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BP Podcast 073: Investing in Rental Properties When Your Local Area is Too Expensive With Mehran Kamari

by Brandon Turner on June 5, 2014 · 95 comments

  
Mehran Invest Real Estate Too Expensive

Today on the BiggerPockets Podcast we are excited to welcome back a repeat guest coming to us from The Los Angeles area!

We first met Mehran Kamari  in the newbie podcast back on show 025, where he took us through the process of his first out-of-state deal, and… well, a lot has happened since then!

Since his last appearance, Mehran’s business has blown up – just completing the purchase of his 10th property!

In today’s show, Mehran teaches us how to successfully invest out-of-state when your local market is too expensive. He goes into detail on how to use BiggerPockets to find out-of-state partners, what due diligence you need to do, who you need on your team, how to overcome fear and much, much more!

If you are in a market where the numbers just don’t seem to work, then this Podcast is for you!

Sponsor

Screen Shot 2014-06-04 at 6.20.56 PMSpecial thanks to today’s sponsors Pensco. Be sure to check them out at: Learn.Pensco.Com

Listen to The Show on iTunes

Click here to listen on iTunes.

Listen to the Podcast Here

In This Show, We Cover:

BiggerPockets Podcast _ Real Estate Investing and Wealth Building 9.42.11 AM

  • How to use real estate to quit your job, the smart way!
  • How Mehran invests in real estate from 2000 miles away
  • How to use BiggerPockets to invest in markets you are unfamiliar with 
  • Using tools such as Google Maps and Google Docs for real estate
  • Joshua Dorkin used to be an actor!
  • The importance of mindset and integrity
  • Leverage is a tool!
  • Making sure you vet out-of-state property management companies the right way!
  • What’s involved in out-of-state due diligence
  • and much, much more!

Links Mentioned

Books Mentioned in the Show

Tweetable Topics

“To be honest I wouldn’t invest out of state unless I had a partner with boots on the ground.” (Tweet This!)

“You are the average of the 5 people that you spent the most time with.” (Tweet This!)

Connect with Mehran

Email *
  



{ 95 comments… read them below or add one }

Dawn Anastasi June 5, 2014 at 6:58 am

Mehran, you did an awesome job on the podcast! Great advice to everyone listening! You are absolutely killing it as a real estate investor and I want to thank you for mentioning me.

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Mehran Kamari June 5, 2014 at 7:41 am

Thanks Dawn :) Without your help I wouldn’t be having the success that I’m having today. Aside from being a partner, you’ve been a mentor along the way. We’ve got a good thing going and I hope others can learn from our ventures/experience!

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Joshua Dorkin June 5, 2014 at 8:23 am

Its like a big giant love fest over here . . . jeez!

Congrats to you both!

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Mehran Kamari June 7, 2014 at 5:22 pm

Thanks Josh! It was a pleasure being on the show.

William Newman June 5, 2014 at 7:28 am

My sentiments exactly Dawn!!! Mehran did a great job on the podcast! Milwaukee is definitely in the building. I am suggesting a takeover people… Mehran, you are doing you thing… We should talk soon… DMW Investments!!! It has a nice ring to it…

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Jaren Barnes June 5, 2014 at 8:27 am

Mehran you crushed it! Really good podcast you guys!

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Mehran Kamari June 5, 2014 at 9:39 am

Thanks Jaren! I appreciate all your hard work that went into the podcast too.

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Mehran Kamari June 5, 2014 at 9:38 am

Thanks William! I think you misheard me though, I meant Anchorage, Alaska on the podcast.. People stay away from Milwaukee!

I’m always looking for more ways to get deals done. Don’t hesitate to reach out with a PM.

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Evelyn June 5, 2014 at 10:56 am

What a great podcast! Mehran, thank you for sharing your story and giving such good advice to all Bigger Pockets Members. Your experience in real estate is another proof that simplicity is the key. There is nothing impossible and good opportunities are everywhere as long as you stay open minded; anything you need to get started is literally at your fingertips!

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Mehran Kamari June 5, 2014 at 3:30 pm

Thanks so much Evelyn! It is true, if you’re creative and driven towards your goals, you’ll find a way to make it happen. This big network we have just makes it a lot easier :)

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Bob Estler June 5, 2014 at 11:25 am

I liked the question during the show about why other people aren’t investing. My impression is most people are afraid of taking on something new. My favorite quote is from a finance professor I had who said “Risk is the likelihood of not achieving your goals”. I have friends investing in bank CD’s at <2% because they think real-estate is to "Risky".

Really people, 2% bank CD's are guaranteed failure.

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Mehran Kamari June 5, 2014 at 11:40 am

Definitely Agree, many people are so scared of even the feeling of failing that they’ll do anything to avoid it.

