All Forum Posts by: Nav Singh

Originally posted by @Account Closed:

Originally posted by @Nav Singh:

>> Tomorrow, another thread will be started asking which markets an out of state investor ought to invest in.

Hello Merritt S.

I understand your sentiment. Yes, I agree that in-state / within-drivable-distance investments are best, whenever possible. However, there are 2 reasons why this may not be feasible - here's my example:

- I live in the Bay Area, CA which as you know is very expensive

- Maybe there are rundown properties that are available on the cheap in my area. I do not have time (or skills) to find them and rehab them.

I've seen that many investors are in my situation. So, instead of getting turning away from real estate, or investing in real estate stocks, or becoming a private lender, I took the risk and bought my first duplex about 4 years ago. Now I have 4 duplexes in Lee County, FL. I use inspection reports, appraisals, and my trusted PM to advise me about what's good versus bad. And despite hiccups, overall I'm making progress towards my goals.

Coincidentally about 2 years ago I called Morris Invest, but they said they do not allow loans. I must have cash ready. I wanted to use leverage and was puzzled why they wouldn't allow loans. Thank God I did not proceed with them.

So here's my advice to out-of-state investors, let me know if you disagree. There are many more experienced investors on BP than me (like yourself), and I'm always looking to learn:

1. Make sure you get inspection report from a trusted company/inspector. Read it.

2. Make sure you look at the appraisals closely. The mortgage company should give you several comparables.

3. Make sure you have a trusted PM who can advise you.

4. Go to the place you intend to invest in. Invest time to interview people and build a team. You may not go every time you buy a new property in that area, but at least go once to survey the area and build relationships.

5. When needed, use services like https://wegolook.com/.

Wishing everyone success!

 No my friend, I do not believe you do understand my sentiment. I'll try to be more nice about it than I was to the last guy. I guess I get riled up because I do in fact, care about people and do not want them to fail. But it gets frustrating - I've been frustrated with this sort of issue for a very long time, and I guess it's a "Soul Challenge" for me - lol (this goes way beyond RE). When I "sigh" in a chat room, that is me trying to find a zen moment instead of typing a long-winded post that few will even bother to read, or maybe I ought not to bother writing in the first place, for various other reasons.

So, I am going to use your post above and you might not like what I have to say - fair warning - but I will try not to be a jerk about it (no promises).

"There are many more experienced investors on BP than me (like yourself), and I'm always looking to learn:"

What makes you think I'm experienced and "worthy" of offering advice? You own more property than I do. Did you say that to be nice? Or do you really think that? What do you suppose the next person who reads that you think I am experienced might think about me if you stated that?

Your post starts by explaining to me why you invest out of market and in your case, on the other side of the country. Why did you feel the need to explain why you invest outside of your own market? If I am experienced as you claim to believe, wouldn't the next conclusion be that I already know why you do it? So, who are you really trying to convince? And for the record, I understand exactly why people invest out of market.

"1. Make sure you get inspection report from a trusted company/inspector. Read it."

I wonder how you decided to trust the inspector? Was it the really nice report structure and font? Did they use big words? Or do you understand what they are saying and why they said it? Maybe you got a referral from another "trusted" source?

"2. Make sure you look at the appraisals closely. The mortgage company should give you several comparables."

This is an area where I do in fact have experience worth listening to. Let's see if you will listen. The mortgage appraisal you receive is not developed or written for what you are using it for. It is not yours. It belongs to the bank. The bank developed the appraisal type, format, and dictated the parameters for the content for their own purpose and use. It is fine for the bank to use. It is dangerous for buyers to rely on it for a purchase and nobody ought to be doing that. The short version is, the content and conclusions in a mortgage appraisal are not the the types of content and conclusions a buyer needs to make an informed decision. That fact that you "look at them closely" is a huge problem in this country. Next time throw it out. But I'll bet you a dollar you won't be able to help yourself and will look at it anyways.

"3. Make sure you have a trusted PM who can advise you."

Like for instance, Oceanpointe?

"4. Go to the place you intend to invest in. Invest time to interview people and build a team. You may not go every time you buy a new property in that area, but at least go once to survey the area and build relationships."

And so, in your judgement, a couple of meetings is adequate to "build relationships"?

"5. When needed, use services like https://wegolook.com/."

I think the internet is a fantastic tool we all utilize to do our due diligence - no doubt. The question is, how much diligence is adequate? How do we know how much diligence is adequate? The people who invested with Morris in fact did their diligence in many cases and still got burned. That point got brought up early in this thread and I think it can't be overstated. Later on, a few posts back, someone used the word naive.

I am very happy you are investing successfully and hope you continue to be successful. I think the point really is, we are usually our own worst enemies.

Peace.

 There is no way to cut out all risk. Not even for in-state investors. The point is to reduce risk. The bank appraisal may not be as worthwhile for the value of the property, but between the inspector, appraiser, your property manager, and services like wegolook, you can ensure someone goes there to evaluate the property. You won't buy a property that was burnt down by fire before you bought it, or a house where the tenants live in squalor: quoting the examples used in the Morris news story. We can either just give up because we live in an expensive area, or use common sense to reduce risk for out-of-state investments, knowing the risk never goes to zero.

