All Forum Posts by: Scott Lundgren

@Account Closed  This is a very tricky way to do RE.  However it is definitely possible and can be very profitable.  I helped an investor acquire around 200 doors in the Kansas City market.  These were in the rough part of town and section 8 was the primary target for renters.   While we did get it setup and it ran very well for 1-2 years what became evident is that this type of renter generally takes very poor care of the properties and they needed 10-20k in rehab to get them rented again.  When you are buying properties that barely cost 20-40k those types of numbers start making them perform very poorly after the first couple of years.    I would make 2 different suggestions for your boss.  First if he is going to do this plan on selling quickly as a package deal to a bigger buyer.  Or just bail on slum lording and get solid rentals in good areas.

@Arty Fresh If you would like I can offer a 30 min no obligation session to give you a introduction to our Turnkey Properties and how we might be able to help you out.

@Antony Munoz You need to get a clear understanding of your goals first.  Then tailor your questions to the potential team members you are vetting.   For example, if you are looking for passive income, then a specific set of questions would apply to creating a long term portfolio.  But if you are looking to do a short term flip, then it would be a whole different set of questions.   Either way you can ask if they would be a good fit for a new investor, not all companies want to work with "newbies".  But some companies thrive on training and educating you along the way.  If you decide your goal is passive long term income PM me directly and I can get you some great questions to ask.   

@Jazmine Kravitz  

There are many ways to accomplish your goal, I would suggest looking into Turnkey options as a potential option.  Companies like ours will have the relationships already built that you can tap into like Property Management, Maintenance Crews, Leasing Agents, Lenders, Insurance, ect.   That way you can get your feet wet without nearly as much risk.   If you want to explore this at all feel free to reach out anytime.  We do happen to be in Indiana along with another dozen locations.

@Ryan Kawash Florida is a great opportunity with the population growth they are experiencing right now.  As others have pointed out most people are aware of this so there are some problem areas so you do have to be careful.   There is another option which is to build a new property instead of flipping.   Right now you can purchase a new construction property and lock in the price below market value by taking on the construction loan.  Today that margin is 265k sales price, 300k+ appraisal.   That's based on todays numbers, these take about a year to build so you can 'flip' the property in a year well over 300k at the current market pricing when it's completed.   The potential for profit is very similar, with much less headache and variables. You don't have to worry about competition, bad contractors, or the other pitfalls you see with older rehabs.

@Jason Kim

This is an age old question that is more about Active vs Passive real estate.

Both options work, it's more about your goals that will determine your path.   

If you decide to take on the rehab and management you do have the ability to increase your profits if you do it correctly, without mistakes.    But you will have to commit time and energy to gain all the profits.  This is active real estate, even though you are rehabbing a rental, because you are committing your time that is what makes it work.

If you decide to work with a Provider that does most of that for you and you simply are the financial backing then you will sacrifice about 10% of your potential profits, but you will gain back security and time.  Of which time is the most important part of the trade off, this is Passive.

For most people it's not the ability to do it on their own, its the time commitment to makes the decision.  Most people have full time jobs that are asking the same question you are.  With jobs, school, kids, church, and all the other obligations in our lives most people just don't have the available time, or they don't want to sacrifice their time.

The investors that are advising you to take on the sweat equity generally have more time and they can trade that time for profits without sacrificing time with family, ect.  If you are already doing real estate full time or don't have a 40-60 hour job, then you probably aren't taking time away from family and the important things.

For me time with family and doing things that are more important than money and for me is a bigger priority than a little extra profit, so my decision is easy I prefer Passive.   But that doesn't mean my situation is the same as yours or anyone else.

Luckily you can do it either way, you just need to decide what is more important to you, time, or 10% of your profits?

 

@Annie R. First off congratulations for taking the initiative to create more financial security for yourself. You asked if there is a Sub Forum for those who have good W2 jobs that supply the investment capital, and want to be passive. While syndications and REITS do fit this description those options reduce your control and ROI dramatically. Have you concidered working with a Turnkey Provider of Rental Properties? The turnkey model would allow you to be passive, but still have control of the entire investment. Most of the posts focus on ROI and how much more you can make if you are DIY, which is accurate. We find that when people do everything on their own they could make 10-20% more than working with a provider. But there is aspect that nobody had addressed in this chain, and that is risk. DIY requires you to find the right markets in the country, then find the best neighborhoods in that market, then the best properties in those neighborhoods. After that you need to find good quality contractors, leasing agents, and Property Management. All of these have their own issues that if not done correctly could end up costing the DIY'er vs letting someone else take that risk on. Even with additional margin that risk isn't always worth the reward. Look at a typical rental that costs 100-150k, after all expenses you should net 250-300 positive cash flow. Let's assume it's 250 for this example. If you can make 20% more by doing it yourself the spread is 50/mo, or 600/yr. If you have any sort of hurdles, or mistakes that cost you more than 600 then you are already behind on the ROI. Even if you do everything perfectly you just traded a lot of time for 600. If you are looking to reduce risk and time, then 10-20% is your cost to make that happen.

@Anthony Loiodice

It's great to hear you were able to get your first rental property, first one is usually tough emotionally.  Thanks for sharing your experience.

@Cristian Orellana

Cash Flow, Landlord friendly legislation, balance of renters to owners, economic and population growth, Fortune 500 companies should narrow down the search. The key to out of state rental cash flow is the team you work with. You can find the ideal property, in the ideal location, but if it’s managed poorly it still won’t perform. Have you considered working with a turnkey company that has already built a network you can tap into instead of building it on your own?

@Kenny Kim Age of the home isn't as important as the condition of the home. Some Turnkey Providers rehab correctly and look at all major components so you don't have any Capital Expenditures (CapEX) for a pre-determined amount of time. These should be items like Roof, HVAC, Plumbing, Electrical, major appliances, ect. Our goal is to have a minimum of 10 years before any CapEx hits, obviously with any investment this can vary, but you should find a Turnkey Provider that pays attention to that in their rehabs. Maintenance and Vacancy are two other areas to pay attention to, industry standard is 5% on these, you want to find a company that is below the industry standard.