Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
I live in Los Angeles. There is just no way I can get a performing rental property in my market. How do you invest outside of your area without getting burned. Already tried getting a "turnkey" property which was a total disaster.
Should your first property be a SFR or is it better to go straight to Multifamily?
What are the pros and cons of multifamily versus SFR?
What is the smallest Multifamily you should purchase if you go this route?
All turn-key properties/ companies are not created equal. To answer your question, I would make sure you either have boots on the ground in the market you are investing in or you use a reputable turn-key company. There are several very good turn-key companies with proven track records to choose from.
In terms of single family vs multi, that is up to you and your strategy. SFH can be an easy entry into investing as you only have one lease and one tenant to worry about. Not much overhead here or things to keep track of. With a multi, you will have more leases and tenants so there is more admin work and maintenance to take care of. Something to keep in mind is your risk tolerance and financial safety net. For example, if you lose your tenant in the SFR you now have 100% vacancy rate until that home is filled. Could you financially handle 2 months of no rent? Using the vacancy example with a multi, if one unit is vacant your vacancy rate is lessened as your other units are there to compensate. You will have to compare the two investments and see what makes best sense for you.
Either way when investing out of state you are going to need help managing the property. Therefore if you do find a property and it looks like the numbers make sense I would make sure you have a strong management plan in place.
Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
10y
I realtor cannot answer what kind of property to start with. They can give me market information, once I determine a market.
Everything I'm reading says i need a team in that local. How do I form that team. I'm finding management companies don't want to help by inspecting the property prior to purchase to give repair costs (Can't even get them to take care of the one that was sold to me).
Realtors selling rentals keep offering properties that are @20-30% over retail just because they are tenanted.
How do you build a good team. Is there anyone working in the Detroit area that has a good set of referrals for purchase, rehab, and property management?
All turn-key properties/ companies are not created equal. To answer your question, I would make sure you either have boots on the ground in the market you are investing in or you use a reputable turn-key company. There are several very good turn-key companies with proven track records to choose from.
In terms of single family vs multi, that is up to you and your strategy. SFH can be an easy entry into investing as you only have one lease and one tenant to worry about. Not much overhead here or things to keep track of. With a multi, you will have more leases and tenants so there is more admin work and maintenance to take care of. Something to keep in mind is your risk tolerance and financial safety net. For example, if you lose your tenant in the SFR you now have 100% vacancy rate until that home is filled. Could you financially handle 2 months of no rent? Using the vacancy example with a multi, if one unit is vacant your vacancy rate is lessened as your other units are there to compensate. You will have to compare the two investments and see what makes best sense for you.
Either way when investing out of state you are going to need help managing the property. Therefore if you do find a property and it looks like the numbers make sense I would make sure you have a strong management plan in place.
Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
10y
Hello and welcome to BP! My two-cents worth. I think you shoul get 15 units and a third person management company is pretty critical. I would say that in this current business MF is better than SFH. Vacancies in MF usually hurt you as bad as in a single family rental. I kept my real estate brokerage license for about 30 years and would still have if I had not had a brain anuerism and a stroke but I never used that license full time.
Do not be so concerned about the expense of a management company. Hire a property management company that has experience in that area. You have to treat it as a serious asset. I did a few real estate deals for other people but have done only one investment deal for myself. Small apartment complexes are generally will be good for you. You can get more value added with MF. Just do what is average in that neighberhood.
I know an older man that said he did small apartment deals from home without ever seeing them. There is potentially more expenses with MF properties but less completion out there. Just be sure that their are no capital expenses that are pending and have a clause in the sales contract that allows you the time to make a detailed inspection and possibly back out of the deal without a penalty that will hurt you too much.
I am 59 years old a found BP about a year ago and I am still trying to decide what to do. I also went to college, which is not mandatory, and I got a business degree that emphasized real estate. Since I was in Texas and planned on staying there, I found out that I was qualified to take a real estate broker license, so I took the test and got a license. Know the market you select and it's best locations.
