Completely New to RE Investing with Some Questions

[Jaci Sattler]

Looking forward to starting this journey! In my brand-new stage I simply hope to find a cash-flowing deal and learn from there. For single-family rental homes, is it normal to have a waiting period of a few years before cash-flowing? 

Only looked in areas such as Tulsa, OK and Fayetteville, AR so far. Much further research is necessary, but what does everyone think in terms of benefits of investing locally? What are the major benefits? I have seen recent posts about more difficulties of investing out of state. 

Finally, any advice on finding local, in-person meet-ups for real estate and investing? 

Appreciate any insights and thanks for all the contributions already out there in the forum. The forum posts are just as educational as any articles and I love the real people and real stories. 

[Caleb Brown]

Locally is best case. You are familiar with the area, can drive to the property and it's easier to manage. Some areas are more expensive though. You either have to get creative or look elsewhere. I'd try to start local. Most would recommend some sort of a house hack. Can be a variety of ways to do that. For local meet ups I'd look on FB. In my area there is a handful of great groups that also have active FB groups. Not sure if every area is like that but there should at least be a couple groups present on FB. 

[Julio Gonzalez]

Starting with the aim of finding a cash-flowing deal is smart. Remember, the time it takes for cash flow can vary based on location and property management. Research is key!

Welcome aboard and best of luck investing!
-Julio

[Michael Smythe]

@Jaci Sattler when you cashflow will depend on the Property Class you target and how INTENSE & patient you are in looking for an acquisition.

Many new investors think they have to pay close to market price for a rental. Low interest rates contributed to this mindset, making it easier to cashflow. With rates now up, an investor needs to get a lower purchase price to cashflow. You may need to look at 100 properties and write 10-20 offers at a PRICE THAT MAKES YOUR ROI WORK, to get 1 offer accepted.

Regarding Property Classes,  investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Here’s our OPINION for the Metro Detroit market (always verify each area for yourself!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

What else can we assist you with?

[Wale Lawal]

@Jaci Sattler

Hello, and congratulations on starting your real estate investment journey! Let's address your questions and concerns:

1. Time to Cash Flow: Depending on the market, the effectiveness of the property management team, and your original investment plan, a single-family rental property may take a variety of lengths of time to begin cash-flowing. Investors may see positive cash flow in a few years in certain situations, but not in others. The local market, finance for the property, and demand for rentals all play a role.

2. Local vs. Out-of-State Investing: Investing locally has a number of advantages, such as knowledge with the market, simplicity of property administration, and the capacity for active involvement in your investments. You may develop local relationships, comprehend neighborhood dynamics, and react swiftly to market shifts by being physically there. On the other hand, investing outside of your state may provide you access to markets or possibilities that might be more advantageous. Robust remote management tools and a dependable local personnel are frequently necessary.

3. Benefits of Investing Locally:
Market Familiarity: You are aware of the economic, residential, and market trends in your community.
Manage Properties Hands-Only: Being close by enables you to take care of problems quickly, manage properties, and establish connections with local experts.
Prospects for Networking: Connecting with other investors, real estate experts, and possible partners can be facilitated by attending local networking events and meet-ups.

4. Finding Local Meet-ups:
To find events relating to real estate and investing in your region, check out websites such as Meetup.com or Eventbrite.
Attend your local REIA meetings; they frequently provide educational seminars and networking opportunities.
Look for workshops or seminars on real estate hosted by specialists in the area.
Make contact with nearby property management firms, brokers, or real estate agents; they could be able to provide you with details on forthcoming events.

Remember, networking and learning from others in your local community can be invaluable as you start your real estate journey. Attend meet-ups, ask questions, and build relationships with experienced investors. The forum here on BiggerPockets is a great resource, and local connections can complement your online learning.

Best of luck on your real estate investment journey, and feel free to reach out if you have more questions!

[Sloane Kraftsow]

Starting your journey with a focus on finding a cash-flowing deal is a smart approach, and it's great that you're considering single-family rental homes. Regarding your question about the waiting period for cash flow, it can vary depending on factors such as property condition, location, rental market demand, and financing terms. In some cases, you may start cash flowing right away, while in others, it might take some time to stabilize the property and attract reliable tenants. Conducting thorough market research and due diligence will help you make informed decisions.

As for finding local, in-person meet-ups for real estate and investing, there are several avenues you can explore. You can start by checking local real estate investor associations, networking events, or seminars. Websites like Meetup.com often list such gatherings, and social media platforms like Facebook or LinkedIn may have groups dedicated to real estate networking in your area. Attending these meet-ups can provide valuable insights, networking opportunities, and access to mentors who can share their experiences and expertise.

Don't hesitate to ask more questions as you continue your real estate journey as I would love to connect!

[Jaci Sattler]

@Michael Smythe I very much appreciate the class breakdown and the opinion because it gives me an ideal way to do my own research and lay out the information. Also the advice on writing offers and the lower purchase price is something I have been wondering about given that I have not yet ran preliminary deal numbers at purchase price without negative cashflow for single family rentals in my area. I'm curious - when you reference your doors in the Metro Detroit area, are these mainly single family rentals? 

[Jaci Sattler]

@Wale Lawal Thank you for the insights and addressing all my questions! This is possibly a silly question, but given you're a real estate broker, what is the best way to reach out to someone like you in my area? What types of questions might be good to start with if I would like to find out about investing in single family rentals? 

[Jaci Sattler]

@Sloane Kraftsow Thank you for the reply! I didn't think about using LinkedIn to find REIA groups, but I will certainly look into this avenue.