden Espinosa

This was definitely how I felt several years ago when I graduated. I would definitely not recommend going and working for a property management company to start when you're comparing salaries to being an accountant. Getting the accountant experience on your resume will make it easier as a contingency plan to fall back on with a quality salary if something ever happens in your future.

If you're still wanting to gain real estate experience, I would definitely leverage the abundance of information here and potentially look at getting a real estate license to just gain more experience about markets and the process of real estate when you're not needing for it to make a meaningful amount of money right off the bat. It'll also help you keep networking in your area.

Once you build up enough savings you can then look to getting a house to house hack and further your experience as a landlord.

The biggest things are to give yourself time to learn and not let FOMO drive you, proper real estate investing is a marathon and not a sprint.

@Jignesh Savaliya

I had a similar situation, where my tenant started talking about their 5 year plan based on their kids.

I didn't want to lock myself into someone that long just in case I decided to go a different direction. So, I ended up giving them 3 options: a monthly, a 1 year, and a 2 year option that they could choose from. Each option came with a different price point, and I left the decision up to the tenant. My price points took into account where the rental market was and potentially the increase it would go. My goal was to raise rent to be closer to market rent based on the lower rent they had from the previous owner. They ended up going with the 2 year lease and $100 bump.

I, personally, wouldn't consider a 4 year lease like that, especially in a market like any major Texas city with the rents continually going up. But if you're more inclined for stability over maximizing cash flow then a 4 year lease wouldn't be bad, especially if they're a quality tenant. That would prevent you from doing any major move out updates, or worry about finding another quality tenant which will eat into your profits. You could always have three options similar to a 1 year at $1000, 2 year at $1200, and 4 year at $1400. That could incentivize them to go with the shorter option or if they are absolutely set on 4 years then you're making better cash flow in the early stage of the lease. You know the leverage you have since they are looking for stability based on schooling and potentially the crazy rental market, so they could go that direction. Everyone (tenant and landlord) has their own needs, just make sure you have an out in your lease if things go sideways.

@Kristi Marie Meyer

I would look to sell your house in Jacksonville. Considering you don't have experience previously being a landlord, I think it would be difficult to have true expectations for a property management team and vet them accordingly vs. simply looking at random referrals or their overall expenses, which aren't the only things to consider.

If I were in your situation, I would sell your house and look to buy either a duplex or buy a single family home as if you kept the Jacksonville house, and I wouldn't put too much money down if you go the single family route. By doing that it would give you flexibility to make potentially better informed decisions later on as your kids enter elementary school and your husband wraps up school. I'm someone that prefers to have multiple options available, so this would allow you to not force anything. This could be especially beneficial if where you move to has a greater amount of foreclosures in the future for you to snatch up when the moratorium wraps up and landlords have to dump their over leveraged investments. Your Jacksonville house is overinflated in the short term a bit so you can take advantage of the seller's market too.

The other thing is that you'll allow yourself to be able to test out the school system to see if it is a right fit for your kids and if maybe you should send them to a private school or something. But this would depend on you and your husband's investing goals too.

To me there are a lot of unknowns with your situation right now and I think it would cause me, personally, too much stress and sleepless nights if I tried the long distance investing to start.

@Andrew Kougl

Yeah I definitely agree about whittling it down in stages. There's 10 cities, but not 10 metro areas so some reside within the same metro area, so it's not like Atlanta, Miami, Nashville, Tampa, Charlotte, etc. that all act very differently. There's really only 3 metro areas of value that I would target initially and then go to the other 10 to examine deeper if I found my initial avenues resulted in only inept individuals to work with.

@Steven Foster Wilson

I definitely was planning on finding some key local boots, I just wasn't sure if I could take out 2/3s of the cities from the get go by doing something that way I didn't come to an individual initially by only saying, "I'd like to look in city X" and have zero base knowledge.

I wanted to thank everyone (@Taylor L., @Andrew Kougl, @Bradley Sriro, @Rob Bergeron, and @Steven Foster Wilson) for your help with spring boarding me with this.

I found three blog posts on BiggerPockets that helped me understand where to find a lot of the pertinent information, and additional metrics to weed out the noise of having 9 states to examine (true first world problems):

https://www.biggerpockets.com/blog/determining-market-invest-remotely-dream-investment

https://www.biggerpockets.com/blog/2015-05-10-invest-out-of-state-how-to-analyze-a-city

https://www.biggerpockets.com/insights/articles/rent-to-income-ratio

My metrics are almost a hybrid out-of State investor mentality in my opinion. I used the third Blog Post’s spreadsheet and got rid of anything outside of my territory, as well as cities that exceed 30% RTI, or are under the 50% RTP. Once I had my “Top 33” I pulled each of their CAFRs to get a better sense of their stability.

I then pulled in other metrics like Population Growth to LY, Unemployment, Median Age (matters to me since I’ll be moving there and am single), Cost per Student, Violent Crime above US avg., Property Crime above US avg., Real Estate Appreciation in past 10yrs, Real Estate Appreciation from last year, Cost of Living, Distance to my best friend in Jacksonville, FL, Distance to my family in Indianapolis, IN, Distance to Atlanta, GA (trying to mitigate against being pulled too far out of the center of my region). Then I ranked each metric 1-33, and then summed the ranks together. That allowed me to be able to find a rough top 10.

Now I’ll start spending time breaking down each city’s neighborhoods into classes. If anyone knows of a quality blog post that shows you how to break down a neighborhood and do this efficiently, please let me know!

Best,

Patrick

Thanks Taylor, I appreciate your response.

I have already broken down census information to track and understand growth areas in my territory (something I wanted to do simply for my day job). Do you have any recommendations for sites that I can take a deeper dive for those other metrics?

Ideally this would be a househack option for the first one, though I want to have some flexibility just in case I can't find a MFH that's worth it in the appropriate area I find. I just know I don't want to resign my lease, and am open to finding a lower cost SFH in a quality market, and then finding another SFH within the year after to rent out.

And I definitely understand the more centralized area. I typically have driven to different areas for work vs. flying since I'm near much of the growth in my territory currently for a commercial construction standpoint, and with Covid concerns easily trickling past 1st quarter 2021 I'm more than willing to keep driving 4-8hrs (it works now since I'm single with no kids to rush back to).

My job allows me to live anywhere within the Southeast (Florida, Georgia, Alabama, Tennessee, Kentucky, West Virginia, Virginia, and the Carolinas). I am looking to buy my first property in one of these states, but don't hold any preference towards these areas, mostly since I know I will be in that area at a minimum of 2 times a year for work and my family lives outside of these states.

I've already been pre-approved for just over $350k, would want to use an FHA loan, and ideally find a MFH property. My main sticking point is that I am unsure how to find a marketplace that would be worth my time to find MFH properties effectively since I have minimal restrictions. Are there any recommendations to help me parse down areas in an analytical way?

Hey fellow BPers,

I’ve recently joined Bigger Pockets and am having a difficult time figuring out where to start.

I recently moved to Denver back in June from Milwaukee for my full-time job, and have wanted to get into real estate investing with 2-4 unit multifamily units. My issue is that Denver is currently over-valued and very few properties are worth an investment.

I was curious how individuals in over-valued markets either jump start their real estate investing (wholesaling or other alternatives) in order to gain enough funds for financing. I wasn’t sure if there are certain Colorado financing advantages I’m unaware of, or some other form for me to take advantage. Simply wanted to find better avenues, instead of quitting before I ever really get going…

Look forward to hearing from you everyone!

Thanks,

Patrick