All Forum Posts by: John Public

Hmm, this is very enlightening. Mike, have you ever had a property management company manage for you? Or do you know any other investors personally that have been burned by property management?

I would love to be able to keep as much management for myself as possible with a remote property however, as you know I'm sure, extensive remote management is virtually infeasible. And buying apartments in most coastal cities are almost as bad an investment right now as the horror stories that your describing of other long distance investors. Unfortunately moving to an area with lower cost of living is not an option for me as it will kill or seriously hamper my current main cash flow (my job).

Also do you (or does anyone) know any ways of getting around this "placement fee". Or is there some other way to negotiate this with them? Perhaps I pay them nothing for placement but pay them a months rent for getting the tenant to resign another year long lease instead. That should give them an incentive to keep the turnover as low as possible, get good tenants in there, and carefully pick who they think would really be a good tenant. Does anyone know of any property management companies that would go for a trade off like this?

Thanks for sharing your experience so far with us, this is all very useful and informative info. I am still not opposed to long distance land lording I just want to minimize my risks as much as possible by educating myself as much as I can first (as I'm sure we all want too). I'm also convinced that I can make money long distance in REI, even if it's not easy, as long as I find the right deal.

I did know about the Mortgage not included in the expenses but thanks for clarifying anyway. Even with that (assuming a $400/mo rent) I could cash flow positively with 10% vacancy, and 20% down (and probably even 10% down if I had too).

The only things I don't yet know are, the condition of the building & neighborhood, the current vacancy rate and the current rents of the tenants. I realize these are VERY important things to factor into weather its a good deal or not and I plan to find them all out and do my best to verify them as accurately as possible before I even put down an offer.

As for "The owners not needing cash flow, just buying them for equity and tax advantages".
That sounds like what I would be doing. I have a pretty good paying job in an industry (health care) thats not dying out until at least all the baby boomers do too. So I don't really need to money right now. I wanna pay it down as fast as possible and then ReFi out what I need when I find another good deal. So any cash flow I get (and maybe even some of my salary) would go back into prepaying the principal down ASAP. At least that's my plan.

Wow less than $25k a unit... is that for non fixer uppers too or just the rehab properties?

I understand that being an absentee landlord is not easy. But I find it hard to believe that there isn't some secret that rich people know. I'm talking about the ones that own 20+ unit buildings and pay property managers to be the landlord. Surely there is enough cash flow in those to be positive.

If what you say is true of the 50% expense (including prop mgmt fees) for long distance properties, then I am seeing properties selling on the internet for so little in other towns that they still make enough to cash flow. I just found a 16 unit building listed for $396,000 the other day. Thats under 25k a unit! And while I don't yet know the price of rent for those units now, I know that the average price of rent in that town is about $400 for an Efficiency.

Dunno if that sounds like a deal in Ohio or not, but here in SoFla its very hard to find anything under $125,000 a unit after the run up. And having a job that pays like I live in NYC, SoCal or SoFla helps too. I'm not expecting much appreciation out of this place, but it should start cash flowing right off the bat at 50% estimated expense (I checked it with the property analyzer on this site).

So with all this talk of great cash flow in these vast mythical areas, is there anyone in this thread currently looking to sell property like this (flippers, rehabbers, anyone not into buy and hold)?

Specifically multi-family apt bldgs.

I'm pretty sure the reverse 1031 would require that I had purchased the mortgaged property less than 180 days BEFORE when I sold for the proceeds on the sold property. I am talking about a second property that I already would have owned for years.

This is probably not something I will need to do for at least a few years, I just like to think ahead. And I'm sure theres someone out there now that probably needs to know pretty soon anyway in case they never though of it.

Can I buy something personally and transfer it into an LLC later? If so how does that work?

Also can I sell a property and 1031 exchange the proceeds (tax free of course) into the mortgage payment of a property I already have owned for a while? Or must I buy an totally new property with the proceeds around that same time?

Thanks, this forum is really great.

Umm, In what area? I don't remember specifying one yet that I am interested in (I'm still looking).

Are you referring to my last post? I wasn't saying I was interested in investing in Ohio necessarily, I was just using that as an example of where I had heard that many "Cali'vestors" are losing lots of money and was asking for more detail.

Basically that last post was a call to describe the pitfalls of long distance REI for those who have the experience to share. I hope that clears it up.

The more and more I research, the more interested in long distance investing I become. And i know that despite my fears, there are people out there that are making lots of good money being long distance landlords. So what would you guys say are the biggest pitfalls to lookout for when doing REI long distance?

- Not enough money down (or underestimated cash flow)?
- Too many bad property managers out there?
- Investors overpaying for the property?
- Investors not managing their property managers enough or correctly?

Please give details. I'm not so much interested in the number of horror stories as much as I am in the frequency (and likeliness) with which they happen. If a long distance horror story would statistically be likely to happen to me once every 10 years... then I will take my chances with long distance REI. And if I just wanted to hear horror stories, I would ask my family who would be happy to talk me out of making a mistake (like investing my money and becoming rich).
(Lotta naysayers out there ya know.) :roll:

I remember someone from Ohio (I think it was MikeOH) saying on one post a while back that tons of investors from Cali would come out there and "lose their shirt" so to speak. Is this really true and how were they losing, what were they doing wrong?

Half of risk is lack of knowledge and education, so please... educate us all, those of you that have experience with this. After all the educational substance is what makes this forum so great.

One note I wanna make on appreciation is that monetary inflation is the opposite of it, and in many markets appreciation only fights evenly against inflation to bring you to a break even point. I remenber reading in the WSJ recently that if you bought a house in '69 for $30,000 and sold it today for $300,000 you would have gained nothing when adjusted for inflation. Of course you WOULD have gained ALL that cash flow rental money (and thats the profit)!

Appreciation is nice when it beats inflation, and it sure has for the last 5 years (at least just about anywhere in Florida or Cali), but don't count on it to do so always as part of your strategy. Just view it as gravy on top of your otherwise already good (I hope) deal.

Mr. Toad

While I'm no expert REI investor yet, I think I have it figured out that those who say that its not important to pay off mortgages ASAP are putting EVERY last penny of that money they would be putting into that mortgage, into another property instead. In other words, they are choosing to build equity into as many properties simultaneously at once, instead of all cash's strategy of building it in one property at a time as quickly as possible to minimize interested paid overall.

I'm sure both strategies have pros and cons, but what all cash is probably saying is that if your not going to pay the mortgage down ASAP, then you better be using that money (that your essentially borrowing from the bank every day that goes buy) in a way thats even more beneficial to you than it would be to avoid the interest payment on it. And that frankly is kinda hard to do these days in a RE market with slower appreciation (which I believe it will be for the next 10 years at least).

If you had asked me 5 years ago weather it was better to buy as many properties as fast as possible (to capitalize on appreciation of all your properties) or to pay off each one as fast as possible (to capitalize on paying less interest overall). I would have said the former. However more and more its dawning on me these days I am seeing the value of all cash's strategy in a slowing RE market.

Please someone feel free to correct anything I got wrong as I don't wanna be giving bad info out myself.

If you really wanna make money in RE, sell a seminar or boot camp for $700+. People eat that stuff up, and you never have to deal with "toilets and tenants" again.
:wink: