Where should I buy?

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Originally posted by @Peter Nierman :

Hi all, 

I am an entry level investor (own my house with a mother-in-law) and am looking to buy my first true rental property.  Since I live in Seattle, where prices are crazy, I am looking out of state.  

Currently, I have about $50k for a down payment and have been looking in Atlanta, Indianapolis and Philadelphia.  It seems all the good deals in Philly are in bad areas, Atlanta is not as good as it was a year ago, but Indy looks pretty good. 

Would appreciate any input from others who are investing out of state or who have an idea as to what markets are safe but will still cash flow.  This is a pretty big step for me, but I am ready to take the plunge.  Also interested if people have input on how to manage out of state property - figure I need property management/yard maintenance. Thanks!

Peter

 Peter, you are definitely int he right forum for advice on this subject. I will begin by cycling I am a little biased towards Cleveland, Ohio - if you have not seen this market, I recommend looking into it, $50K down payment can go a long way in good well established suburban neighborhoods. You can expect to see hi yield rent ratios. Its a good space that is booming a little bit about Cleveland:

Did you know:

CLE - home to the 2016 Republican National Convention

CLE - Superman was created here

CLE - Cleveland Clinic #1 Heart Surgery Center in the World

CLE - Over a dizen Fortune 500 Companies

CLE - Second largest theatre district in the Country

CLE - Epicenter for BioMed Research & Development

CLE - A great place for the WHOLE family/

CLE - A great place for investing come check out the beautiful things CLE has.

Anyhow, I think we need to get back to the core of the question: As a new investor looking / considering investing outside of your local hyper area you will want to define someone who is not just going to help you buy, renovate and then you will figure out how to manage, you want someone who can allow you to have passive income without giving up your full time occupation. Who is this person and how do we define this individual? You will notice if you dig around BP a lot of discussion about TurnKey - this is your number one solution! However, I think it is important to standardize the definition of Turnkey:

*Turnkey = A cash flowing asset, that has been acquired, renovated, tenant placed and vetted and all managed by (1) operator - all service are in house.

You do not want to work with a piecemeal operator, they have no skin in the game, the loyalty is very short lived, plus you cannot place actual value on a property that has not been renovated yet, difficult and complex to finance. What I mean by this, if the "partner" you define in any marketplace can take you through acquisition and construction and have to pass you along to some tertiary management team, I will suggest avoiding this situation, no one has any accountably for anything. 

I am assuming you are not going to be looking to try to have a long distance rental and doing it on your own. I think a big fail here is that you do not get the value of the team, the economies of scale, the immediate hyper local knowledge to make your rentals a success in long term play, for cash flow with an eventual exit or reposition.

Next, moving on! 

Now, we have defined our perfect operator: someone who offers a completed renovated, cash flowing asset with in-house management services. You get the global experience, you get the economies of scale. Best practices to consider when working with a turnkey operator is to discuss the construction method and methodologies, tenant screening policies, view copies of the rental agreements and management agreements. You want full disclosure, complete transparency and operator who has the sophistication to accommodate and communicate with far reaching clients. The management is the secret sauce behind every asset, a good and happy tenant is a good and long term tenant. Visit the teams you expect to work with, see what they do and how they do it, Meet the people see the communities.

Do your homework, be invasive, ask tough and hard questions, scrutinize and understand the pro-forma and what the pro-forma is saying, just because it says one thing in Kansas and another in Cleveland, does not mean they have the same definition, I know our core logic tells us they should all be the same, but, believe em I have seen some crazy stuff over time. Be diligent! You will want to ask blunt questions about resilient product implementation during construction so you can better understand the ramifications of multiple tenant turns. Ask why they use specific products and how they serve you. A sophisticated well established turnkey operator with the proper systems, should be any more expensive not he contrary you should be able to take advantage of the efficiency and uniform systems designed to service investors exclusively. It's not just any amazement and any construction materials and any support staff, you want the A team, no matter what area. Whatever you do in any market you need to make sure you get a home inspection. You want to get as much repaired and cleared up during the purchase process. The more risk you mitigate = MORE ROI ! You want to define an operator that can provide you with scientific data to your questions, I am saying yes, precision data, a good sophisticate deported will always be measuring themselves with a series of widely accepted metrics to enhance the performance and opportunity to the investor.

Finally, some people will post about the premium placed on these Turnkey assets, NO a good sophisticated operator, with good systems in place, with a positive track record will be able to extend their economies of scale to the investor, you should be able to acquire at or below market, obviously below market if possible. If you plan on financing, this condition will be regulated by the lender regardless, the appraiser will determine f the home is or is not worth the money. Obviously if you do not appraise, you will need to bring money to the table to cover the gap, this places you in an underwater situation, I would avoid this type of transaction. I know it sounds perhaps silly, you would be shocked to learn how much of this goes on.

Happy investing!

GO CLE!

#TeamTurnkey

Originally posted by @Peter Nierman :

I am preferably looking for multi.  I found what appeared to be great deals around Temple Hospital, but my buddy in Philly said the homes were in a horrible neighborhood. 

 Peter, when considering Multi VS Single - consider the additional owner burden responsibility and the communal area you would be responsible for serving, yard, snow - then you need to define if the utilities are separately metered or not etc. Just a little item to consider when looking at the ramifications of Multi vs Single

Single Family  tenant is responsible for all services, at least this has been my experience. 

Originally posted by @David Bokman :

I highly suggest you link up with someone in the area and learn more about it if not even take a trip down here. Philly is a block by block city and if you invest on the wrong block your screwed! We see many out of state investors get burned big time by thinking just because the price seems good, doesnt mean its a good investment. If you don't know anything about the area I'd be very careful and cautious.....just my 2 cents.

 David good point, its not about price, its about the actual value and the operator you define. You want to have an understanding what the sweet spots are and what the sweets are for renters. Most importability again ask your operator for actual scientific data for the immediate area, if they are masters of their hyper local areas, they will be able to flood you with knowledge. Good advice, I think it applies ot all markets, however not all areas, if that makes sense :) 

#TeamTurnkey

Originally posted by @Alex Craig :

Notice @Steven Gesis didn't mention the Cleveland Indians or Cleveland Browns.  

 Alex, you are correct, they are not notable at this time, hey, we cannot have it all, however we do have (3) major sports teams. As you did notice I am certain I did mention the Cavs. 

I am true Clevelander and it has been absolutely amazing to be a part of this Renaissance, I can take a few on the chin when it pertains to our sports teams. We have them and we are proud of what we have :)

If you happened to watch the Monday night Football game you would have seen something, I think no one has ever see before, is watching the Cleveland Browns have a blocked field goal, with a return to the house by Baltimore (the former Cleveland Browns) for a loss with 0.00 seconds to play, this was not notable in-fact embracing. 

Come tour us and come check out our awesome spaces, I think even though the some of our teams were not notable still a great time at any one of those stadiums.

#TeamTurnkey

As mentioned @Peter Nierman by @Justin Ericsson flying out to those markets and finding some reputable turn-key providers can go along way. 

When looking for a market to invest in its best to look for:

1) Landlord/business friendly

2) Job Growth

3) Population Growth

4) Steady appreciation in property values

5) Affordability(personal preference)

6) Macroeconomics

Hope that helps

Originally posted by @Justin Ericsson :

Peter

i would recommend flying out to meet 3 turkey operators in the markets you like. This will give you a wealth of information to narrow down your decision. 

 Peter-

Excellent recommendation, I think meeting the people / operators in the respected markets half the battle, this way you can get a real feel for who they are and their operation. Not only meet but see what they do and how they do it, check out the city, learn about the local history and economic conditions.

Originally posted by @Account Closed :

Hi Peter

I closed recently on my first out of state property. When I first started looking I was focusing on what were the areas I may want to invest in. What it turned out to be for me was not where to invest but with who to invest. It is truly about being comfortable with your turnkey provider and trusting that they know what the good and not so good areas are. If you are going to go the turnkey route talk to different providers but make sure you have a conversation with Alex and Jeremy at Memphis Turnkey Properties. So far I'm very pleased with this partnership. 

 Marty, first and foremost congratulations on taking the plunge! Im certain if you have a good experience now, you will continue building your wealth and portfolio. Great advice, eating the operator is hyper critical, you want to see these people, the office they have, the support staff in place, physically see the area and the homes. We have experience with clients that never visit us during their first acquisition, but eventually travel to see us. On the other hand I would say over 70% of our clients do come and visit and want to see the physical home, the process form A-Z, we encourage it and I encourage investors on BP especially first time investors, put boots on the ground, visit the operator and be intrusive.