My father has been buying and selling commercial real estate for about 45 years and he has taught me a little bit. When you do close on a improved property get an insurance policy that will protect you if there is a loss. If you think that I could help you with anything please contact me through BP at any time. Good luck to you!
Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
10y
That gets into the management companies. I was definitely looking at a management company, but am not finding ones that will assist me with the purchase. Your really need to know what repairs will be needed to get the property up to snuff, but they are telling me they will look at it after I buy it. Chicken and Egg problem.
I agree with @Andrew Michael on his first point. You need boots on the ground. I have found no good Turn-Key operations. Talking to realtors only gets you so far. Remember they are sales people and you are the rich California kid (whether that's true or not is besides the point). I picked one market that is 2500 miles away and have been working it since 2009. I believe this is the only way. I travel quarterly and its fun (and I am married with three kids). If I can do it so can others. Let me know if you want to hear more about what I have done. It's work and it takes time, but it's paying off. I am only doing multifamily properties and all out of state.
Timothy Ryan I am very intrigued and would love to pick your brain on investing in another state. I currently in So Cal and want to go MFR and it seems like it will be difficult to find good deals out here. I am at the fledgling stages of investing at this point - still doing a lot of reading/ podcasting/ posting but would love to hear some of your "war stories".
Investor · North Bay, Ontario · Member since 2015 · 709 posts · 262 votes
10y
work in a number of states and have boots on the ground full teams in all ares including property management and contractor that gives a 5 year warrantee on his work if you are interested contact me... should solve your issue
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes
10y
Just downloaded the BP App on my phone. Didn't know BP had one till now. So hope this reply goes to all on the conversation.
I am investing in Tennessee and Georgia (not Atlanta).
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes
10y
Jeff H. Let's get together sometime if you come down to Pasadena area. I will tell you what I've done and I have a few local development projects you could look at.
Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
10y
So for those working remotely. How did you find and vet your "boots". I am looking in Detroit and Lee County Florida right now. I have the "failed" unit in Detroit, but would like to get some properties on the east cost. I was looking at Florida and figured I might as well purchase near where I have some land.
I live in Canada and my portfolio is in Texas. Don't let the distance stop you from investing out of state - go where the best deals are.
The #1 most important thing is to have a rock star property management team. They are the ones who will have your back and will keep an eye on your property for you. I recommend meeting them face to face, getting referrals and doing your homework before selecting one to work with. Ask the property management company if you can speak to 3 of their clients who are out of state/country investors.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
I have the perfect solution. I am a wholesaler in Orlando FL and I have been a full time investor for 17 years. Right now I have 45 SFR, duplexes, triplexes, quads and small MF in central Florida. I also have a company that I am working with (that own many of these properties they are selling) that can offer a complete turnkey package. They are a title company, then can rehab the property, they can get renters in the property and manage it for you if you want to buy and hold. They can also get it ready for sale at full market price and list and sell the property for you if you want to fix the property up and sell it. And they have access to funding if you don't have all the cash to buy any property.
I have already sold a house to a Canadian investor using the above strategies. He wants to buy, fix up and sell it, which this company can handle everything.
I also have 25 Small multifamily (less than 50 units) in Chicago IL with the same scenerio. But the best part they also offer seller financing.
I am sorry to hear your past experience with a turnkey property was a total disaster. Finding the right turnkey provider is just as important as finding the right investment property. We specialize in SFR turnkeys in the Metro Detroit area and like others have said you need to trust the "boots-on-the-ground". What I can tell you is that a really great turnkey company will not cut corners, especially on the rehab process. They also should have numbers to back up their claims and not consider property management as an addon service. I can only speak for us, but we don't cut corners on our rehabs, because we want to ensure lower maintenance costs. We also are really diligent on our tenant screening process, because your not just buying a property, your also inheriting a tenant. Because of this our investments may be slightly more than others, but are they willing to guarantee the capex for the first year like we do on our turnkey properties?
