For those who own Rental Properties

18 Replies

For those who own rental properties, landlords, etc, what areas do you like to buy in? What do you like to see in your deals? Do you invest in Trust Deeds as well? Or just property?

The best area that will produce the largest ARV and rent that my money can afford.

Key phrase: "that my money can afford".

 I'm a cash buyer and can only afford low income areas at the moment but I'm seeing my purchasing power rise after each deal.

What I like to see in my deals are $5-$10k less than listed price when I come with cash.

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Tim,

Are you flipping or holding?  I hold and refi, or Wholesale in my area of Michigan.  The cash flow is so good we pay cash at AP and let the Rehab gain our equity fast.  We refi within 30 days, get all of our cash we put in back out (sometimes more) then repeat it all over again.  This way, we actually never really spend any money...we just keep using the same cash over and over again.

oe Villeneuve
REcapS Systems

My husband and I look in areas that allow us to invest in properties that give us around a 20% ROI give or take. We focus primarily on purchasing properties that generate cash flow each month and that are in an area where home values are increasing (not at a rapid pace but at a steady pace)

In addition, we look for properties that are under market value by anywhere between 15%-25%.  Then we are able to do some light renovations and force appreciation in the first year or two.  

For instance, one of the properties we own we bought (with conventional financing 20% down) at about 17% under market value, put around $5,000 into a light reno, and two years later market value for that same property is around $30-35k more than what we paid.

Like Tim, we have also done a cash out refi on another one of our properties that has allowed us to have cash right now that we are looking to invest in another property. 

Hi Joe,

I invest a lot in Redford. I am using a similar buy and hold strategy (buying cash, fixing up, and then refinancing so I can repeat over and over).

The lenders I am using are requiring much longer than 30 days seasoning of title before I can refinance at a greater value than my purchase price. Are you refinancing through a private lender or through a bank?

@Daniel Libman  

I'm a buy and hold cash flow investor, and have had success in Dallas, Memphis, and now focused on Atlanta. I look at a few things -- cost of living, job growth & unemployment, vacancy rates, job drivers and cones, and then of course -- price points, rent ratios and expenses. For me, it all starts with the market.

Andrew

I think a lot of folks like the midwest in general as you tend find a higher frequencies of deals meeting the 2% rule (monthly rents at 2% of the purchase price).  I'm currently focused out of St Louis and like what I'm finding.  I plan to branch out to Dallas or Houston.  I feel are primed to explode over the next decade or so.  Jobs, transportation (e.g., ports, airports, etc.), natural resources, low taxes, friendly landlord laws, land area, prices...

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Hi @Daniel Libman  ,

I am in Houston and if you are looking for SFHR, Houston is a great spot to be. I see the ROI on properties at over 15% on a daily basis. I am not sure what the rest of the country is doing right now, but I think that is really good.

Good luck,

Andres J.

@Timothy Riley  Fear of having a mortgage is understood.  Need to lose it.  As long as your cash flow is high enough (how high is your call), the mortgage is just another expense like taxes and insurance.

You use cash to buy rehab the 1st deal, refi it all out (and then some in some cases), use it again on the next house, refi that one, and keep repeating until you can't get any more mortgages.  Then find a partner with credit, and share the cash flow with them.  Use your cash, and their credit.  You can repeat this system with as many credit partners as you can get.  When you refi the cash out of the last house...just keep it.  The end result is you have a number of cash flow deals paying you monthly, that your tenants are buying for you, that you never spent any of that cash on...you just used the same cash on all of them.

Joe Villeneuve
REcapSystem
A2REIC

I think you guys are forgetting about the biggest part when looking at areas to purchase in. You need to look for high concentration of government/military workers.  The military makes up a large majority of our rental market because no one stays more than a couple of years.  Also if you look at the fact that they have a guaranteed paycheck every month, and they even get extra money "Basic Allowance for Housing" just to pay their rent.  If you look at where my husband and I live we have multiple military bases (Naval Station Norfolk, Naval Support Activity Norfolk, Naval Amphibious Base Little Creek, Fort Story, Naval Air Station Oceanna, Damneck Training Facility, Naval Support Activity Southwest, Norfok Naval shipyard, Naval Medical Center Portsmouth, DOD Complex Suffolk, Fort Monroe, Langley Air Force Base, Fort Eustis, and Naval Weapons Station Yorktown) where we have a constant turn over.  Our vacancy rate is very low because there is some battle group always deployed, and we literally have thousands of people coming in to town in a week period and vacancies fill up when a battle group comes back from deployment.  

You always need to make sure that your potential tenant pool is going to be there before you jump in to investing in the wrong area...

@Lisa Doud 

All good points, however it has been my experience that the Military/Government doesn't always pay as high a rent as in some other areas.  Having said that, and along a similar line, zoning in on areas where there are student housing...particularly around teaching hospitals, is another great way to go.

Joe Villeneuve
REcapSystem
A2REIC

Personally I love the "shittier" military towns. These are the areas usually with lower priced houses and higher bah. Many military won't buy due to the fact they don't want to stay. Therefore these areas tend to be good deals. I personally invest heavily in military areas. We have done very well.