All Forum Posts by: Roger Poulin

@JOHN DALEY It is not about what specific industry as much as having diversity. Energy is a strong sector, and should be a good employer. I mentioned coal towns earlier that dried up. The shale oil fields in the Dakota oil fields sprung up over night and created huge opportunities, then disappeared almost as fast.  Tech has been solid for decades, but I know people that bought houses near AOL's corporate campus 15 years ago, and many were foreclosed on because people wanted to live closer to D.C. 

Avoid industries that are obviously at risk, but remember no industry is immune to competition and innovation.

I am a numbers guy in Nashville. I can't offer specifics for Asheville, but I can tell you some generalities around getting it to cashflow. It involves you doing some research. I look for three things in rental market regardless of type (residential, retail, storage, etc.): 

A) Vacancy Rate: I look at the vacancy rate for as small a niche as I can identify. If residential, are you looking at 1 bed room apartments, or 4 bedroom SFR? Try to find data for the zip code? North of the interstate vs South? Knoxville has low vacancy of 1 & 2 bed units near the university, but north of the interstate SFRs are occupied less. Know your market.

B) Gross Rent Multiplier (GRM): divide the selling price (retail) or value of a property by the subject's property's gross rents. This will tell you how many months it would take to recoup your investment under ideal circumstances. I know the ideal, will never happen, but it gives me a measuring stick to compare market A to market B. It gives me an indication of the properties ability to support itself. SFRs in Nashville are often more than 100 to 200 range and that makes it a bad market to buy and hold unless you get a GREAT deal.  Los Angeles, New York, and Miami are much higher and they will never cash flow. I have bought house in Jackson TN with a GRM of 30, and they cash flow like mad, I'll take all I can get.

C) Employment: What is the unemployment rate? Which direction is it going?  Is it a one industry town? There are towns in WV that were very strong 10 - 20 years ago, that died when the coal industry dried up.  You need a diverse employment base.  If the town runs on just a handful of major employers, if they are publicly traded, get the quarterly reports. Are earning up or down. Did the up the guidance?  For private companies, drive by and take a close look. Are they adding new buildings, silos, docks, etc.? Or are their buildings being unused, re-purposed for storage, do they have padlocked gates or otherwise not being used efficiently.  Who's hiring in town?  If the only people hiring are security and social workers move to the next town.

Do the research. 

Good luck

When you are in your 30s, you will realize how wise your dad is.  You can find a deal in any market unless it is a dead market. Los Angeles is expensive, that means you need to look in the suburbs, knock on more doors, and offer more creative funding plans.  If you really want it, you will go out and get it.

@Chris Lopez is offering good advise in my opinion. I am suggesting only slight differences. Denver is hot, which means there are opportunity, you just need to find one to get started. Rehab a house in Coal Town, WV and see how easy it is to sell. It is impossible.

1. Instead of reading "Set for Life" a third time, I suggest you read "The 10x Rule", a couple times (and take notes). 
2. If you want to rehab, spend a day down at your local Codes or Permitting office. I this can be done before you move, but you will probably want to do it again in Denver. Talk to the people waiting to get in. Find a person that is friendly, and is willing to share information. It is even better if he has several jobs going at the same time. There are contractors that have 1 or 2 projects going, there are others that have 50 to 100, who do you want to emulate?
3. Once you found the person(s) for step 2, ask you you can ride along with him for a day. Spend that day listening a lot, and talk only a little. Be friendly, ask a few well thought out questions.  Take more notes. Find out who he is meeting and talking to, get their names (and number). Buy lunch. 
4. One of your last questions of the day should be, "what are your biggest challenges?"  Ask if you can help him resolve one of those issues. It might be competitive research, it may be meeting inspectors, it could be getting prints from the engineer or architect. Learn what skills you need to do this.
5. You will definitely gain hands insight. You will grow your network. You might get a job out the deal.
6. Also go to your local real estate investment club, and make contacts there. The main meeting of the Denver club will expose you to a few hundred potential partners, and some actually have money. Some may have the skills you need most.
7. When you find a find a deal start calling all the people you met in steps 2, 3, 4, and 6 to fund, finance, and execute your deal.

Good luck

I'm not a lawyer, but I do live in Tennessee and I hold rentals here.  My understanding of state law is once you begin the eviction process with a notice to pay or quit, any acceptance of payments would restart the clock for the tenant.  This may be true even if they give you a bad check, but that creates a new issue to deal with.  My property manager only accepts full payments. If eviction has begun, they only accept cash or certified funds.

I hope this helps.

Good luck

@Brandon Cobb I want to know who these high volume wholesalers are. 

Is your property in a "historic overlay"? If you don't know you can look it up on the city maps and going to the historic layer tab. If the neighborhood was built in the 1950's it probably is not historic. If you are not in one of those zones then you have no problem with the historic commission. 

If you are in one of those zones, then you have a big job.  Each neighborhood has its own book (100-200 pages) of regulations. It covers what you can and can't add to the structure, maximum height, set backs, materials for siding, pattern of brick work, windows, light fixtures, light switches, and all the rest. The commission approve every detail, and it slows the process. I know a guy that failed an inspection for having "non-contextual vent registers" and had to replace them all for $200 each. It can be a huge deal. 

Is the house "blighted"? That can get you certain exemptions. They keep a list of those, but they are adding to the list from time to time.

Now that I scared you, some of these historic neighborhoods are in ideal locations. A well done rehab can get $300-400/sf in some places, but have a large reserve going in and an architect and GC that is familiar with historic restrictions.

Good luck

@Tim Schroeder, Nashville has setup an office to regulate STRs. They have been instructed to do what is needed to maintain a good quality of life in our neighborhoods. They have set up a hotline to report problems with STRs and the people who rent them. You can be forced to address / correct complaints without the benefit of confronting your accuser or having real proof. They have implemented new fees and taxes, and they will yank your permit without notice that you are delinquent, or notice that there is a new fee. They are no longer issuing permits in residential areas unless it is owner occupied. They are planning to stop renewing permits on non owner occupied in 2019. Permits are non-transferable, so you can't sell your STR as a business. The hotel lobby has the attention of the council members, and they are driving out competition

It is not generally referred to as a foreclosure, but a Tax Sale. The process starts when they are 2 years delinquent, but it usually 3-4 years before the auction actually happen.  There are notification requirements, that can drag out a long time. After the auction there is also a 1 year right of redemption. 

All states have their own rules. Returns can be much higher in your home state of Georgia.

Why do you ask?

The 1% rule is just a guideline to help you weed out the non-starters vs. those worth looking at closer. There are a lot of variables to consider. One big line item is property management. To professionally manage a $20k house in a dead town will cost you $75-100 a month. If you get $200/mo (1% purch. to rent), and 50 percent of the income is gone before you even start to pay the bills like taxes, insurance and maintenance. If you have a loan on it, you will need to get $400/mo (2%) to put a dime in your pocket. When you tenant moved out you make the payments out of your own pocket. 

Contrast that with an 8 unit multi-family that cost $1M. You get $1250 for each and you pull in $10k/per month (1% purch. to rent). Because they are all in one location, you can get the property management to handle them all for 500/month, 5% of the income is absorbed by the PM. At 1% this property will probably make $1k - 2k of cash after all expenses including mortgage.

Lastly , your $400 people usually come with lots of drama.  They lose their cat, the heat is broke, kids sick, Front door won;t latch,husband lost his job,...  You will hear it all. At $1200/month you have people that know they need to get up every morning to do their part, less drama. Somewhere between $1500 - 1800 a month, you give the tenant a website to pay the rent on-line, and you will not hear a word until the lease renews.