Need advice on next step

Ann Arbor, Michigan
Real Estate Deal Analysis & Advice
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Need advice on next step

Thomas Daugherty
Member since 2022 · 4 posts · 1 vote

Hi bigger pockets family. I need advice! I worked as a corrections officer for 23 years. It was awful and I had no pension. So I quit. My wife supports us right now. I'm 47 and for the first time have no w-2 job. I took all the money from my 401k and a HELOC loan. I have $105,000. I'm in the process of buying an STR property. I have run the numbers over and over. It seems like a good investment.

My question is with the remaining $45000 should I invest in a long term rental? I'm in the Jackson Michigan area and there are a lot of rentals in the city. The problem is the city is not very good.

I can get a triplex for around $100,000. I am just worried I will have so many problems as to not make it a good investment.

Any comments or ideas or advice is greatly appreciated. Thanks in advance.

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y

Recommend not jumping in too deep.

Run your STR for 6 months and see how it goes. Your results and learning curve will help dictate your next move.

[email protected]248-209-6824
Logical Property Management4.9451 Reviews
WebsiteView Page
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  • Account Closed
    Wholesaler · Euless, TX · Member since 2021 · 8 posts · 5 votes
    4y

    Congrats on your STR Property!

    I think this comes down to what you are looking to get out of your properties. STR has the high work/high cashflow and LTR has the low work/low cashflow (relatively speaking). When looking to invest, I would keep in mind that you are not limited to just your city. If you aren't happy with Jackson, MI, then look a little further out and see what you can find. I am not in the MI area, so I cant say too much about it, but would Ann Arbor or Lansing (both within an hour of Jackson) fit the profile of what you are looking for better?

    Just staring out I would ensure that you don't spread your self too thin, as in: 1) Make sure that you have enough capital in reserves to handle any unexpected expenses (such as a new HVAC/water heater/roof/etc) 2) You aren't growing so fast you start missing items/deadlines.  As you get systems in place, you will be able to grow faster and more efficiently. 

    Good Luck!

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    4y

    Recommend not jumping in too deep.

    Run your STR for 6 months and see how it goes. Your results and learning curve will help dictate your next move.

    [email protected]248-209-6824
    Logical Property Management4.9451 Reviews
    WebsiteView Page
    7Reply
  • Malcomb StapelPro Member
    Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
    4y

    @Thomas Daugherty  are you thinking you won't be going back to W-2 employment? That could be a scary proposition if your needing to hit a home run with this $100k dollars. 

    I'm with @Drew Sygit on this one, manage the STR, hold your extra capital in reserve until you can make a sound and educated decision.

    3Reply
  • Thomas Daugherty
    OP
    Member since 2022 · 4 posts · 1 vote
    4y

    Thank you so much for answering. Lansing and Ann Arbor are close and I have looked at both areas. The problem would be the cost of homes in Ann Arbor is very high and out of my range for now. Lansing has the same problem as Jackson. However there are areas of Lansing that are nicer and safe. I think once I have the first STR up and running mining then I will start looking for the next deal. I do like the idea of short term over long at this point. I think once you have the right systems in place they can be less work on the owner. Would you agree or am I kidding myself?

    1Reply
  • Thomas Daugherty
    OP
    Member since 2022 · 4 posts · 1 vote
    4y

    I'm very much hoping to never go back to w-2 employment. I am getting ready to start a lawn mowing business. I do need money coming in lol. I've also looked at other options but all are working for myself.

    0Reply
  • Malcomb StapelPro Member
    Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
    4y

    @Thomas Daugherty I have not heard anyone say that the STR's are less work. Generally they say they require more diligent management. My LTR's are generally not much work, especially if I just turn them over to PM and let them have 7% of the rents.

    Good for you starting your own business. Your not going to use all the hours of your day managing that STR. Might as well be working and keeping the cash rolling it. It's only going to help your end goal.

    1Reply
  • Andrew Moore
    Real Estate Agent · Grand Rapids, MI · Member since 2016 · 89 posts · 51 votes
    4y

    To dive a little deeper on what was said above; a long term rental option is going to have a unit turn over maybe once a year (if you get good tenants maybe less). Managing & refilling that unit with another longer term tenant requires some work and due diligence but not a ton with the right systems in place. 

    With a STR, figure your average night stay is 4 nights, so you've got to coordinate getting a cleaning company through. You've got to coordinate repairs in a timely manner if you have another set of tenants coming. You've got to maintain a pretty high level of customer service, as a large portion of the success of your short term rentals are the reviews people leave from positive experiences.

    If you are planning to self manage, a LTR will absolutely be much easier to get experience with. It is possible with STR, but pretty labor intensive.

    Both are possible to be hands off, but you're going to eat into your cash flow by paying much higher fees. 

    Only advice I tend to give people in your position, is make sure you really understand what you are looking for, and what you might be getting yourself into. Reach out to people who self manage & find out what the headaches are associated with that, and if that sounds like something you would be ok with. Network with someone who passively invests in STR & find out what their margins are, and get a more accurate understanding of what your operating costs might be.

    2Reply
  • Thomas Daugherty
    OP
    Member since 2022 · 4 posts · 1 vote
    4y

    Thanks everyone for all this great info. I'm sorry if I don't get back to everyone individually. However I am reading everything!

    0Reply
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