I would stay away from the property for several reasons. Your cashflow is most-likely going to be negative after you get hit with both property management fees that are additional to that are additional to the standard percent of rental income and you will get hit with many more additional costs because you are not hands-on e.g. management companies don't have the ability to inspect your property the same number of times as you for damages caused by tenants like when one of my out-of-state rental properties was being used for a huge dog kennel inside the home.
When owning long-distance properties you often get hit with huge bills that can be avoided when you are hands-on. You can't expect that property management companies will spend the same amount of time as you when it comes to finding the best and most-honest contractors. I live in Los Angeles and own properties in Boise idaho. At 8 pm the weather is 15 degrees and my property management company calls to tell that my tenant's furnace is broke, the water pipes will freeze inside the house and I will have to put my tenant into a hotel for a few days. The property management company tells me that the furnace fire-box is cracked and I need a new furnace for $6500. That is strange because the furnace is maybe only 8 years old and modern furnaces have heat exchangers and not a fire-box. I am a heating contractor. So, I tell the property management company I am leaving Los Angeles and will be in Idaho in about 13 hours to repair the furnace, or install a new one. About 15 minutes later, I receive a telephone call telling me the furnace is repaired and the cost was only something like $350.
I am not saying that management companies are bad. My point is that when you are not near the property you have to rely on other people, hope and pray that they are honest and efficient. If we lived in an ideal world everyone would be billionaires, but we don't and the expectation is that people do and will make mistakes and you will pay the price.
Don't be anxious to invest money burning a hole in your pocket. Since you feel the need to ask your questions, you are not ready to invest in real estate. Never rely on advice from others including myself. I've been wrong many times and some deals I told people to stay away from turned out much better than I expected. But...when I am not absolutely 100% positive about a deal I am not going to cross my fingers, pray and hope the deal pans out because the chances are it will not pan out and if it does then we are investing based on hope and not good business practices.
Hold onto your money until a deal comes that is so sweet you can't let pass, but don't listen to advice from even your own broker when it comes to what is good to invest in because nobody on either side of the deal represents you and as far as brokers are concerned they only show you what is on the market and tell you every property is good for you as long as you are willing to purchase them.
The profit from real estate investing is earned the day you close the property. Example. My business model is to earn 50% to 100% profit (ROI) on my investment capital every year. That means, if I invest $50,000 for a house today, then by the end of the first or second year my property has to be worth $25,000 to $50,000 more than what I paid to give me a 50% to 100% annual return on my money.
I always achieve my goal of earning 50% to 100% on my money the day the property closes escrow and this is because I look at thousand of properties until I find a property that is discounted and worth more than the price I pay, or I purchase properties where a little rehabbing and rent increase will get my my 50% to 100% return on my money.
If you don't have a business model and plan to earn 50% to 100% on your money then you never will. Just remember that you will never make a profit by buying them, collecting rents and having tenants pay down the mortgage. The rent collected and maintenance costs will not keep up with inflation. The money in real estate is earned when you buy the right property, when you earn immediate returns on the money you invested and when the properties appreciate in value.
As stated in about 20 previous posts. I live in Los Angeles and just sold about 24 to 28 homes in Las Vegas. Can't remember how many because some belonged to my children. I do all my work myself with my employees. My cost, not including the cost for my labor, to clean every home cost not one penny less than $6,000. The average cost was about $8,000 and one home in Boise Idaho cost me $18,000 to clean and the work took my employee and myself 3 trips from Los Angeles to Idaho and a total of 11 days from 5 am to as late as midnight.
I was shocked when I went to Idaho and found that house painters want $5500 to $6500 just to paint the inside of a 3-bedroom home. The house in Idaho belonged to my son. So, since I am a licensed contractor I made a very legitimate bill for the work I did to his house and the bill was for $32,000.
Just imagine you get a call from your property manager in Texas and you are informed that your house is thrashed. We are very sorry and we did a lot of shopping for the best prices. Can you deposit $15,000 into our account today so we can get the work started because we already have another tenant ready to move in to get your house thrashed, again. I made several million dollars in profit with my Las Vegas homes because I purchased them for 30 cents on the dollar between 2008 and 2010, but with the high costs for everything today I would not invest in single family homes and subject myself to paying $6,000 to $12,000 to clean up the damage that tenants cause even within their first year.
There are two popular sayings that make a lot of good business sense, but it is very strange that few people know the meaning of these sayings and those who do don't practice this good advice.
"The rich get richer"
"It takes money to make money"
You need to practice these two sayings in the order they are written.
"The rich get richer" This means, when a great deal comes along people without money can't get into those deals, but people who are rich get richer because that have the cash when the really hot deals fall in their laps. So, we people who don't have a lot of cash need to learn to stay away from so-so deals with the poor potential for large profits.
"It takes money to make money" This saying is similar to "The rich get richer", but it is critical to know that when the really hot deal falls in your lap you need the money to make more money. You need to understand that if you blow your cash on a so-so deal in Texas and cross your fingers then you won't have the money to make more money when a really profitable deal comes.
Homes often look like good deals in other states because the prices are cheap, but the rents are also much less in other states and the costs for materials and labor throughout the United States is very close to the same. The cost to install carpeting, plumbing, roofs and painting is very close in most states. The problem with low-priced homes with low rents is in California I just paid $1300 to install carpets for an apartment unit that brings in $2200 per month and I still have $900 left in my pocket from the rent. In Columbus Ohio, I have apartments near Columbus State University that sell for $60k per unit and I rent the units for a maximum of $800 per month. So those carpets cost me $1300 and it takes more than 1-1/2 months of rent to pay for the carpets. When I need to do a major cleaning for an apartment in California the total cost is 1-1/2 to 2 months of rent. A major cleaning for an apartment in Columbus costs me 4 to 5 months of rental income.
Don't listen to me. I've been wrong many times. It is your money. You have to be 100% positive and you need to be able to made decisions without relying on advice from any person including brokers, attorneys, financial advisor, friend, BP members, etc. NOBODY!