>> Tomorrow, another thread will be started asking which markets an out of state investor ought to invest in.

Hello Merritt S.

I understand your sentiment. Yes, I agree that in-state / within-drivable-distance investments are best, whenever possible. However, there are 2 reasons why this may not be feasible - here's my example:

- I live in the Bay Area, CA which as you know is very expensive

- Maybe there are rundown properties that are available on the cheap in my area. I do not have time (or skills) to find them and rehab them.

I've seen that many investors are in my situation. So, instead of getting turning away from real estate, or investing in real estate stocks, or becoming a private lender, I took the risk and bought my first duplex about 4 years ago. Now I have 4 duplexes in Lee County, FL. I use inspection reports, appraisals, and my trusted PM to advise me about what's good versus bad. And despite hiccups, overall I'm making progress towards my goals.

Coincidentally about 2 years ago I called Morris Invest, but they said they do not allow loans. I must have cash ready. I wanted to use leverage and was puzzled why they wouldn't allow loans. Thank God I did not proceed with them.

So here's my advice to out-of-state investors, let me know if you disagree. There are many more experienced investors on BP than me (like yourself), and I'm always looking to learn:

1. Make sure you get inspection report from a trusted company/inspector. Read it.

2. Make sure you look at the appraisals closely. The mortgage company should give you several comparables.

3. Make sure you have a trusted PM who can advise you.

4. Go to the place you intend to invest in. Invest time to interview people and build a team. You may not go every time you buy a new property in that area, but at least go once to survey the area and build relationships.

5. When needed, use services like https://wegolook.com/.

Wishing everyone success!

Thank you @Peter Davis, @Joseph Colon, @Justin R.

Appreciate all the replies. Peter, I'll send you a message.

Hi. I live in CA, and invest out-of-state -- in Florida. I own 3 duplexes in Lehigh Acres (about 10 year old constructions) and 1 duplex in Cape Coral (new construction). I have been seeing higher than expected repair and property management costs in Lehigh. I'm looking for a new property manager. I searched the BiggerPockets forums, and found some good recommendations, but most replies were 2-3 years old. So I thought of posting a new thread.

Please let me know if you have used a great property manager for Lehigh Acres and Cape Coral.

- Nav.

@Joe Bruck. The positives: great property management company, very responsive, smoothly managed tenant turnover and repairs. To watch out for: make sure you understand that you won't get the rents used in the MR calculations from day one. Existing tenants are at lower rents, and it may take 3, 6 or 12 months for tenants to leave and for rents to be raised.

Make sure you have a great property management company. I've had experiences with a bad one (outside MR) and a good one. I totally believe in the adage (if it is one) that an average property with a great PM is better than a great property with an average PM. My PM got me rents slightly higher than expected upon tenant turnover: $975 each side compared to the expected $925 or $950. And turnovers also involve expenses. So expect your first year cash flow to be much lower than expected, or even negative. That's all I have so far, about 9 months in. I can do another update at the 2 year mark :-)

Thanks @Dmitriy Fomichenko, @Mark Nolan and @Justin Windham.

Justin, I'm not self-employed. I have a regular W-2 job. In future if I do get self-employed, I'll heed your advice of course! Thanks for your kind words about the blog.

Aha! Well, a reason to change jobs? :-)

I just completed a property purchase using self-directed IRA (rolled over funds from my previous employers' 401k's). I thought I'll share my experience so others can get insight into this semi-complicated process. You can read about my experience here: http://successwithyoursoul.com/how-i-used-my-401k-...

Looking back, I probably should have gone for an LLC to get checkbook control. The fees for every transaction + the mechanics of going through the custodian for everything is a pain. For example, every single mortgage payment will have a fee associated with it.

I have no regrets about investing my retirement money in real estate though. I'm all in for achieving my financial freedom goals through real estate.

Hi Madhavi Ganti I am an investor from the Bay Area like yourself. I've been a BP listener for a couple years now. Have educated myself on topics related to real estate like taxes, asset protection, evaluating a property, and so on. I know there are many good turnkey remote real estate companies. I've followed some of their podcasts, like Clayton Morris, Norada Real Estate, Real Wealth Network. I invested through Marshall Reddick because I attended their seminar and they didn't appear very sales-y to me. I just purchased a duplex in FL through them, and invested my self directed IRA money. Overall my experience has been great. Be aware though that I'm just starting my property management journey through them, so will have a better update about cash flow in 6-12 months. I do plan to invest more through MR. If you want to discuss, send me a pvt message. Nav.

Thanks @Daria B. I think having 2 PM's for 2 units might require too much coordination. The first tenant started on Jan 1st.

I agree that I should take some time to talk to a few PMs before I finalize anyone.

Yes makes sense. That's a learning - to negotiate the PM agreement next time.

My first tenant lease should be 1Y, and the second tenant is not yet in (the property is a duplex). Looks like if I have to cancel the agreement now, I will have to negotiate a cancelation fee.

Thanks @Daria B.