People don’t realize how inflation comes into play against their money, if they really thought about it, it would scare the hell out of them! 2% if better than nothing but if inflation is 2 or 3 times that (maybe more), than it’s in people’s best interest to figure out how to preserve the wealth they’re toiling for!

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Jarrod English June 5, 2014 at 12:59 pm

Perfect timing for this podcast as this is exactly what I want to do, lots of great advice from all three of you! I’m from Canada and want to get more active in the forums to try and find a partner to work with to handle property management down in the states. I’m typing this as the friends and getting complacent comments are being discussed. I’ve definitely been slacking as of late but time to get back into it!

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Mehran Kamari June 5, 2014 at 3:31 pm

Thanks for listening Jarrod! Glad to hear that this podcast could be a good kick in the butt to get you going. I’ll see you around the forums then :)

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Grace Ng June 5, 2014 at 1:01 pm

Hello Mehran,
I really enjoyed listening to your podcast today. I live in DC/MD area and the prices here can be prohibitive. I started out pretty much the same time as you, April 2013 and I am on my 6th property in the DC area but have hit a wall in terms of financing. My lender is also hitting on the brakes, saying that I am borrowing too much too soon. (I buy and hold too) Currently , I am looking at other states for more affordable alternatives because it would be a shame to stop. I am a little curious about one thing, sorry that if it sounds silly – if prices are so affordable in Milwaukee, why would the locals rent if houses are so affordable? I also wonder when it comes to selling these homes, would it be easy to sell? Somehow I have this preconceived idea that places like Detroit where cash flow is strong have not so good capital gains. Have you found that to be the case? I am interested to hear how your flip will go.

You made a good point about joining the forums. Most of the time, I am a lurker because English isn’t my first language and I feel a little intimidated that sometimes what I say may come out all wrong but from your podcast, it seems like it is very valuable to have a voice online.

Thanks once again and to Josh and Brandon as always for having such a great platform to learn. That wolf video was awesome!

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Brant Richardson June 7, 2014 at 3:09 pm

A lot of renters don’t have the down payment (even though it seems small to us) or don’t have the credit history to get a loan. It blows me away that people can buy for less than renting yet there is always a pool of renters out there. Typically these areas with low purchase prices do not have much appreciation.

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Mehran Kamari June 7, 2014 at 5:37 pm

Yep that about sums it up. There is also the challenge of getting loans for homes that are under $50,000. Many lenders have set that as a minimum. Forgot to mention that in my response to Grace above.

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Mehran Kamari June 7, 2014 at 5:31 pm

My apologies Grace, I believe I overlooked this comment somehow and didn’t respond to it earlier.

Like Brant below mentions, some times people don’t have the down payment money or good credit. People would still be able to get into these homes with 3-5% down payment, and many do. But I think also that the dream/belief in home ownership in many of these types of areas just isn’t there. Many people don’t even have checking accounts and don’t trust the banks.

There will always be homeowners and investors looking to purchase in this market. I’m not sure if I’d want to sell though :) As far as appreciation goes, this area isn’t going to be rising up in value astronomically like properties in Los Angeles do. They won’t stay stagnant though. My main aim is cash flow and appreciation is just icing on the cake. Milwaukee is still in the beginning stages of it’s recovery and that house prices are not close to what they were during the last bubble.

I’ll keep some update on the flip, probably in the success stories section on the forums! Your English sounds great to me and I hope to see you more around the forums
:)

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Mike Cutting June 5, 2014 at 1:16 pm

Mehran – you’re getting your Indy rents a MONTH late? C’monnn mannnnn! (Just kidding, Josh told us to…). Seriously though, very much enjoyed this podcast, you’ve got a great story. I vividly remember listening to that “newbie” episode last fall during 16 hours of round trip driving during which I listened to BP podcasts and only BP podcasts. Really appreciate hearing the update on how you’re doing since you got started – nicely done and keep it up!

Josh & Brandon – great idea having Mehran back on. It’s awesome to have the whole frame of reference of Mehran’s story from the newbie podcast, followed by the update today. If the other newbies from that show have made progress, have them back too! Also, the show continues to get better and your questions continue to get better.

I was most of all pleased to hear Brandon ask “what time is it?” before the fire round intro (instead of “it’s time for…its time for the fire round”…I know, I’m nitpicky!). Well done!

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Mehran Kamari June 5, 2014 at 3:34 pm

Haha Mike, Josh will be glad that you came to grill me on that… I’m seeing what I can do to work out things on a final straw with my current PM. She manages the property quite well, there is just an issue when it comes to the “paperwork” side of things since she’s old school. She’s not an investor so I think that plays a big part in her not realizing how important it is that I get things on time.. If this doesn’t get better, I’ll definitely be looking elsewhere.

I’m really glad you enjoyed the podcast. It is kind of cool to look back on where I was on the newbie episode and to see how things are going today :)

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Mike Cutting June 11, 2014 at 6:43 am

Follow up question for you, Mehran – don’t think I heard this on the show or have seen this in the comments.