#TeamTurnkey

@Steven Gesis  I was just yanking your chain; no I didn't see that.  I simple could not bring myself to watch that game, but I did see it on Sports Center.  Looks like it is Manziel back to being the stater...what a knucklehead he is. I have been to Cleveland before, saw the Indians play the Yankees; great town.

Hi Steve, Thank you! You are right and I know it's important to go visit and interview the different providers and the areas. I did not for my first purchase but I will before what I hope is many more. 

Originally posted by @Alex Craig :

@Steven Gesis  I was just yanking your chain; no I didn't see that.  I simple could not bring myself to watch that game, but I did see it on Sports Center.  Looks like it is Manziel back to being the stater...what a knucklehead he is. I have been to Cleveland before, saw the Indians play the Yankees; great town.

 Lol, I know, I was just giving Cleveland some moral support :)

Looks like Johnny is back, hope he keeps his nose clean, we will see , I think he will be our 25+ QB in the past 10 yrs. its sick!  Happy to hear that, I don't know when you were here last, I would say its worth checking us out now and seeing all the amazing things going on around town, we are a whole new city in every corner and every aspect.

Originally posted by @Account Closed :

Hi Steve, Thank you! You are right and I know it's important to go visit and interview the different providers and the areas. I did not for my first purchase but I will before what I hope is many more. 

 Yes, sounds like you have a descent experience not a stellar one, sometimes you need to crawl before you can walk and with experience you begin to see how important the operator is to the sustainability and viability of your asset. I truly believe the management is the glue that keeps it together, so you want an operator who can give you that in one package. We hear the horror stories everyday here. We actually existed our retail property division in April to a national vendor, this department would take on any homeowner but not any property we were selective, but we were constantly battling massive overhead cost due to the unique qualities and building found at every site, being scattered site with over 700+ doors under management was super complex and required a lot of staff. Now, we do things differently after we exited this company, we exclusively manage assets for our investors that acquire direct from us, we will not take on any outside portfolios, the reason why we do this is that we can control the entire process and place systems that allow us to reduce the administrative burdens commonly associated with management companies. Through our uniform construction material and methodology process, we are able to mitigate lots of risk to the owners, ourselves and tenants, plus we know and the investor knows exactly what goes into the property and why, we can control materials and implement resilient products throughout, everything from paint, flooring, sinks, light fixtures, tile, furnace to hot water heater. Not only are we bringing the homes to a specific high quality standard, which allows us to provide a warranty with the property for maintenance, but the  long term and short term maintenance is mitigated by/through the implementation of uniform resilient product lines. I think actually seeing and meeting the operator you intend on working with and seeing the product goes along way in building/forging good long term relationships.

Originally posted by @Peter Nierman :

@Marty Bosse and@Justin Ericsson - are there any turnkey providers you would suggest?

 I suggest that you give Alex Craig a call at Memphis Turnkey Properties. Of coarse do your due diligence and talk to others as well. They are full service if that is a proper term for what they do. They buy, rehab and provide the property management. My experience with them so far has been as good as I hoped it could be. If I can say one more thing...I lurked around BP for a good 8 or 9 months and was suffering big time with analysis paralysis. If your ready to go talk to some providers and get started. Good luck!!

 @Peter Nierman :

Also interested if people have input on how to manage out of state property - figure I need property management/yard maintenance. Thanks!

We invest in & out of state.   Consider establishing relationships w/ local Property preservation companies along w/ property management as you explore investing out of state.

I work at Temple University regularly. I can say first hand that properties around the university and the hospital are only blocks apart, but might as well be worlds apart. I would never leave my car parked around the hospital, but I park on the main campus all of the time and feel totally safe in that area.

Originally posted by @Steve Babiak :
Originally posted by @Alex Craig:

Notice @Steven Gesis didn't mention the Cleveland Indians or Cleveland Browns.  

Didn't mention the NHL Barons ... oh, they folded, maybe that's why ;)

http://mweb.cbssports.com/nhl/eye-on-hockey/228142...

Steve, do not have a lot of 1970's NHL Hickey knowledge, however, looks to me like we had at one point (4) major sports teams :)  The article references cult like followings of major Hockey Teams and Cleveland got a little beat up in this 2013 article. 

Do not forgot about our Arena Football League - Cleveland Gladiators

Why not throw in our current American Hockey League  - Lake Erie Monster

So much for 2013 and the 70's, the next frontier in Cleveland is something unlike anything else before.  We welcome you and look forward to hosting you in the remarkable space, come relax, live, laugh and enjoy the renaissance for yourself.

CLE