Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
I currently live in State College, PA, but my wife and I have considered a move to Portland Maine. All of our investments are in our local Pennsylvania market and I have no experience with PM or turnkey companies, however I am exploring both options currently.
I see a lot of discussion regarding out-of-area investing in different Texas markets, Indianapolis, Chicago, and Memphis markets. Ultimately, if it's simply a buy-and-hold investment, the area shouldn't matter too much, except that I want the right amount of stable growth coupled with consistent job growth. For my wife and I, we would enjoy taking 'business trips' to Portland, ME to look for additional rentals or to inspect the units we would own.
When I read through most of the BP posts, I see very few references to any markets in the North East. Is this because the NE is that much more expensive when compared to other markets? Is it that most North East REIs haven't found BP yet?
Any thoughts would be appreciated.
Thanks in advance.
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
12y
"one of the turnkey companies I talked with in Memphis mentioned that in order to finance any of the properties they were offering would require significant down payments (30-40%) because the appraisal would not come in high enough to support the 'purchase' price. My initial reaction is that the asking price is too high if the appraisal won't support the sale price."
Keep well away from them Liam. Our market has more than a few over priced cowboys. Could take decades for the properties to be worth what they are trying to sell them for. if they have no equity now don't touch them!
THis whole strategy of "the price doesn't matter as long as it cashflows based on finance" is a reprehensible strategy. In New Zealand we would say it is stitching people up, (not a good thing) :-).
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Geoff S. I agree with your sentiments regarding location of the BP members. I'm sure Brandon or Josh could figure out a way to make a really cool map showing how many members are from various areas of the country.
I see you're a contractor as am I, are you an investor as well? I helped start a design/build company in State College, PA. I now oversee the day-to-day operations for our MEP, insulation/air sealing and renewable energy crews (which is actually only one crew right now; we're planning to expand to 2 - 3 crews this year). My current work is not quite my cup of tea, which is why I want to grow the division this year.
Contractor · Chebeague Island, ME · Member since 2013 · 68 posts · 14 votes
12y
@Liam Goble:
Hey Liam, Investor, contractor and fellow trail runner. You gotta get up here this summer and run in the Bradbury Mtn race series a lot of fun. Keep in touch.
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Geoff S. The trail series looks fun. Unfortunately our currently planned trips fall between the Scuffle and the Breaker. I've always wanted to run an ultra though, so maybe I just need to train for the Pounder.
Maybe next time my wife and I are in your area we could grab coffee/beer in Portland or on Chebeague Island.
I'm just a little further north than @Geoff S. ... and am also very well acquainted with trails (I run ultras).
There are almost 600 BP members listed for Maine, though I have no idea what percentage of that would be active. @Kenneth LaVoie is about an hour north of Portland in the Winslow/Waterville area and would be a good person with whom to make contact.
I think the high-level answer to your question regarding mentions of Portland, Maine on BP has more to do with population than anything else. Not counting the population of the surrounding communities, Portland has a population of around 66,000. Some of the more popular areas mentioned on BP like Memphis and Austin have more than half a million people and probably the suburbs of those large cities even surpass Portland, Maine in population. More people equals more housing and more investment opportunities. There's probably more to it than that, but that's my bet anyway.
If you are interested in rentals in Portland, maybe a get in touch with a realtor and get an idea of what to expect for cap rates, etc. there and maybe give them some of your criteria so they can be on the lookout for properties you might be interested in. Unfortunately I can't recommend one to you as that isn't my farm area, but maybe use the search box at the top of the page and try to connect with a BP member from that area and see if they can recommend anyone. Good luck to you.
Contractor · Chebeague Island, ME · Member since 2013 · 68 posts · 14 votes
12y
@Stephen Doyon:
Hi Steven, I would agree with your perspective regarding the population, units available and subsequent deal availability.
The original discussion was more about the number of BP members from this area vs other areas. I wonder if this corresponds to what you mention or if it's some other reason such as New Englanders being older, fiscally more conservative, etc. Or is simply BP and it's core group having possibly originated elsewhere having yet to fully extend it's reach here?
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Stephen Doyon I hadn't considered the size of the population in regards to mentions of Portland ME. State College has approximately 50,000 people with a total of about 100,000 in the entire county, so I am familiar with a city the size of Portland. Interestingly enough, according to Zillow, both State College and Portland median home sales are approximately the same.
I actually wonder how much the age of the population and speed of adoption of new technology (BP) affects the demographics on BP. For instance, I know that within my local area, very few Realtors or investors know of BP. I've discussed the benefits and resources on BP, but to my knowledge, no one has joined BP.
Stephen or @Geoff S. , would you have a recommendation for an investor friendly Realtor in the Portland area?
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
12y
@Liam Goble
What's up Liam. I went to Penn State and spent a couple summers in Maine. Recently, I saw a nice Victorian condo in downtown Portland. It was gorgeous for only 54k. I was ready to get it immediately. After more investigation turns out it was 540k. Wishful thinking. I like that combo of Portland and State College though.
Both areas, can be late adopters for a lot things. I think it mostly has to do with their geographical remoteness if it's actually low on BP per capita scale.
Sheffield, IL · Member since 2012 · 85 posts · 27 votes
12y
I see a lot of discussion regarding out-of-area investing in different Texas markets, Indianapolis, Chicago, and Memphis markets. Ultimately, if it's simply a buy-and-hold investment, the area shouldn't matter too much, except that I want the right amount of stable growth coupled with consistent job growth.