What kind of legal/partnership agreement did you and Dawn have in place when you started? And has this changed at all on more recent properties? Furthermore, how are you guys structuring the individual transactions/holdings, in separate entities for each house or one entity for all?

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Mehran Kamari June 11, 2014 at 7:44 am

We formed an LLC in Wisconsin and the operating agreement spells out all our terms. On the most recent deals, I’ve been acquiring them solely under my name.

For the deals done on my own, I’ve been taking title in my personal name with high liability insurance to cover me. I think each property in it’s own LLC is overkill and would probably do them in batches If I went that route. If it were a big apartment building, I’d definitely put that in it’s own LLC.

Shaun June 5, 2014 at 3:29 pm

Good job Mehran.
Very interesting and cool to hear the progress since the first time you were on.

BTW repeat guest?
That is rarefied Leybovich territory my friend! :)

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Mehran Kamari June 5, 2014 at 3:38 pm

Thanks Shaun! Really enjoyed listening to your show as well.

To be fair to Big Ben, the first one was just an intro so this would be my first official podcast all to myself :)

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Brandon Turner June 5, 2014 at 5:04 pm

Hahaha “Big Ben” – That’s what I’m calling him from now on!

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Mehran Kamari June 6, 2014 at 6:01 am

You mean he didn’t tell you call him that? That’s what he said to me… haha!

Jonathan M June 5, 2014 at 5:06 pm

Mehran, you knocked it out the park with this one.

Thank you for being an influence on my investing.

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Mehran Kamari June 6, 2014 at 6:02 am

Thanks Jonathan! I’m really glad I can help in any way like those that were there to help me when I got started. Looking forward to our future venture :)

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Jason Carter June 5, 2014 at 6:22 pm

Nice job Mehran! Great tracking your progress, remember talking to you when you were doing Indy and now you’re a celebrity! Very inspiring. Hope to meet you at one of the meet-ups eventually.

And change that prop manager man. I let one of mine slide in a similar fashion while having our 2nd child. Bad call. Cost me thousands and ate up a lot of my time. I’m still feeling the ramifications almost a year later. Where there’s smoke, there’s usually fire and things could be worse than your realize. I hope not, but make sure.

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Mehran Kamari June 6, 2014 at 6:05 am

Thanks a bunch Jason, I’m sure we’ll connect at one of these meetups for sure. I appreciate the words of wisdom about the PM, especially since you’ve been through it before. I’ll keep everyone posted on how things work out with the PM and whether or not I find another one to work with. She’s hired on help to help with the back office (paperwork/bookkeeping) workload and we’ll see how things for the next few months.

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Gerald K. June 5, 2014 at 6:46 pm

Mehran,
Good to hear the update on how things are going for you. Sounds like you’re moving right along. I can understand why you decided to invest out of state as a buy and hold investor in the LA area. We bought some rentals during the housing slump but have been spinning gears lately since buy and hold in our area of interest makes no sense at these price levels. It was good for appreciation but lately not so good for buy and hold purchases. I guess you could say we’re in the hold phase right now. We also have the dream of replacing our income with cash flowing properties. We’re investigating other strategies and working on fixing up our primary residence. Once done, hopefully we’ll be abe to get back in the game. See you around BP!

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Mehran Kamari June 6, 2014 at 6:08 am

Definitely Gerald. It’s good that you did get into some properties nearby during the crash, prices have gone up significantly and I’m sure you’re sitting on a bunch of equity. This happened with my primary residence and helped greatly with funds to invest out of state. You may way to consider the same thing!

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Matt Rosas June 5, 2014 at 7:33 pm

Great Job Mehran! But I think you too good for Indy and the rest:) I see you as a player in the big time markets. Great podcast either way.
Thanks,
Matt

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Mehran Kamari June 6, 2014 at 6:10 am

Hey there Surfer Matt, glad you listened to and enjoyed the podcast. I don’t like to compete with the crowds! What markets would you consider to be the big-times?

Regardless, I still need to learn how to surf one day. Maybe when I retire from my job I’ll be down by the beach more often :)

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John M John June 5, 2014 at 9:52 pm

Great show. Within a short period of time you acquired very good number of units.
Congratulations!!!!

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Mehran Kamari June 6, 2014 at 6:12 am

Thank you very much John! If I can do it, anyone can do it.

Thanks for listening.

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Pat M June 5, 2014 at 10:53 pm

can’t wait to hear this one on my flight to vegas Saturday…and #72 if I have time

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Mehran Kamari June 6, 2014 at 6:13 am

Safe travels Pat, enjoy! If you have any questions, don’t hesitate to ask here.

