All Forum Posts by: Rodney Smith

@David Faulkner & @Walter Ichikawa-Doyle , I second that comment. I'm very interested in macro economics of it and how it might change the perspective of how we might view investing in that climate?

Hey all,

I'm curious to get some feedback from others, but from previous experience / talking with other investors it seems to me that 2/1 unit property mixes seem to be the bread-n-butter type of properties for rental income (assuming that i'm pursuing simple rental agreements using a property management company to manage the units .. i.e. not going after specific niche markets like student housing, etc.). There are a few reasons that standout to me for why this might be:

1) It seems that the extra rent collected by having a 3rd (and especially 4th) bedroom doesn't always proportionally add to the rent price relative to maybe a stereotypical price hike in buying a 3/2 vs a 2/1 (i.e. maybe a 2/1 rents for $750 and a 3/1 gets $900. Only $150 for a 3rd room.

2) I think that there is a large market of people looking to not pay more than absolutely necessary in rent, thus a 2/1 (although marginally cheaper) is cheaper than renting a bigger house, and better fits the budget for a larger demographic. I would wager this dynamic will probably grow in strength / validity over time as the economic outlook of things is (in my fallible opinion) probably more dovish than hawkish. If thats true then that makes these properties pretty marketable.

I'm sure there are a lot of variables at work in this thought process, but I'm curious to hear other peoples thoughts on this - Especially with regards to the Kansas City Missouri market which is one of my primary markets where i'm building my portfolio. It could very well be that i'm mistaken in this thought process as well, which is why i'm interested to hear other people's thoughts on this.

Thanks!

@Eyan Lakhani ,

Sorry for the slow response!

The short answer is that we walked away from it after the inmates mother (POA) got nervous and decided not to follow through. The house went to auction and I couldn't be sure what the starting (or winning) bid prices were, but in my experience they generally start loan auction price at the outstanding balance on the mortgage. I suppose this is definitely not true everywhere but in my locale at the time this seemed to be the standard M.O. & in my opinion I wasn't willing to take on the project with a higher acquisition cost due to the amount of the repairs needed... I just didn't think there was enough room to make it worth it.

Interestingly enough, someone bought it and fixed it up (too nice for the area judging from the pics and materials used)... However, they were surprisingly able to sell it for about $165k which was a very nice comp to have on my other property which was 2 houses over. I personally would not have guessed they could've gotten that much for it. Now i'm considering selling my house to roll the monies into another market :) 

I have not yet personally used him, but I was referred to Mike Burnett Handyman Service, he came highly recommended. 

Also, I have used and REALLY recommend Greg Schneider for home inspections and construction jobs ... He is NOT a handyman, he will likely cost a little more, but he is awesome!

In-spec Home Inspections is the name of his inspection business, I forget the name of his construction division. He's busy and thus needs a little advance to be scheduled in, but he can handle most things, and has a solid understanding of the investor mindset.

http://www.inspeckc.com/index.html

Just my $.02 but I personally live in the Oregon (Bend) area and have grown up here and all my rental investments, etc. are out of state. I find that i'm getting much better cap rates elsewhere. Oregon has a low pop. density and I find that in the market conditions (currently as of 1/12/16) , that good rental areas or higher density areas with good renter pools are overpriced and offer low cap rates. The areas that have attractive pricing end up being places like Pendleton, Hermiston or Madras, etc. and have IMO a poor renter pool / pop. base. 

I personally house hacked a 4-plex myself when starting out, but I bought for $192k in 2012 ... theres no way I could do it right now. Having said that, i'm sure there are many who are craftier than I at acquiring good deals.

Although I will acknowledge that if your starting out it is much scarier (and impossible to 'house-hack') when working out of town. I would suggest that if you want to pick PDX to be your market that you operate in, then take a close look at what REI strategy lends itself to that market and pursue the path of least resistance, rather than trying to force your strategy on a given market (not saying thats what your doing). I spent a few months scouring the I-5 Corridor looking for buy-n-hold rental income props and couldn't find anything to get excited about, but now we are closing on 16 units out of state and will have a 14%-18% cash on cash return / cap rate given 75% or better occupancy. The numbers are there, but definitely require a little more initial startup efforts if going out of state.

Just food for thought. But I will say, if you can come up with something profitable in the valley area now, then it will likely pay big dividends later (or built in equity) that I wont get in my out of state portfolio.

Ditto ! Thanks, I will also be getting in touch since we will be needing Insurance. Thanks for sharing guys!

Thanks everyone for all the help! We were able to have a massively successful week in Kansas City! Thanks to all who met up with us and we are sincerely sorry that we weren't able to connect with everyone on our list due to time restrictions ... Next Time!

We were able to inspect all 16 properties, interview 4 Prop. Mgmt companies, put an offer on an additional duplex line up construction / support crews, etc. It was a busy week!

Now we just have to finalize the negotiations (hopefully close by end of year), and rinse and repeat!

 Welcome and congrats on your recent successes, great to hear!

As far as what steps are next, I can't help too much since i'm not a flipper. The biggest thing I would say is to look ahead as far as possible and try to picture the life you want, and workload you want. What i'm getting at is to develop your vision so you know where your going, without that no one can tell you what to do next. I say this because, you say that you've already flipped 3 homes, so i'm guessing you know what to do in regards to your next flip. However, if you want to take your generated capital and re invest in a different way then you need to clearly define your vision, and then it's much easier to work backwards from there and determine your immediate steps.

I am more of a buy and hold rental income type. I actually house-hacked 2 properties in northern california to get started (maybe similar to you), but am currently re-investing those proceeds into long term rental properties, because finding good deals that are 'flippable' is a lot of work, and once I have a good cost basis on a property I don't want to give it to someone else, I want to collect on it for the long haul.

I know this is a bit late of a response, but as others mentioned - forming in DE would be good IF you were running an internet based business where the online business could be 'located' in DE, but since operations are virtual you wouldn't necessarily have to claim operation and thus register as a foreign LLC in CA ...

Having said that we are obviously talking RE business here ... given that your speaking directly to a cluster of property in MO, I would think a Series LLC would be the way to go (thats what I'm currently leaning towards as i'm forming an entity to house a portfolio in MO myself).. However, as @Walt Payne said, i'd love to see more historical data on the reliability of their protection since they are a newer structure. But again, since this specific entities operations and assets would all be completely confined within the state of MO a series LLC would be scrutinized under MO laws / interpretations and you shouldn't have to be concerned about other jurisdictions.

This article might be mildly helpful? http://www.stlouisllcattorney.com/missouri-series-llc/

--------------------

Maybe to be more clear, I am looking for someone to walk properties with me as an extra set of eyes to point out anything I may miss. I am fairly comfortable doing the inspections, but I would happily pay an inspector to lend an extra set of eyes. I do NOT NEED written reports and 'official' inspections (meaning the attached liabilities to the inspector). I just want someone who I can pay for their time to come out and take a look at the physical condition (primarily exterior & plumbing) to back me up. There are 16 units we will be inspecting in the Grandview area, please contact me if this is up anyones alley! 

Thanks!