All Forum Posts by: Travis Timmons

It's very difficult. I've done it, but I think an out of state rehab - especially if you are flipping - is the highest risk strategy for the average investor. You need to visit the property as much as you can. There's no substitute for meeting vendors and establishing trust. You can also sniff out BS when you are on site. 

If that is not possible, you have to have someone that you trust visit the property on a regular basis. Otherwise, you are just blindly trusting a stranger with a major investment.

@Jay Hinrichs the hourly wage stat was on CNBC this morning. It was fresh and top of mind on account of just watching it. 

You have to go see the property. Also, what is the purchase price and the age of the home? If it is a cheap and old property (sub $120k, 50+ year home), the cash flow on paper just doesn't match end of year actuals. I'm also a little cynical of the $400-500 per month cash flow on long term rentals. Those deals just don't exist without some risk due to the location or tenant pool.

You're just stacking risk factors here. 

1. First time investor, 2. Have not seen the property in person, 3. Long distance, 4. You are inheriting a tenant, 5. Neighborhood and tenant pool risk? I don't know but just a guess

Each one makes the likelihood of success, while not impossible, go down a bit. If this is an A-B class property, I would feel better about it. If it is not - and be honest with yourself, would you live there? - it's gonna be tough.

As far as scaling, that's a question for future Rachel. She's gonna know a lot more.

If and only if those making decisions have certainty that a consistent tariff policy will be in place for years to come. What if you make a hundreds of millions-billions+ investment and policy decisions are reversed in a month, year, or in the next presidency. The average auto worker in the US makes $70 per hour. The average auto worker in Mexico makes $6 per hour. That's a big gap to fill and a lot of money to spend without some reassurance of long term stable policy (not making a case for either here...just that the rules of the game need to be known before major capital investments are made).

@Henry Lazerow I agree that out of state investors need to focus on quality with class A-B tenants. That's the strategy that I have employed and a big reason why it has worked and makes self managing from a distance realistic. 

What seems to be the norm, however, is wanting to buy an old $100k house that cash flows on paper in a questionable location. They buy a $80k property in Dayton that is going to appreciate well below the rate of inflation and attract a tough tenant pool rather than trying to house hack a $500-750k property in a high appreciation market that will double in value over the next 10-15 years - resulting in a $500k+ gain on a 25k-50k down payment...just can't get past year 1 "cash flow" 

I have nothing to sell and would be happy to help if you think that I could be a resource. Feel free to send me a DM.

I'll echo what @Nicholas L. said - VTSAX will likely outperform a first time real estate investor buying out of state. I've done it and had success, but it's hard and most people do not do as well as strangers on the internet make it seem. 

You don't get cash flow from leveraged long term rentals in the current market. It just doesn't exist...even the cheap, on paper cash flow properties like will not make any money on end of year, after all expenses, actual returns.

The only real path to cash flow to live off of right now is either a paid off property or a well executed higher effort strategy like short term, mid term, or rent by the room. Even those don't provide much in the current market. Pretty much every STR market has normalized to an 8-15% return...it's a lot of hassle, expense, and risk for the incremental increase vs. VTSAX long term average. And MTR/rent by the room isn't really enough cash flow to make a serious income if that's what you are looking for.

I think that it's a "What can you do that is really hard?" market right now. Answer that question, and you have a strategy that could work. I still think house hacking is your best bet. Leverage + appreciation + time in a high appreciation market is and probably always has been the best investment in real estate. You just have to figure out how to stop the month to month bleeding in year 1-2-3.

Lastly, be careful with leverage against your investments. I think it's a Charlie Mungor quote that I remind myself of regularly - "Leverage is how smart people go broke." You have $1M. Be opportunistic and paranoid at the same time.

It's a mixed bag in the markets where we own property. Regardless of the location, it feels like there is this pool of demand just sitting there waiting for the right price level. When a property hits that, it's gone...just a matter of finding it for the neighborhood, asset class, etc.

Houston - pretty balanced, but unsettled - feels like the market can go whatever way the wind blows week to week

Central TX - more of a buyer's market

Oregon - seller's, but the junk is sitting on the market

Maine - seller's market with very limited supply that is not older homes with deferred maintenance issues

@Peter Tverdov I'll break the 4th wall and admit that I am one of the folks that answers these calls. It's mostly new investors trying to get their footing...most are more financially stable than you would think and have pretty realistic goals and expectations. It's tough out there; newbies are just trying to break through and get some help where they can. There are a few mixed in that want to buy a $60k BRRRR property in a rough neighborhood - the allure of cheap properties is real for those that do not yet know how expensive cheap properties end up being.

My first deal was my worst one by a long shot. It would have been helpful to have a resource like this when I was getting started. We'll see if it sticks or not, but for the time being, I hope and think that it is a net positive.

DSCR rates are not that much higher than conventional. I've done 2 in the last year and 1 refinance. All have been around 25-50 basis points higher than conventional options depending on LTV. I did have to put 30% down on one to get the ratio to be above 1, though. You're going to pay a point or two at closing and likely have a 1-2 year pre-payment penalty, but if you're okay with that, rates aren't bad.

I'm a fan of buying the best asset possible in your budget and then employing a higher effort strategy to make it cash flow. For us, that's mid term and short term...it could also be rent by the room, but I know nothing about that business. 

I think that we are in a "What can you do that is really hard?" market. If you can solve a tough problem or pull off a strategy that requires a lot of work, you can likely find something that works. If not, returns are just far to thin and meager to justify writing a giant check for the right to bleed cash each month.