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Chris Vail June 5, 2014 at 11:45 pm

Mehran, you did a great job with the podcast. It is good to hear the success stories about folks that started with BP and where they have gone. You mentioned getting more active on the forums, I am curious if you could expand on this? I am new to the site (only been a member for a couple of months) on the site most weekdays and try to add value where I can. I just don’t want to steer someone in the wrong direction with my limited experience on the REI front. So I read a lot of the forums but don’t always comment as I am just doing my best to soak everything up at this point.

Had you not partnered up with Dawn how do you think your journey would have changed?

I have been on the hunt for someone to partner with or perhaps a mentorship but don’t want to come across as that person that is just looking for a hand out (I see the posts all the time on the forum). Members that have just joined BP and their first post is “Hey who wants to mentor me?”. This kind of goes back to my first question about activity on the forums… How soon is too soon to ask about taking that next step and taking a BP posting relationship into the world of partnering/mentoring?

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Mehran Kamari June 6, 2014 at 10:46 am

Thanks Chris! Those are great questions.

1. There are many ways to be active on the forums. Like you mentioned, helping others when they have questions is one way. Asking many questions of your own can spark deep discussions while at the same time you’ll be learning. You can take the time to welcome new members to the forum in the new member introduction section. There are tons of ways to participate in the forums and develop a BP “presence” :)

2. Partnering with Dawn gave me the contrast I needed between my first venture in Indianpolis and how things should be ran. I believe if I didn’t partner with her right away, I probably would’ve come across the same realization another way. My goal has always been the same so I’d still be on the same path, just not sure that I’d be as successful. The great thing is that I’ve figured out a formula that works and that can be duplicated in any market!

3. There really is no way for me to explain the difference between “too soon” and when it’s time. I can say though, that looking for a partnership is a whole different thing than just asking for a mentor. In a partnership you add value as well. So perhaps you can look at it as, when you’re able to add value to a partnership in some way, then someone else may be willing to work with you.

I wouldn’t worry how you come across as long as you have good intentions, you ask questions, are always willing to learn, and are putting the effort in to becoming a better investor. People will see/feel that and it won’t be an issue.

Hope that helps!

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Chris Vail June 6, 2014 at 11:10 am

Yes that does help and thank you for responding.

On the partnership / mentor question, I might be looking at them in the incorrect way based off of my knowledge of them. I know a partnership is two people coming to an agreement and generally both have “skin in the game” when it comes to an investment. Most things I have read about seeking a mentor talks about what you can offer the mentor in return for them helping you on your REI journey. Since this is also about what you can bring to the table I have viewed this as a partnership and have started to interchange the two titles. For instance from the podcast it sounds like you and Dawn started out as a partnership and you guys have added the mentor role as another layer to the working relationship.

A mentor or partnership could be viewed as the chicken or the egg theory when it comes to which comes first. Guessing it doesn’t matter in the end which comes first as long as the relationship continues to grow and flourish.

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Dawn Anastasi June 6, 2014 at 5:31 pm

A partnership is really 2 (or more) people coming together to achieve common goal(s).

So each person doesn’t have to contribute the same thing (e.g. capital). In a real estate venture, there can be many valuable contributions — contacts, time, grunt work, deals, private money, credit, knowledge of a market, a buyer’s list, etc.

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Mehran Kamari June 6, 2014 at 5:48 pm

I can see how there can be confusion distinguishing the two when people tell you the best way to find a mentor is by adding value to the relationship. In our case, we are business partners and there hasn’t been any formal mentorship laid out. Dawn just has a lot more experience than I do as a landlord and I’m learning a lot working with her. So she’s been a mentor in my mind whether she’s aware of it or not!

I wasn’t looking for a mentor, but it seems this same method/structure would work out the same way if someone did have the main objective of learning. I believe a good partnership is 10x greater than the sum of its parts, and highly suggest working with others if you can.

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Matt Rosas June 6, 2014 at 6:50 pm

Coolio Mehran, yes come down to surf before or after retirement, at the Venice or Santa Monica locations. I can convert your fencing skills to shredding waves. For you, the biggies are Houston and Dallas both have your name all over it! And of course LA can fill in the gaps…San Diego to Santa Maria.
thanks,
Matt

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Mehran Kamari June 7, 2014 at 2:33 am

Awesome Matt, maybe I can shred waves with a sword in my hand! I’m not to fond of the landlord/tenant laws in CA, but I definitely have considered the TX market. That’s probably where I would invest if I could slap myself in the face in 2010 like I mentioned in the podcast.

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Kiran June 7, 2014 at 10:10 am

Mehran,

Congrats on your success, and Wish you all the best to meet your goals.

It was a nice podcast and definitely inspiring for newbie investors like me, to know what you can do in just over an year.

-Kiran

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Mehran Kamari June 7, 2014 at 5:33 pm

Thanks so much Kiran for listening and for the good wishes. I’m glad you liked the podcast and if it could inspire in anyway, then my goal has been accomplished!