Liam, You are right, I am in Houston, Indy, and Memphis :) Cash flow works many places, but the team is a big piece, and you can believe there are different quality teams in those markets. The class of property is also important for us out-of-state investors. I've made mistakes with C and D in other markets and there's no way to sell and cut your losses! If you want to know more about those three areas, I can share my resources.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
12y
@Liam Goble the area matters tremendously, no matter what your objective is. Some markets are better for buy and hold cash flow while others are better for appreciation. The first thing you should do is decide which is more important to you and what your overall investment objective is and then find the market that best serves it. I shuddered a little when I read your comment that the market doesn't matter. I see too many people invest in markets without really knowing why and make mistakes. I wrote a report on how to choose the best market. Feel free to contact me if you'd like a copy or just to get some ideas.
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Mike D'Arrigo I was actually listening to a previous podcast of your radio show that had been shared to me by another investor a few days back. Your show pushed me to begin seriously considering out-of-area investment. I guess I would like to quantify (maybe I mean qualify) my statement regarding "Market doesn't matter". I should have concluded that statement "so long as a few conditions are met: the area is stable or growing (no Detroits) and the numbers work with out fudging your projections".
For me, my current objective is cash flow. The issue I have with my local market is that the 'best' available opportunities are returning ~6% cash on cash. I can get that amount of return with REITs. At 6% it will take me a really long time to become financially independent! Because of the lack of return on my investment, I'm actually going to be starting a flip in the near future, because that's all my market has to offer right now.
I'll get in touch to get a copy of that report. Thanks for taking the time to reply.
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Steve Endress Thanks for the info. I would really appreciate any information you have on those areas. I had been thinking about Indy or Memphis, but a lot of people been discussing many of the cities in TX. I admit, one of the turnkey companies I talked with in Memphis mentioned that in order to finance any of the properties they were offering would require significant down payments (30-40%) because the appraisal would not come in high enough to support the 'purchase' price. My initial reaction is that the asking price is too high if the appraisal won't support the sale price. Maybe I'm wrong and just don't understand investments at a distance.
This outfit from Memphis also listed potential cash flow from these properties, however, with the sizable down payment, the cash-on-cash return is back down to the 7-10% range, which is again quite possible with REITs or even some strong LLPs (EPB, KMP, KMI) or traditional blue chip stocks (T).
** Disclosure: I'm Long EPB and KMI. No interest in KMP or T and no plan to start a position within the next 30 days.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
12y
@Liam Goble I'm from CA so I totally relate to what you said about 6% returns. Actually, that would be a smoking hot return in CA! That's why I'm such a fan of some out of state markets. All of the ones that you're talking about are good cash flow markets. I think Indianapolis and Memphis are a little stronger than some of the others. TX has a great economy right now but also have some of the highest property taxes and homeowners insurance rates in the country. Feel free to reach out if you'd to bounce ideas around.
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
12y
"one of the turnkey companies I talked with in Memphis mentioned that in order to finance any of the properties they were offering would require significant down payments (30-40%) because the appraisal would not come in high enough to support the 'purchase' price. My initial reaction is that the asking price is too high if the appraisal won't support the sale price."
Keep well away from them Liam. Our market has more than a few over priced cowboys. Could take decades for the properties to be worth what they are trying to sell them for. if they have no equity now don't touch them!
THis whole strategy of "the price doesn't matter as long as it cashflows based on finance" is a reprehensible strategy. In New Zealand we would say it is stitching people up, (not a good thing) :-).
Rental Property Investor · State College, PA · Member since 2013 · 287 posts · 99 votes
12y
@Dean Letfus Thanks for the advice. I did some further research and the amount of flashy suits they show online makes me wonder (not really wonder, but know) where the money from the deal goes. In your experience, are turmkey providers generally over priced in order to keep their model working?
When you say stitched up, kind of reminds me of the Black Knight in Monty Python's Search for the Holy Grail "Tis but a flesh wound. NO 'tisnt, your arm's off!"
Did your job take you from NZ to TN?
@Mike D'Arrigo Thanks for the feedback. I'll get in touch over the weekend...long day and it's late in PA.
Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
12y
@Liam Goble well my business is supplying Memphis investments to non US residents I live in Fiji but spend plenty of time in Memphis and New Zealand. NOw get thee to a nunnery or I will fart in your general direction.
Turnkey is such a generic term in the USA it is very difficult to stereotype them. In Memphis there are a handful of players, most of whom are on BP who all know what they are doing but their required margins vary a lot. Some of them generate most of their leads through third parties and real estate guru roadshows and they have to pay enormous commissions to them so their prices are crazy high in my opinion.
I know one company pays 14 to 17K per sale to the referrer, hardly a good deal for the buyer is it!
The smaller players like Alex Craig, Curt Davis and ourselves work on smaller margins so I think we provide better value by leaving equity in the deals.
But the bottom line is make sure the location is OK, the property is rentable and you aren't paying too much. Nothing else matters you can always change management and repair damage but you can't change the location.
Unlike a lot of cities Memphis has many areas where values are falling or permanently stagnant so you have to be careful where you buy!!
Real Estate Attorney, Broker, Investor · Indianapolis, IN · Member since 2013 · 207 posts · 58 votes
12y
Liam,
If you are interested in the Indianapolis market and need some insights, please feel free to contact me. I would be happy to discuss the current market and housing inventory.
Sheffield, IL · Member since 2012 · 85 posts · 27 votes
12y
Liam,
Cash on cash return is 7-10% on the A properties I own, but that's only a quarter of the picture. You don't get depreciation, appreciation, leverage, or principal paydown with a REIT. When you add those all together, the IRR is 30%+.