Second rental closed and occupied

6 Replies

I closed on my second out of state rental back in early July and the tenant finally moved in a week ago.  Here are the lessons learned from this one:

1.  if vacant, assume it will take 2 - 3 months to get a suitable tenant

2.  if section 8 and none of the occupants are under 6 years of age, you don't have to be as careful with paint as you otherwise would need to be.  

3.  even if in turnkey condition, expect to spend between $500 and $1,500 on making the place rent-ready. 

4.  when doing home inspection, tell the inspector you intend to rent the property, and if to section 8, make that abundantly clear

While not a lesson learned, it is critically important (especially when buying out of state) to make sure everyone else is doing their job.  This includes seller's attorney, your attorney, lender, home inspector, property manager and most important, TITLE AND ESCROW.  I had to correct the title officer 3 or 4 times, otherwise my cash to close would have been $5000 higher.  Needless to say they shall not be used again.  I had to double check things with the lender several times and fortunately those mistakes were tiny.  

One last thing.  When writing complex emails involving multiple people, be a professional and don't use pronouns.  He, she, they, them, our, etc., lead to confusion and delay.  Use proper nouns and be overly specific.  

That's about it for this last one.  On to the next! 

@Patrick Britton What title and escrow company did you use? 

What is your CoC % like? What type of deal did you get into, did you need to put more cash upfront for it to cash flow or did you find a bargain?

If this is your second out of state, are you using two different property management companies or are you going through a big national one? 

@Cristian Aviles-Morales Old Republic was the title company used in the last transaction. cash on cash is just under 30%. it was MLS deal. i think i bought it at a fair price. same PM company but local and highly recommended, GC Realty & Development @Mark Ainley

BTW - sorry for delay, i didn't get notification that someone had replied :(

@Patrick Britton Didn't know Old Republic was so far north. I have them, but they serve as a Home Warranty solution. 500~ a year. $70 service call. Handles what my policy covers (appliances and stuff..) at no additional cost to me. If it goes over a certain amount it then costs me money (like a failed HVAC unit that has to be replaced and will cost $x,xxx amount. 

Still I've been happy with them. 

So you found it on the MLS, and the property "fit your numbers"?

I'm having issues finding properties like that unless if I sink more than 20% cash into them to drop down the mortgage price or negotiate a deep discount off the listed price. Both are not optimal solutions of course. Any tips regarding that issue that I may not have thought of? 

Originally posted by @Patrick Britton :

@Cristian Aviles-Morales  what zip codes are in looking in?  I'm buying all sub-90k homes that rent to section 8.

 Local to my city and my city is expensive. 32824. No section 8 around me that's for sure. Mostly Class B, Class B-, Class C+. 

And being new to this, I COULD go after section 8 but it is a scary thought that's for sure. 

Did you start off with renting to Section 8 tenants? What made you decide to take that plunge? 

oh i see!  I thought you were investing in southside Chicago as well.  

I live in WA state and it's actually very easy.  I have no issues with section 8 whatsoever.  in fact, in many respects they are superior to market tenants.  not all, but many.  it helps to have a property manager like GC Realty, otherwise I would not be comfortable investing there.   Arguably, the property manager is the most important member of the "team."   

Funny, out of state investing in southside Chicago with section 8 was my first full-blown, long-term rental.  now i have two and maybe in a month i'll have a few more.  Like your area of the world, mine is expensive and cashflow is impossible.  To me the decision to invest there and in section 8 tenants was easy, but i am a contrarian by birth, so wherever most people avoid, I flock.  Section 8 gets a bad rap but it's not always justified.  

Southside Chicago has a bad reputation, but there are areas that are not war zones - this is where good property manager comes in.  Because "no one" wants to live there, prices are low, but section 8 housing voucher is very generous.  So you get cheap homes with large subsidies...that equals great cashflow potential.  

Don't get me wrong, it was a monumental effort to get everything sorted and to finally pick the area.  I searched all over the country for several months before landing on the windy city.  I had to go through a few realtors as well.  The hardest part was finding a lender, since the loan amounts are so low.  

I hope this helps a bit.  

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you