If you have any questions, don’t hesitate to ask here or send me a PM on the forums.

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Dan Ryu June 7, 2014 at 10:53 am

Haven’t had a chance to listen to many BP podcasts, but I had to download this one to hear you talk! Great job and I got a lot out of it. Thanks for your continued encouragement and it’s so awesome to hear just how far you’ve gotten in so short a time. I hope to be joining you soon among the ranks of successful out of state investors!

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Mehran Kamari June 7, 2014 at 5:34 pm

Hey Dan! Thanks for chiming in. I’m still enjoying the benefits of that gift you so graciously sent me. Mmmm Coffee!

I’m really glad you liked the show and I have no doubt you’ll be successful in your venture if you keep putting the time and effort into getting it done. I’m sure you know that you can send me any questions you have, any time.

All the best!

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Dan Ryu June 14, 2014 at 9:55 am

​Just a quick note – started reading Brian Tracy’s Focal Point (not “Brain Tracey” as it says in the podcast notes ^^).. It’s not the Success Academy you mentioned on the podcast but the content looked good, so I started giving it a read.

It’s been really great. Spent my Saturday night re-thinking some organizational strategies. Anyways, great tip on the Podcast!

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Brant Richardson June 8, 2014 at 12:21 am

I loved this podcast because there were so many things that I could relate too. I read the comments above and went back and listened to podcast 25 before I listened to 73 to get the full perspective. Like you, I am a CA resident investing out of state. I’m probably in the stage you were at a few months after podcast 25, currently working on property #4 in Kansas City. William Robison is my boots on the ground there, not a partner like Dawn is for you, but a similar business model. He knows the neighborhoods, sends me 30 pictures of the properties with good potential, gives an estimate on the rehab, runs the rehab and runs a property management company there as well. It is amazing how getting in contact with the one right person can make the entire thing possible for an out of state investor. The idea of setting up an entire team out of state is very daunting but that one right contact can make the whole team come together. And yes, I met him on Bigger Pockets too.

Josh and Brandon. I started listening to the podcasts around #35 and must say they just keep getting better. Your ability to interview and make great podcasts keeps growing. Nothing has opened my eyes more to the number of strategies possible in real estate than these podcasts. I recommend them to every person I meet with an interest in REI.

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Mehran Kamari June 8, 2014 at 9:32 am

I’m glad you enjoyed the shows Brant. I’ve actually spoken with William before about the KC market. He’s a sharp dude and that market seems great as well. I’ve actually considered it as a secondary target market in the future. I agree about connecting with the right people, and it’s great that you’ve got the right mind to identify the qualities that right person needs to have.

Looking forward to chatting with you in the future!

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William Robison June 15, 2014 at 7:55 pm

Feeling Humbled….

Great podcast Mehran! Its all about the team with the boots on the ground and the supporters that believe in the system. Wishing everyone the best of success.
Thanks again to all that make this Podcast and website happen.

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Mehran Kamari June 15, 2014 at 8:40 pm

Thanks for listening to the show and chiming in William!

Ben Leybovich June 8, 2014 at 7:16 am

Big Ben here guys :)

Couple of takeaways for me:

1. Mehran has a nice set-up – Dawn does all of the heavy lifting and he collects CF. Nice! I’m calling Dawn…
2. You talked about a thing called “JOB” for a long time at the outset of the show. What the hell is that? Where do I get one? How? Do I want one? Josh said it’s good to have one…HELP!
3 Mehran – you are learning! In fact, would you mind sharing a little wisdom with Brandon – he is lost and confused!

Great show guys – a lot of actionable nuggets; specifically the piece about the “growing too fast and portfolio lender”. Welcome to the real world Mehran (kinda) :)

Congratulations on all of your success and wishing you the same going forward!!!

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Mehran Kamari June 8, 2014 at 9:53 am

Big Ben! Thanks for listening to the show. Glad you could glean a few things from it!
1. There’s only so much I can do in Milwaukee from here in LA. I’m not Stretch Armstrong :)
2. Hah! I’m blessed to have my job for now, but it’s definitely what I’m trying to transition out of as soon as possible. I want a different lifestyle, as you know.
3. He actually gives me some guidance every now and then, give him some credit! However, I’ll see what I can do, lol!

I’ve been listening to the CFFU a lot and it’s great to see that you’re checking in. Thanks for the good wishes and I’m sure we’ll be in touch going forward :)

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Ben Leybovich June 8, 2014 at 12:13 pm

Hah! Is that a threat – do I need to change my phone number…? lol

You got brains Mehran – you’ll do just fine. Understand – perspective changes as a function of the images in the rear view mirror. Brandon and I talked for an hour yesterday about this. Listen to your heart, and collateralize that with your brain. Don’t be stuck in one vision. You’ll be just fine!

