All Forum Posts by: Ron Karr

We were in a similar situation with cash flow when we became accidental landlords on our very first home, originally purchased for our own use. The house was kept in excellent condition since lived there ourselves. We did many updates, new floors, renovated bathroom, light fixtures, etc. When we moved out, the economy was down and the house prices took a hit. We decided to ride the storm and rented the house instead of selling it. We ended up with a negative cash flow of about $900 per month. It is tough to subsidize someone else's living standards, while hurting your pocket book. We thought the same way as you did too... we get a house in the bay area for $900 a month. The real costs are higher if you factor in the opportunity cost, your time to manage the property, etc. But we looked at all our rental properties as a portfolio and looked at the combined net cash flow, just to keep our sanity.

We do our best to find long term tenants. But over time, as tenants moved out, our rental income went up. Every time a tenant moves out, we end up spending a lot of money in painting and fixing minor things that add up. Some landlords are comfortable renting the house as-is and we are not one of them. We like to make the place clean and presentable, as something that we wont mind moving into. While this drives up our costs, we also get a lot of interest and there have been times when the rent gets bid up. 

With rising rents in the bay area and our effort to pay down mortgage, the property is about $1000 cash flow positive now. Its not an ideal investment property, but it was never intended to be one. We looked into converting this equity into other proper investment properties. But decided against it because that neighborhood is developing fast (read hoping for higher equity) and because of the transaction costs to sell and buy other smaller properties. 

While this is not an ideal investment property, just because of the developing neighborhood, changing demographics and better rents, we decided to keep ours for a few more years. We will likely ride out another recession and look into selling it at the next upswing. 

Thanks @Account Closed and @Jay Hinrichs for your valuable inputs.

We are not set on doing this. We are just exploring possibilities at this stage. West coast certainly offers appreciation. While positive cash flow can be accomplished, the challenge is to get enough to offset employment. How are you guys going about generating great cash flow in the west coast?

@Account Closed Can you elaborate? 

Investing 250K here gets a place in a bad-to-not-so-bad neighborhood with perhaps 2K revenue per months. Whereas that 250K goes a long way in a different state with much higher rental returns. For instance, you can buy a decent house in Ohio for 20K with 1.2K per month return.

How are you managing contractors & handymen for repairs? Even locally, it is hard to build a long-term relationship with these folks. 

@Account Closed Thanks. I will look into the details for local meetings. 

@Mehran K. thanks for the link. I listened to the podcast and it has a lot of useful tips. Yes, CA money doesn't buy much in CA, but is huge in other areas. Where are you focusing now? Still Wisconsin? Are you looking for local partners given that LA is still a cheaper market than SF.

@Ali Boone How are you finding good property managers? I'd hate having to trust someone and not able to have full control of my funds / investment.

We are based in San Jose, California. Given the bay area prices, the rent to price ratio is terrible here. We are exploring investing in other states where houses can be purchased for $10,000 to $250,000 a piece.The goal behind this is to improve cash flow and generate passive income.

1. What are the pros and cons of investing out of state?
2. Which cities are relatively safe, offer low-maintenance (not much weather / nature related damage), and positive cash flow with 25% down payment?
3. What occupancy rate should we factor? 
4. What else should we know?

We can't leave the bay area for the next 10 years for various reasons. Therefore, these out of state properties have to be remotely managed with the help of a property manager.

Hi everyone

First, I am glad that I found this community. In fact, even before my intro post (this post), I have been helped by you all. Thank you so much.

My spouse and I have two properties (details below), but so far we have not been very thorough or professional about it. I am hoping to engage more with the community (and contribute where I can) and think of our real estate investments like a business.

We live in San Jose, CA.

Our first investment is in East Bay where. It became a rental unit when we bought a house for our selves in San Jose.

Second unit is a 2b/2b condo in SJ.

I am glad to be here.