All Forum Posts by: Supada L.

i would say first step is to look at what you can do to improve cash flow. are rents at market rate? what is your property manager charging you? where the issues you had to fix one time fixes or atleast wont have to do again for a long time? do you pay utilities? if so is there a way you can make the renters take them or lower the cost to your self? insulation, maybe switch out bulbs to energy efficient bulbs, new toilets can cut down on water. do they pay electric but you pay gas? heat pumps might help switch that over to them and extend the life of your furnace.

i would say before selling look at what you can do to improve you number even if it means spending alittle more now for some fixes. if there is nothing you can do then its time to look at selling taking the lose and using this as a learning experience. from what iv seen turnkey properties from website like that never(mostly) do that great

Ill bet a Dunkin Doughnut OP didnt go and walk the property. First lesson there. Probably bought because house was cheap, etc.   Too much you have to do something.

I think Roofstock isnt a TRUE Turnkey Company.  Its kind of like a Wholesaler............lol. Personally i would never ever buy from a wholesaler sight unseen. 

Modern day new investor. Expenses dont matter. Rent minus PITI equals juicy cash flow.

Sell it and buy ideally local a 2-4 unit these tend to cashflow better after all the expenses then single family. 

@Supada L. I’m assuming there wasn’t any maintenance and/or capex reserves in your monthly numbers before cash flow? Or just maybe not enough? What about an inspection before close? As a rule of thumb, I always have an inspection before close and usually set aside ~10% reserve in case any issues come up but this may be more or less depending on the age of the building and any recent upgrades. I assess my cash flow after taking that figure into account. I find that marketing packages from seller agents and turnkey providers fail to take this number into consideration or far underestimate it. Same with property taxes (sometimes they use the same figure as the existing owner is paying not taking into consideration that a sale - especially one that has an increase in value since the last sale, will trigger any increase in property taxes) and same with property management fees if they account for it at all. It’s important to figure out all the numbers on your own without relying on figures provided to you.

Like others have noted, now may not be the best option for you to sell since you’ll have to pay 6% + to do so, unless your market appreciates very quickly. However, if your market does appreciate well, then that may be able to compensate for the (hopefully temporary) loss of cash flow in the long run.

If you need any further guidance, feel free to reach out anytime.

First of all, congratulations for getting off the sidelines and making your move.  I’m sure that was an experience in itself, and while it surely won’t make up for the sting of $ flowing the wrong way, I’m sure there will be lessons learned here that can’t be learned without doing.

A couple observations: $100 in pro forma cash flow is more than adequate  on a 70k house.  BP hasn’t been told what your investment is worth so I’m not sure how someone might say it’s not adequate.  Also, one(or three) months isn’t a reasonable look back history to evaluate the performance of your real estate  investment.  It’s very possible that your investment is solid from the proper perspective.  The monthly variation in ACTUAL cash flow is part of the risk that allows us to demand a proportionally higher return from our investment than say a physical bond with a defined coupon rate.  

Mississippi is a great place to invest in SFR homes. Our landlord-tenant laws favor landlords very strongly. Cost of labor (repairs) is reasonable. Demand is extraordinarily high, and finally the relatively inexpensive homes here allow an investor to scale and smooth the monthly cash flow line by doing so.

In summary, make a plan, stick to that plan, evaluate the results of your plan on a periodic basis (3yrs., 5yrs?) and then allow your plan to evolve as your knowledge and insight grows.  Stay the course and work the plan..

I’m a full time investor and professional property manager in Mississippi.  I would be happy to talk specifics of your particular investment if that suits.

I wish you much success 

Echoing what some others said here, when you buy "turnkey" you are buying from professional investors - and not from a homeowner much less from a "motivated" seller - who have made the judgment that they would be better off selling the property than holding it as a rental. 

@Supada L. Real estate is a long game. I agree with a ton of the sentiment. Given the other factors to building wealth in real estate besides cash flow, it might be better to give this a little more time to accurately assess if this property is making you money or not. Selling this quickly after buying an investment is almost always a sure fire way to lose money. Good luck! 

This is a great cautionary tale. I see a whole lot of hype about "building your stack" and "How to become a Real Estate Milllllyonaire!" The reality is that in hot markets, particularly the hot ones that are relevant to me (Northern Utah), buy and hold properties simply don't cash flow. Any SFH that comes on the market is being snapped up at or above the asking price by retail buyers. Appreciation is great, but is that really going to be all that attractive in the long run? Do I really want to lose money in the short run for the possibility of long term appreciation? Not really.

"But, but invest OOS!"  Is the counter-mantra.  But that's not necessarily a good choice, either. When you invest OOS, property management is generally mandatory, not optional.  So that's a 8-10% expense that you pretty much have to spend that local investors don't necessarily need to. Also, you gotta ask why these properties are cash flowing in what has generally been a hot US market? In my view a lot of it can be explained by the simple lack of economic opportunity in the areas in question.   
 

$100/month CF is way too thin as you can now see as if anything goes wrong with the property, it will gulp up that $100 CF in no time and even much more, which means you will then have to throw money into the property. 

The answer is simple: Cut your losses and sell this thing, as you never supposed to buy it in the first place.