Feel free to reach out whenever, and for crying out loud QUIT GOING TO BRANDON for advice. I’m getting tired of him texting me “…Mehran wants to know xyz – what do I tell him?” lolol

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Mehran Kamari June 8, 2014 at 4:36 pm

Very sharp advice, I find myself having to adapt and be creative to inch towards my goals now. I’ll definitely remember that. It’s very limiting to be stuck in only one vision of how you’re going to accomplish things.

LOL is all I can say about the the advice thing hah. I love this stuff.

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Mark Bradford June 8, 2014 at 2:52 pm

@Mehran Kamari
Thanks for all your comments on this podcast. I have listened to a lot of podcasts but I have never posted a comment. I have not heard one that hit home as much as this one did. You and I think about investing a lot alike! I just haven’t bought as fast as you have. My wife and I have done around the same number of deals as you plus we have completed two flips. We are also owners of a property managment company. Many things you said about your PM is why we started Pinnacle Property Group Inc.
Thanks agian for the information you shared.

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Mehran Kamari June 9, 2014 at 10:33 am

Thanks for listening Mark. Glad the podcast resonated well with you! That is definitely an answer to the many issues faced with a bad PM, start a company of your own! Looking forward to staying connected and watching each other grow as investors.

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mark bommarito June 8, 2014 at 9:41 pm

Mehran, great show. I really hadn’t given any thought to out of state investing until your podcast this week. I am also located here in Los Angeles county where it is very expensive to start out here. My question is how did you arrive at investing in Milwaukee? Was it purely from meeting Dawn? Were there other out state cities with similar affordability that you were or are considering.? Is there affordable cities like this in Texas?

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Mehran Kamari June 9, 2014 at 10:36 am

Thanks Mark! The first idea to invest in Milwaukee did come from my connecting with Dawn. I was also looking at Indianapolis, Kansas City, and St. Louis. I am not entirely sure about the TX market as I don’t know much about it. I remember hearing on one of the podcasts, I believe with Danny Johnson that there are (or were!) some deals in this price range some where in the San Antonio area. Hope that helps!

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Brant Richardson June 9, 2014 at 9:02 am

Two questions.
1. Why did you start using a portfolio lender before you had 10 loans?
2. What terms is your portfolio lender giving you?

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Mehran Kamari June 9, 2014 at 10:39 am

1. After my first deal in Indianapolis, my DTI ratio was maxed out and all the lenders I spoke to would not allow my new rental income to be used towards the calculation until I had 2 years of rental income on my tax returns. (Conventional guideline). Instead of waiting around, I just went straight to a portfolio lender for loan #3 (primary residence was #1, indy property was #2)

2. 80% LTV, anywhere between a 10 to a 30 year amortization (depending on loan amount), and a 5 year balloon payment – Commercial loan.

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Brant Richardson June 9, 2014 at 11:28 am

Ahh yes, I forgot about the Woodland Hills residence, that would hit the debt to income ratio hard. I too will soon be hitting problems with debt to income ratio due to the 2 year rule, doesn’t make much sense when you have a professional property manager.

The terms look better than what I have found so far, 75% LTV, 15-20 year term, ARM.

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Mehran Kamari June 9, 2014 at 3:08 pm

20 year term with an ARM instead of a balloon is attractive, the payment wouldn’t be THAT much different. What are the terms of the ARM? (5/1, 7/1 etc.)

Karen June 9, 2014 at 1:40 pm

First off, Brandon, that is a cool wolf video. Do you think the wolf was interested in your dog as a mate, a toy, or… lunch?

On the podcast, it was wonderful to hear more about Mehran and Dawn’s work and progress together. Big congrats to both of you — it’s fun to see you guys doing well and having a very successful collaboration. Wooo!

Karen

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Mehran Kamari June 9, 2014 at 3:09 pm

Or maybe the wolf was interest in Brandon as mate! :)

Thanks for listening Karen!

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Karen June 9, 2014 at 3:24 pm

Ow, Ow……Awooooooo! LOL ;-)

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Scott Hearne June 10, 2014 at 11:52 am

Fantastic show Mehran (and Joshua/Brandon). For me, one of the better shows. Thank You. You mentioned during the show Mehran that you use the equity from your primary residence to buy other properties…I would love to learn more about this. Are you saying that your portfolio lender uses this equity income (somehow) on your dti ratio? If not, how does this equity benefit you for financing investment properties? (any books or threads you could point me to?) Thanks you guys so much. Scott

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Mehran Kamari June 10, 2014 at 2:19 pm

Thanks for listening to the show Scott, glad you enjoyed it!

I use a Home Equity Line Of Credit to tap the available equity in my home to use as capital for my purchases. The only effect this has on my DTI ratio is it makes it a little worse by adding another payment onto my credit report. However, on the back end, the properties I purchase with this money produce more cash flow than the cost of the HELOC.

