I invested in Memphis in 2009 ( to be exact Cordova). Bought a place for $87k needs about $25k remodeling. House was valued at $125k. Originally was going to get a loan that would cover house and remodeling with no money down. But the bank issue killed that for me, so I had to put about $12k down. And loan was for about $110k. Rent was about $1,200. Almost fits the 1% rule. Now it is 2015, rent was just increased to $1,250.
Mortgage, tax and insurance was $1,000 a month. Property management about $100 per mont. Earned about $100 per month. Did not count repairs or vacancies. I thought that was decent, but when you add in quarterly inspections, you lose $65 per quarter. Yearly lease signing another $300 per year. The profits get smaller and smaller. Even though we did what I thought was a big repair, it seems every few months a small repair is needed. By the way property management takes adds another 10% to the price. This year roof issues, skylight, a tree falling over and water issue caused to to spend another $17k. This fix wiped out any "profit" I had.
So I tried to sell before repairing, best price I could get $97k. $10k less than on loan. I decided to pay off debt and fix place up. Spent about $124k to do that. Tried to seek after fix up, estimate was $115k. Once realtors get their cut, I'm still losing.
Bought a condo last year in Fremont for $315k. Put int $35k to redo kitchen 2 baths, repaint and flooring. Earned enough to break even on condo for monthly payments. Had to replace Windows this year for $5k. However renting for $2,400 now. Condo I think I can sell in the $450k. Originally was managing myself now, with property manager taking 5%.
So, if you can get a good deal in the Bay Area, makes much more money than in Memphis. In Memphis, no appreciation. Rent hardly goes up.
So brings me to morale of story, managing a team far away is hard. You are counting on them relying the truth to you about the property. In general they did, but they did not account for vacancies and maintenance. I think managing something more local is better. Even if it was a few hours away at least you could see it rather than just from google maps. Best to invest in areas you know. There are always deals, you just have to wait for next down turn in Bay Area market. Just make sure you have enough cash on hand.:)