We all know that with any investment there is risk, but I hope you don't give up on turnkey completely because there are a few of us good ones still out there.
I live in Los Angeles. There is just no way I can get a performing rental property in my market. How do you invest outside of your area without getting burned. Already tried getting a "turnkey" property which was a total disaster.
Should your first property be a SFR or is it better to go straight to Multifamily?
What are the pros and cons of multifamily versus SFR?
What is the smallest Multifamily you should purchase if you go this route?
How not to get burned: Do your research. Trust, but Verify EVERYTHING.
First property should be SFR.
Generally....Lower tenant quality with MF, but obtain economies of scale. It's a trade off of tenant quality/economies of scale. There is a lot more involved, but you're not yet ready for MF.
Smallest multifamily: 60 units, unless you are willing to self-manage or you are able to acquire to 30 units close by and can split the management for both properties.
Investor · Burbank, CA · Member since 2016 · 62 posts · 18 votes
10y
This is a great chat thred, but makes a huge assumption, that owning RE is the only way to make a good ROI. There are tons of other ways, for example, I'm always looking for private lenders. You get 10% on your money, secured by the asset. No dealings with Agents, Tenants, Management, late payments, leases, repairs, vacancy, questions on which markets? what area of town?, excuses, etc.
This is a great chat thred, but makes a huge assumption, that owning RE is the only way to make a good ROI. There are tons of other ways, for example, I'm always looking for private lenders. You get 10% on your money, secured by the asset. No dealings with Agents, Tenants, Management, late payments, leases, repairs, vacancy, questions on which markets? what area of town?, excuses, etc.
I don't think that's an assumption made by the original poster. He asked specific questions about investing in real estate. That said, though your remark may be true, in my experience, directly owning the asset often provides the best opportunity to generate the highest return. Compare REIT investment with direct property investment.
Also, if I'm understanding your post correctly, I don't agree with your comment about "level of work required" by hard money lenders. If you're a hard money lender and are not researching the quality of the borrower and the asset he's investing in, you'll be in for a world of financial hurt and it's unlikely your business will last.
Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
10y
Stay on topic. The other diversification strategies are not relevant at this time. I want to build a rental property portfolio. Need to know how to build strong teams remotely and find good deals remotely.
Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
10y
Hi @Sharon Anschultz, I have helped many clients that live in California invest their funds into grade A multi-family properties around the country. If you're an accredited investor you might consider investment into DSTs. They are hands-off, institutional grade real estate investments, and they allow you the option to diversify. You can buy into institutional grade $50-125M projects with as little as $100,000. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse. Feel free to connect with me here on BP, happy to help. - Leslie
Canyon Country, CA · Member since 2016 · 20 posts · 2 votes
10y
@Leslie Pappas
100K is steep for me. I'm not ready for that level of real estate investment. I keep this in mind for the future. I'm really looking for SFR and Multifamily 1-4 if possible so that I have the option of financing.
Designer/Contractor from Riverside, CA · Member since 2015 · 56 posts · 26 votes
10y
Sharon Anschultz have you contacted a commercial real estate agent? Some specialize in multi family or working with investors specifically. When I was in CRE most local investors invested in both the high desert and low desert. You can find agents and their listings on loopnet, maybe even find a team that's investor friendly in another state or find a local agent who can refer you to someone they know out of state.
Now we get into the trust issue. I have been browsing loopnet. Unfortunately, we are not sure how we figure out who we can trust and who we can't. End the end, a real estate agent is focused on that commission.
Designer/Contractor from Riverside, CA · Member since 2015 · 56 posts · 26 votes
10y
Sharon Anschultz find someone who is a member of AIR that's where all the serious CRE agents are and where their listings are posted. If you don't want to pay someone then you'll have to find a deal before they do.