So basically the equity benefits me by giving me capital to buy properties cash or use as down payments towards purchases.

Hope that helps!

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Tom Waddell June 10, 2014 at 8:40 pm

Thanks for your insight Mehran. Great show!

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Mehran Kamari June 11, 2014 at 2:29 am

Thanks for listening Tom!

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Joseph Atkin June 11, 2014 at 7:39 am

Great show, Mehran!

You’re my first BP contact to make it to the podcast level – somehow that makes me feel like I’ve just taken one step closer to the big leagues… :)

Very inspiring to a new guy like me to hear how much you’ve done in just one year while working full time. It seems like the partnership with Dawn has been a very good thing for both of you – well done!

Thanks for sharing your story, and keep kill in’ it!

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Mehran Kamari June 11, 2014 at 7:48 am

Thanks Joseph! I’m a product of the BP community and commitment. That means that anyone on the site, including you, can do exactly as I’ve done or even better. Since attempting to educate/inspire/motivate people was my main goal on the podcast, I love reading messages like this, thanks :)

And I will definitely keep killing it! Hope to see you doing the same.

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Teresa Mak June 12, 2014 at 6:27 pm

Amazing podcast! It’s nice to hear your story since I’m also from LA, and I’m starting down the path of investing out of state. I’m now in the process of identifying a couple of markets to focus on, and Milwaukee is one of them. It’s been a little nerve wracking, but I’m learning a lot through the BP forums!

Newbie Question – You mentioned that you eventually moved to a portfolio lender. Were all of your first deals financed through conventional financing? At the local level? (I’ve only financed through conventional lending on my property in LA.)

Again – great and inspiring podcast! Thank you!

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Mehran Kamari June 13, 2014 at 8:25 am

Hi Teresa! Really glad you enjoyed the podcast! It’s always nerve wracking at first, but eventually it will become second nature.

Regarding your question, which is a good one: Only my first deal in Indy was done with conventional financing. My DTI ratio was too high after that and I went with the portfolio lender for all my financed deals since then. The portfolio lender only lends locally in the market that I’m working in (Milwaukee).

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Matthew Roybal June 17, 2014 at 9:55 am

Hi Mehran,

Awesome podcast! I also live in CA and I’m very interested in buying a second rental out-of-state this year. So this podcast was very helpful to hear. There’s a post in the forums asking if anyone else has done deals like this with a partner. It sounds like this is fairly unique but it can obviously work. I have just a few questions if you don’t mind?

1. Are the specific job duties for each of you spelled out in the LLC?

2. You mentioned some of the properties you bought yourself after the first few. How did you structure compensation for Dawn since she’s doing the in person due diligence but not in on the purchase?

3. How did you gain MLS access? Is Dawn a broker/agent or are you both using a realtor in addition?

Any help is greatly appreciated!!

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Mehran Kamari June 17, 2014 at 5:57 pm

Hey Matthew, glad you enjoyed the podcast!

1. Not specifically no. We just have an understanding. This could be spelled out by the lawyer that drafts the documents for you though.

2. Basically a “finder’s fee” for each property that I end up closing on.

3. We are working with an agent for direct MLS access. But by browsing the MLS, there are many sites that have the MLS listings as well, like Zillow, Trulia, etc.

Hope that helps :)

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Matthew Roybal June 18, 2014 at 1:19 am

Thank you very much Mehran, that does help a lot! It’s always the little details that are hard to pinpoint. Much appreciated!

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Michelle Y. June 18, 2014 at 10:05 am

I really enjoyed this podcast, lots of great information! Congratulations on everything you’ve accomplished, Mehran, and in such a short amount of time! I remember when you became a moderator – a year ago this month! Happy anniversary!!

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Ewa Reza June 27, 2014 at 1:28 pm

I like the podcast in general but I looooved yours. Maybe because we’re both from LA and it’s comforting to know someone else goes through the same hurdle and is so successful.
I bought a triplex in Los Angeles and my DTI is suffering now big time. I tried to look for out of state cash flowing properties but the issue I have is finding a lender who would be ok with under $50K mortgage. How did you find yours?

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Mehran Kamari June 27, 2014 at 6:21 pm

Hi Ewa! Glad you enjoyed the podcast. My DTI suffered big time just because of my primary residence purchase in 2012, I definitely know what you’re talking about!

There are definitely lenders that are okay with sub $50k loans. My first property I bought, I did with conventional lending through AIMLOAN.com and they did a sub $50k loan on a property in Indianapolis. Since then I’ve been using portfolio loans. Make a little spreadsheet of lenders that will lend out of state and just call them all. I guarantee you’ll find a couple.

