All Forum Posts by: Warren Foster

@Jon Holdman My pics were from Indiana.

@Lisa Phillips That is one fine rehab! No wonder your tenants never want to leave. I'm sure it is light years beyond any thing around it.

Another great thread that shows that Sub$30k investing truly is a viable real estate niche if done in an informed manner and with a specific purpose.

Warren

I'll Play...

Purchase + Rehab $6052

Rented @ 400 mo

Purchase + Rehab $14500

Rented @ 525 mo

Purchase + Rehab $17700

Rented @ 600 mo

Lot's of great recommendations for successfully investing in Sub$30k properties! Where were all you guys a few years ago?

When I first started picking these up a few years ago, it was more an experiment than anything else. I was working overseas and knew I would not get back to the US very often. I did not have any W-2 income so I knew conventional loans were out and my own market back in Colorado was much to expensive to buy with cash and the ROI was less than stellar even if I did. So, I started to look for markets where I could buy outright for under 20k and that met the 2% rule.

I eventually picked up, rehabbed, and rented a bunch that I have to this day. All of them are managed by PM's so I have little active participation. Overall, they are definitely a lot more work than my more expensive rentals (at least they are for the PM) but the returns more than make up for it. In fact, several of the properties have already paid back the initial purchase and rehab cost and most will be that way in the next year or two. In addition, I was very,very conservative with my estimates i.e. doubling usual amount for repairs, 16% vacancy, eviction cost every year (luckily only a few hundred dollars), etc.

Looking back, I got some things right and many things wrong. I probably would have had an even better return with many less issues if I had just sent all my money to @Lisa Phillips and had her find me the best locations and values (is that still an option?)

If I could do it over, I would follow the great recommendations in this forum as well as definitely find a local partner who knows the area and the neighborhoods.

Oh, and hire some of my ex-Green Beret buddies to manage the properties and collect the rent...

Some of my SFH's definitely qualify here.

I picked up 10 Homes in the last few years in FT Wayne, IN for well under 30k.

Average purchase price was around 7k (High of 10k and low of 1.5k)

Average Rehab was 4.5k

Rents run 400-600

Now i picked all of these up while deployed overseas so everything was done remotely. There have been plenty of issues over time, but due to the extremely low buy-in prices, the overall ROI has been excellent and most have already paid off the original investment.

All that being said, I would agree with those that recommend caution when dealing with lower income properties from a distance.

Warren

Josh,

Thanks for taking the time to do this. Investing in RE can be especially challenging when your job moves you around every 2-3 years, often to different states or even countries. But on the other hand, it can also bring great opportunities.

How 'bout a "Mentor a Vet" Day?

Warren

@Craig Tauterouff

Welcome Craig. Sounds like you have a great plan to get started in RE. I picked up several rental properties over my 23 years of military service and think it makes for an interesting and exciting post military career as well as a great way to bring in a little extra.

Feel free to hit me up with any questions you may run into.

Warren

@Kerry Smith

Welcome to BP. I think you're on a great start with your PCS real estate investing plan. I did the same thing, buying a house at each duty location, then turning it into a rental when I PCS'ed to a new location. In fact, we probably served in the same area as I have rentals in Colorado Springs and Fayetteville. I retired a few years ago and work overseas, but I plan on doing real estate full time when i move back to the states. Good luck and let me know if i can answer any questions.

Warren

I had a few before going overseas but picked up the rest remotely.

Probably would not do it again as i failed to heed my own advice from above :)

Learned the hard way, but at least it was still learning...

Warren

It is feasible, but it can be a challenge.

I have worked overseas for the last 7 years and have 15 SFH's in 4 different states.

From my personal experience (and many, many, mistakes) I would offer that the key to success (or failure) is setting up a trusted team in whatever area you choose to invest in. The most critical is a good Property Manager. Of course this is true whether you invest a state away or a continent.

But yes, it can be done.

Warren

Mike,

Nothing wrong with idealism. It's what get's us going in the first place.

Besides PM fees, it really is a challenge to estimate maintenance, vacancy, capital expenses, etc... Some options might include:

- Network with other local investors to pick their brains regarding their historical averages for similar properties.

- If the property you buy is already a rental, ask to see historical returns based upon their Schedule E filings.

- Educate yourself regarding capital expense items such as roofs, mechanical's, etc. If you know something is getting close to the end of it's useful life, you can adjust your purchase price to allow for it later (also makes a great bargaining tool!)

Consider managing the property yourself to increase cash flow and control. Tenant selection can be crucial to your long term success and no PM will do as good a job as you can. No need to tell the tenants you are the owner and not just the PM.

Regardless, it just makes sense to be more conservative in your estimates, especially when just starting out. Expectation management is important if you want to succeed in the long run. Over time you will have more data and be able to make better estimates.

Warren