All Forum Posts by: Jesse S.

I agree with Chris. I would start small to understand the process and get some real world experience before you buy into your ultimate goal of 8-16 units. For starters, multi-units deals are becoming increasingly hard to find (theres posts about that on here) so you might be waiting a long time before you can have the money and find the right deal for a 8-16 unit complex. 

Probably most importantly, you can look at numbers on a spreadsheet all day, but you never really know how you feel about real estate until you get your first rent check, miss your first rent check, have to evict your first tenant, etc. 

Good luck and welcome to BP! 

@Ryan Mullin my gut says there is an element of this happening. I've been very happy with the turnkey provider but I noticed that every house I looked at had a rent to sales ratio of 0.90%-1.10%.... a little too precise to be a conscience. Since both properties rented for slightly more than the pro-forma, I'm guessing they got in someone who was stretching their budget to afford a nicer place and they shouldn't have been approved in the first place. I'd rather a slightly lower rent with a more creditworthy tenant.... if I do have to evict, I will certainly take a more proactive role in setting rent and screening tenants. Thanks for the perspective! 

@Chris Clothier thanks for your note. I actually closed on the properties about a week apart and both were vacant at the time of underwriting. I had residents (love that!) move in about two weeks after closing.  So I dont think what you described was the issue. I haven't given up on Memphis. This is a long-term investment for me and I think Memphis is a great place to start. More than anything, I'm grateful to learn some of these tough lessons early on so I don't fool myself into thinking that out of state investing is easy. 

@Jason Carter thanks. I learned the hard way when I house hacked years ago that 2nd and 3rd chances are not ok unless you are running a charity. Thanks for the reminder!

@Ali Boone

@Ali Boone Thanks for the perspective on PM. I'm hoping it turns around for these properties, possibly with a new PM. And no, no rental guarantee came with the houses.  

@Lane Kawaoka interesting...... was there a theme about why the lost money? Vacancy? Repairs? etc? Also, you said had... does that mean that you no longer have them? 

@Caleb Heimsoth Raleigh and Whitehaven View.... I even visited both houses before purchasing so I know they aren't crap areas! 

@Stephen Akindona yes the PM is owned by the turnkey company. I thought that would be a benefit, but maybe its not....

@Mike McCarthy good idea.... I will do that before they start screening new tenants

@Dean Letfus  yes its Memphis. If this is normal for Memphis, why do so many people invest there? Are all the newbies suckers? (i'm including myself in that category...)

Hey BP Community- Wanted to share a bit of my story here to get some perspective. I started reading the site back in January and after many conversations and a few site visits, I decided to purchase two out-of-state SFRs using the same turkey provider (both closed at the end of April). I’ll write a longer post about my purchase experience later but overall it was incredibly smooth and easy…. I even had both properties appraise for more than purchase price! Both homes are in solid class B neighborhoods in TN with rents between $1,000-1,200/month.

My frustration began once the tenants moved in. Both places were rented at the time of closing with deposits and first month (May) paid at lease signing. Property 1 has been a disaster from a first-time investor’s standpoint. The tenants basically stopped paying and communicating after moving in and we had to file papers to evict at the end of June. I had a court date last week where possession was granted back to me. If the tenant doesn't pay in full (i.e. 2 months) in 10 days, we file a writ to remove the tenants and I have to start over.

Property #2 has been better, but not smooth. They paid in full for June (thank goodness), but only paid a partial amount for July (about 60%) with the promise of paying in full by July 12th. It’s now the 16th and they still have not paid in full and are not responding to the management company. I’m not sure where this one will go, but I’m certainly not brimming with confidence.

Don’t get me wrong, I understand that stuff happens and being a landlord is more than just “collecting checks”; you’ve got to have a stomach for some unpleasantness and for things to not go as planned. However I've got to say, I wasn't mentally prepared for such a rocky start. In the three months I’ve owned, I'm running about 50% vacancy (on average) for 2 properties! I had hopes of buying 2-3 more SFRs before the end of the year, but now I don’t want to do anything until I see these situations resolve and I quantify the bleeding.

Does anyone else have a similar experience? Or perhaps words of advice to give me some perspective? Feeling a bit dejected at the moment….

@Paige Kelsey thanks so much for sharing your experience! I've read so many success stories on here that it would be easy to believe that RE investing is all cash flow and no headaches. I think its especially important to learn from others about the good and the bad, especially if you are just getting started and don't have any skin in the game. 

I just purchased my first two SFRs (out of state and turnkey) and so far so good, but its way too soon to draw any conclusions. I want to see a few rent checks hit first before I start to buy more. 

Thanks again for taking the time to share your experience. 

@Bo Kim , I agree.... definitely pros and cons! Especially in the past ~5 years where the coastal markets have had some exponential price appreciation.  

In looking at the numbers in Brooklyn again, they really don't seem to make sense. We're leaning toward being permanent renters and starting OOS REI. Exciting times!

@Nathan Gesner good call... I spoke with two mortgage bankers and after running some hypothetical numbers, neither seemed concerned with the DTI ratios they were seeing with the costs of the primary residence vs investment properties. However, an interesting point around credit scores came up as credit scores generally decrease when you take out a mortgage because it increases your total debt outstanding. However, it recovers over time as you have more on-time payment history and you reduce your total debt outstanding.

That being said, there could be a situation where you buy 2-3 investment properties which decreases your credit score. Then when you go to get a mortgage for your primary residence (with a much larger mortgage), you don't qualify for the best rate because of a lower credit score. That would be REALLY unfortunate. 

Unrealistic? Seems believable to me, even if its a bit unlikely.