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Nate July 2, 2014 at 11:19 am

Mehran – I have some thought to share on the question about why our friends do not invest in real estate. I found that, at least, some of my friends can’t get over their ego….. I am an engineer, similar to most of people I am hanging out with. I am certain that their income would definitely allow them to invest in real estate. Even though we are located in Houston, one of the best places in the planet to invest in Real Estate nowadays, but no one’s ever asked or talked to me about it. Once in a while, I talked about it over the dinner table, they’s changed the topic quickly and talk about stock and any other things. I didn’t understand at first and my wife came to a conclusion that they just don’t When they see you are successfully investing, they do not want to follow your steps.

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Mehran Kamari July 3, 2014 at 5:01 am

Nate, thanks for listening to the show!

I can see how many peoples egos can definitely get in the way of them asking for help from someone they know who is successfully investing. Many people aren’t coachable and like to think they’ve got everything all figured out already.

Those who understand they don’t know much, leave their ego at the door, and are willing to be coachable, seem like the type of people that will reach out for help.

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Nazz Wang July 2, 2014 at 12:43 pm

Great show Mehrad Brandon and Josh. Thanks for the insightful discussion!

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Joshua Dorkin July 2, 2014 at 10:03 pm

Thanks for listening and taking the time to comment, Nazz!

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Nazz Wang July 2, 2014 at 10:28 pm

I love the BP community. The active members don’t hold back and the communication is open. My goal this summer is to stop being a reader and start being an active member so here I am. Thank you guys for everything you have done!

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Mehran Kamari July 3, 2014 at 5:03 am

Thanks for Listening Nazz! Glad to see the show piqued your interest in out of state investing. I got your PM and will respond soon!

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Walid July 2, 2014 at 9:38 pm

The BP Podcast was amazing, I will be reading and learning a lot more with your insights. Good luck with your investments.

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Mehran Kamari July 3, 2014 at 5:03 am

Really glad you enjoyed the podcast Walid! If you ever have any questions, don’t hesitate to reach out. Good luck with your investments as well and thanks!

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Rob Cee July 13, 2014 at 1:07 pm

Awesome Podcast Mehran! Mehran has only been doing it for 1 year so far. I think the key is going to revisit Mehran in say 5 years after he’s gone through lots of property tenant turnover, possible evictions, lot’s of repairs, etc… I’m very curious to see how those older Midwest cheaper properties in lower income neighborhoods work for an out of state investor over the LONG TERM as income generators.

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Mehran Kamari July 14, 2014 at 9:39 pm

Rob! Thanks for listening to the show and I’m glad you liked it. I’m just as curious as you to see how this works over the long term :) I’ll definitely be around!

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DL Martin July 24, 2014 at 5:16 pm

Hi Mehran;
Excellent Podcast. (You don’t remember me, but I met you at a meet up this summer at Will Barnard’s flip in Agoura Hills.)
I love your business model. If I understood correctly, it is: purchase for $20k, rehab for $5k and then rent for $700.
My question is with regard to financing:

I’m assuming that your portfolio loan is for 80% of purchase price and that you were funding the 20% down payment and then the $5k in rehab. So typically you are in for $4k (down payment) and $5k (rehab) for a total of $9k per property? Are there any other “typical” incidental purchase costs?

After one year (seasoning) could you refinance for 70%-80% of ARV and get a little bit more money out, or would the new loan costs make it not cost effective?

One last question:
Of the $5k in typical rehab costs, what percentage is for materials/labor? And do you typically have to do roofs during the rehab? (I believe it rains/snows in Wisconsin!)

thanks again for helping make Bigger Pockets what it is.

DL Martin

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Mehran Kamari July 26, 2014 at 6:15 pm

Hey there DL, I think I do remember you. Are you the one who owned a fourplex in Loma Linda? Glad you enjoyed the podcast!

Just to clarify, that happened to be a smoking deal, even for that market. Some times the rehab is more than $5,000. Not all of my purchases have been 2/1’s like this either.

You are correct in the logistics of how the purchase/rehab usually goes. There are other the closing/loan costs that usually add up to $2,000(inspection, loan origination, title insurance, misc fees) for each purchase. There is also the compensation that I’ve arrange with Dawn.

Theoretically, yes I could refinance after one year at a new ARV. The new loan costs would have to be factored in. If the deal makes sense where I’m creating enough value with the purchase and rehab, to justify a way higher ARV, I’d probably buy it all cash, rehab, place a tenant, THEN refinance at the new ARV. If I hit all my numbers this way and I’m all-in 70% of the ARV, I may be able to pull most of my money out IF the appraisal comes back good.

Last question:
Materials/Labor %: Not entirely sure! That’s a good question though. I’m sure it depends on the different items in the Scope of Work.
Roofs: For most of the properties I have not had to re-do the roof. Their condition is a major part of the evaluation though. If the roof is bad, and the seller won’t discount the property enough, there’s no choice but to pass.

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