All Forum Posts by: Sean Larsen

I'm not too far removed from college. While me and my roommates took pretty good care of our apartments, I wouldn't have rented a place out to half my friends because they trash places. My thoughts are:

- Might make great investment if you're willing to put more effort up front to screen and interview tenants.

- Obviously someone out there is making money renting to college kids, so learn from them. Maybe start by getting your nephew's landlord's information and asking him/her for some tips.

From the discussion above, it's pretty obvious a lot of people don't want to rent to college kids. If you can crack the code, it might make for a great niche without much competition!

Thanks for all the great responses. What I am getting out of this is that the "hyped" markets are hyped for a reason. It's worthwhile to at least investigate to see if your investment strategy would work there. It's irrelevant if there are a lot of investors as long as the deals work. Thanks for your thoughts!

Sometimes it can help to convert to percentages. $200-300 per month on a $50K down payment is a 4.8-7.2% annual return. Most investors outside of real estate wouldn't scoff at 7.2%. But if you're looking for more cash flow than that, you just have to find a better deal, whether that is in the CT market or elsewhere.

"Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett

There are some markets such as Kansas City, Memphis, Indianapolis, etc. that seem to be listed as "Best Places to Invest" year after year. Are these kinds of locations still good investments when investors swarm in, or is it better to invest places no one talks about?

@Ryan Spearman Agreed. I think the market needs to work for rental cash flow first and foremost. Then you need to find the fix-up properties. In order to get good cash flow and cash-on-cash return, you will always need a solid rent-to-value ratio. In my market you're hard-pressed to find a $200K home that rents for at least $1,600 a month, but there are certainly flippers making money because they just need to improve a home's value beyond what they paid without regard for rents.

@Kyle Petitjean I'm pretty much right where you are in my process. I think the other people who have posted provided great responses I will be implementing. My selection process so far has been finding places I can afford that meet the 1% rule. After that, I will research area crime rates. Once I have a few markets identified, I will call property managers in all those markets to interview. If there's a few markets that work for your strategy, then it really comes down to having a property manager and other team members on the ground that you can trust.

Ask your agent to do the math on a piece of paper. Based on the above, my guess is s/he is doing something like the (cashflow+appreciation+pricipal reduction)/down payment. The BP report you attached also takes into account that your initial investment actually yeilds depreciation (not appreciation) in the first year because you paid a total of $311K for a home worth $305K. It also takes into account the closing costs and agent fees if you were to sell after a year. Many investors recommend buying a home for 25-30% under ARV, especially when your cash flow is this tight. That way you start with more equity than you paid for and any appreciation adds to it.

For a lot of these, you or your clients can get pretty good estimates by contacting the providers, i.e. speak to an insurance agent, loan officer or broker, property manager, etc. For things like the property manager, the cost may change depending on the level of service, so it's good to identify a property manager that fits your clients' needs before buying a property anyways.

What are the primary non-financial market factors you consider when entering a new market? I.e. are you more focused on school ratings, employment, population growth, demographics?

As an example for employment, do you give more weight to employment growth, employment rates, or something like having a primary employer in an area that's not likely to go out of business?

@Rick Albert Great response. It seems like the housing cycle isn't necessarily tied to the overall economic cycle. What things would you look for in determining when housing prices will fall?