All Forum Posts by: Sebastien Hitier

@Curt Davis and @Jay Hinrichs thanks for reminding us the risks of a $40k deal. Buying those means there is no exit, is a bit like getting the property tattoed on your skin. 

Out of state investor need safer cashflow. How much do you suggest is the price that  allow for mistakes by the property manager not to escalate into disaster. Or do you have another criteria.

Hi @Alex Aguilar, the cities mentioned have high positive cashflow. 

I would be interested in pointers for Oklahoma City and Raleigh. Those are very healthy cities but I did not find any easy way to invest there for an out of state investor. 

Some of the cities mentioned have a secular trend of population decline, which does not bode well for the long term. You can use it to check how population changed from 1950 to now, and from 1990 to now.

Also, there is a caveat about high yield. I believe you can get 14% net even from turnkey, you can get above that in Detroit, but also in many inner cities. The worst that can happen is that the tenants vandalize the property, then once it is vacant, the property gets stripped of its furnace,boiler,windows,copper pipes and wire by burglars. (I don't know what thieves are doing with all these used furnaces/boilers/wiring. For all I know, it makes sense for them to sell them back to people who need them for rehab.)

An increase in marginal yield corresponds to an increase in marginal risk, but that risk is not born evenly by investors: the ones with bad setup end up with a vacant property, while the ones with good setup can access that higher nominal yield.

To support that "city xxx" is good for investment, one would need to know what gross yield, vacancy rate/average tenancy duration (there is a cost to switching tenant) and net yield people achieve there. 

Indeed, @Jason Bradstreet, I found it hard to get 1% with the contacts I had in GA. I was more lucky in Florida to get 1.2%, but those are houses at 110k, so outside your target. 

May I ask what is the reason for your price band? I would expect rental yield and tenant quality should be your criteria, and those would vary with price depending on location.

Memphis seems to be a great city too, with some solid providers. I had blogged about city choice here, and was a bit more for places like Charlotte than Birmingham given their secular demographic trend.

I may be missing something, so don't hesitate to share facts about where good turnkey providers with properties that make sense can be found, or PM me.

Hi @Codi Tripp if you check city demographics, you see that some have lost population (Cleveland being the biggest loser) in the last 50 years, and some have gained. 

I talked about this in my blog post US Cities for Turnkey Investment

I would consider cities that have grown or stayed stable at least, to avoid pressure stock of vacant houses hanging on that rental market.

It depends on the investor involvement, background, etc.

SFH market is very simple, people have a good idea of the kind of yield to expect, liquidity is deep. You can try a flip and improve your procedures on the next flip. You have enough funds do do many smaller deals even if the smaller ones are not perfect. So you have a margin of safety to learn.

For a fixer-upper apartment complex, you need a team that is battle tested. You don't want to be the novice buying something he does not know about, with a team he never worked with, and hoping for profit. It is about building the right contacts with contractors, knowing what a given apartment building potential is, and who is selling.

The latter style is more traditional, you have to leverage local knowledge. Now, if you live in San Francisco, it is going to be harder to end up with a better yield than with SFH in Kansas City, so you also need to be in the right place.

With more units, you may get higher gross yield, but possibly lower rent per unit. Each unit still needs a kitchen, bathroom with all the maintenance that it entails. Remember you need the rent to be high enough to make the maintenance cost comparatively low.

Can you PM me the addresses? I am looking to buy rental properties in KC. cash deal

Hi Andrew, I did both MF and SFH, I am not sure what you mean by scaling with multifamily.

You can buy 10 SFH, that gives you scale and diversification.

With MF, you may get higher yield for same area, but you may find resale opportunities and price growth more limited as you need to find an investor buyer.

MF will have higher maintenance cost, as these properties have more kitchen and bathrooms where maintenance occur, also, if there are common areas, you may need to hire someone to take care of them.

Financing for MF can be easier: if the price per unit is low, buying several units in one go allows you to borrow an amount large enough to better cover the fixed costs of mortgage.

This service allows investors to use projected and historical performance information and use it to make the relevant comparisons and produce a investor Dashboard as well as performance review by property.

https://www.investor-realestate-accounts.com/

The service is currently free, comments more than welcome.

Out of state?

It is quite easy to contact a agent through zillow for the area you are interested in, and see what they can find for you. You need to find a manager that you think is competent to run this property before you make an offer, and you are restricted to houses that are in tenantable condition.

Turnkey providers offer greater convenience. They select properties that make sense in terms of rental yield. While they do sell for profit, they should still sell at market or near market price. 

Noone should be expecting to make money by selling properties above market, but below market price can be obtained usually looking at special situations (foreclosure, rehab needed). 

Other countries like Japan Tax have depreciation over 46 years for reinforced concrete structure buildings and 26 year for wooden frame. One could argue for slower depreciation for brick buildings than wooden framed ones. US IRS made the simple choice, allowing a 27.5 years depreciation.

You might want to check out this website to get the right depreciation number: http://www.investor-realestate-accounts.com/, it is 1/27.5 if the property was in service for the full year. If purchase or sale occured on a given month in the year, the house is asusmed to be for half of that month.