All Forum Posts by: Martin Yung

Thanks Cliff

@Wendell De Guzman

Is CIC foreigners OK?

@Jay Hinrichs 

1% rule available in Portland and west coast? What is the entry price for these deals?

Talking about 50% rule in Houston or Texas generally, is the 50% rule conservative enough in this market? For example, a $120k house property tax in good school district is about 20% of rent, 7-10% insurance, and 10% management fees. That left you with 10% for vacancy + maintenance + CAPEX to meet the 50% rule. I think 50% rule is very optimistic in Texas.

@Jay Hinrichs 

You are a great source of info with your vast amount of experience. You have seen more failures than success in out of state turnkey investment, that's a great source for us newbie too. Most people will ask and focus on how to success, let's focus on why they fail? So that we can avoid those mistakes. 

From the 200+ foreclosure that you have help, let's dig deeper into why they end up with that? 

A few possibilities I can think of: 

1. They buy because it's cheap, here I mean the area is cheap, bad neighborhood, not that they have found a great deal at great area. 

Solution: Location is the fundamental in RE investment. I think is best to aim something above $100k in good neighborhood.

2. They are underfunded. They do not prepare and expect big tickets repair, for example, after a few months collecting rent passively, the roof collapse, the boiler stop functioning and they do not have the money to repair it, so the tenant leaves and they are stuck with the fixed cost of holding properties and they just want out. 

Solution: Have extra emergency funds before jumping in. Use the strictest inspector, buy newer build homes, say after year 2000. 

3. The property managers couldn't deliver. 

Solution: Make sure there are a lot reputable PM that are willing to manage your property before buying, interview them. If your PM fails you, switch to another one. 

4. They perform eraser math and believe in the pro forma provided by the sellers. 

Solution: I prefer for the deal to survive the 50% rule. 

Anything else Jay? 

Getting to Yes by Roger Fisher

@Jay Hinrichs sorry I didn't state it clearly. When i say location I mean the micro location in the market they serve. Not to the extend to have a negative cashflow turnkey company in CA and their selling point is wait for the capital gain. Because capital gain is widely available in Asia and some part of Asia (HK and Singapore) capital gain is on par or even better than CA. The only attraction for me as a foreigner to invest in US RE is cash flow, capital gain I can get it in my local market. 

For example, I couldn't find a turnkey provider in better area of Chicago, such as north Chicago, but there are a lot turnkey companies operating in the south side. However in BP communities, they are quite a lot people invest in the better area of Chicago for buy and hold. just that the return is not as good as the south, I wish to follow that path but I find it difficult to have a turnkey company do that for me. So a realtor is the alternative. 

What I feel most turnkey providers are missing:

1. Low to non build in equity (some you have to pay a premium)

2. sub par location and old properties - (I know that's where the numbers look attractive, but I find it difficult to locate premium turnkey providers who really provide good location and newer houses. So if higher quality homes, I guess using a realtor is the alternative)

I will stick to the fundamental in investment, for instance, investing in stocks i prefer to evaluate the fundamental of companies instead of chasing the most popular or heated stocks for long term success. In properties, I will stick to location as I believe that's the fundamental for properties.

Anyway its still boils down to personal risk tolerance. I am more risk adverse, and I find it difficult to find a premium turnkey providers. (If you know any, do let me know) 

Ana A. Let's call her in