Out of State Investing - NEW and IMPROVED

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Out of State Investing - NEW and IMPROVED

Joe Kim
Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes

I recently had a post "Out of State Investing-SCAM! False promise land of cash flow".

https://www.biggerpockets.com/forums/88/topics/351...

I may have given the wrong message that out of state investing is not a good way to invest.   I think it can be a great way to invest but it's not as easy as it seems and the cash flow model does not FIT everyone's goals.

I want to outline in detail my 3 most recent out of state purchases in 2016 and show how they better meet my goals. (PASSIVE + APPRECIATION + CONTROL + CASH FLOW)

Disclaimer: everyone has different goals, different financial background, and different current job/family situation(time).

I listened to countless podcasts, read the forums and I totally bought into the cash flow model of buy/hold (out of state since I live in California). I also had the dream that I could replace my income with rentals.

But I realized that I have a dream job. There is no need to replace my income with rentals and in fact my goals totally changed to "wealth building", "college saving", and "retirement saving" RATHER than wanting or needing any cash flow NOW.

I want to accomplish this as a PASSIVE investor. Now all the note investors, syndicators, and private lending people are going to rush in and say their type of investing is what I should be doing - YES. I agree. But there is still a place for buy/hold of real property for tax benefits, and long term equity/wealth building.

I have no plans to quit my job. I think for those of who really love their jobs, make a great living (more than top 10% in your region. making 125K in some parts of the SF bay area is pretty middle class) - this focus on wealth building rather than just cash flow is a better way to go.  Imagine how many SFRs you have to buy to replace your income of 200K, 300K, or more...too many and NOT passive at all. 

Let's jump into it. Property #1 5/2016

Location: Atlanta suburb (Buford)

Brand new construction single family home. School district 8,9,10 rating!

4 bed 2.5 bath, 2330 sqft. Purchase price $195,000

Rent $1600

PITI : $964/month (25% down, 30 year fixed at 4.25%)

HOA: $38/month

Maintenance: $0 (projected for first year)

Vacancy: $130 (although tenant already put 3 month deposit!)

Management cost: $0 (SELF- Managed!)

First year cash flow is currently $600/month or minimum $470/month if vacancy.

So far I got one phone call about electrical panel (breaker problem). I sent an email to the builder and it was fixed without cost or any headaches.

IF property management was used at typical 8% rate = $128/month or $1536 savings per year by self managing.

So my cash flow is pretty good at max $600 but probably typical at $400-$500 in the next 5 to 10 years. Principal paydown is $200/month unlike my cheapest property at $100/month. With schools in the 8,9,10 ratings and brand new construction, appreciation potential is good (5% annual?)

How did I find this deal? Biggerpockets! I met an agent online and started looking at properties without the aid of turnkey provider/property manager etc..

Because it's a new construction, I put LVT vinyl on the first floor for durability and added value.

Financing: HELOC loan to pay for downpayment. Equity pulled out of my high priced California home and putting it to use in make equity! HELOC (4.0% fixed for 3 years, but then I rolled into my primary home at 3.25% fixed at 15 year fix)

Therefore 25% downpayment is now fixed at 3.25% for 15 years! and 75% primary mortgage fixed at 30 year fix for 4.25%.  

Next post Chicago property! 

Here are some pics of my buford home.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y

@Joe Kim  I was buying those same homes in 2011 for 60 to 70k putting 25k into them renting at 1200.. I bought 54 of them.. they about doubled and I sold to a hedge fund 2 years later.. I like Atlanta.. I would not count on a lot of upward movement from here on out though I think many markets are at the top.. demand is still there no doubt but we are seeing push back on raising prices anymore.

I also bought 11 New constructions in the mid 2000's for go zone bene's  and I had them put in scored concrete floors and they were brick homes.. other than hail damage these have been worry free .. the Go zone tax bene's sunseted on the recapture so I am selling them all.. they never went up and I am breaking even.. which is pretty good since I bought at almost the peak in 2006 ish.

I read you other post.. your issues as is all issues with rentals is in PM it looks like and maybe you did not pick the more expensive less headache properties its common for many to pick the one's that look best on paper but then you soon realize they only do because they are not in the greatest areas.

As for your Dallas stuff  TAX's and foundation issues just eat your lunch in Texas.. I personally would not buy and hold anything in that state.. because of these reasons.

And it also appears your turn key out fit up front did not do a great rehab job.

did you get properties inspected prior to closing?  this is important.

wish you the best of luck with it.. and yes us Note guys are going to tell you to buy some notes.. much less headache and return is higher frankly.. but no tax' bene's but I prefer write on's not write offs.  ( with the exception of the GoZone that was a brilliant play)

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  • Matt Harris
    Property Manager · Rochester, NY · Member since 2015 · 243 posts · 62 votes
    10y

    wow beautiful homes and good info. I'm looking at out of state investing in the near future just to diversify a little more. 

    0Reply
  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y

    Looks beautiful. Congrats!

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Joe Kim  I was buying those same homes in 2011 for 60 to 70k putting 25k into them renting at 1200.. I bought 54 of them.. they about doubled and I sold to a hedge fund 2 years later.. I like Atlanta.. I would not count on a lot of upward movement from here on out though I think many markets are at the top.. demand is still there no doubt but we are seeing push back on raising prices anymore.

    I also bought 11 New constructions in the mid 2000's for go zone bene's  and I had them put in scored concrete floors and they were brick homes.. other than hail damage these have been worry free .. the Go zone tax bene's sunseted on the recapture so I am selling them all.. they never went up and I am breaking even.. which is pretty good since I bought at almost the peak in 2006 ish.

    I read you other post.. your issues as is all issues with rentals is in PM it looks like and maybe you did not pick the more expensive less headache properties its common for many to pick the one's that look best on paper but then you soon realize they only do because they are not in the greatest areas.

    As for your Dallas stuff  TAX's and foundation issues just eat your lunch in Texas.. I personally would not buy and hold anything in that state.. because of these reasons.

    And it also appears your turn key out fit up front did not do a great rehab job.

    did you get properties inspected prior to closing?  this is important.

    wish you the best of luck with it.. and yes us Note guys are going to tell you to buy some notes.. much less headache and return is higher frankly.. but no tax' bene's but I prefer write on's not write offs.  ( with the exception of the GoZone that was a brilliant play)

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  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y

    @Joe Kim - I have bought new homes before as rentals and they required money to be spent on backyards, window coverings, appliances, etc.... Did you have to do any of that? 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @John P.  its common for builders to provide a rental package when you know or they know they are selling to investors..

    the one inherint danger in buying form a builder though Is if they get hooked up with a marketing company and the next thing you know 30 out of 40 homes are all sold to landlords.. the neighborhood will erode over time

    My 11 I bought were in 5 different subdivisions which had limited rentals. I was very cognizant of this.. so now on the resale they are all going to home owners.

    Were most folks that buy rentals in cash flow markets will NEVER sell retail to a home owner.. they are forever stuck as rentals and only sold to other investors who will back into the purchase price by running rate of return numbers.

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  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y

    @Jay Hinrichs as usual great info. Thank you.  

    We had that happen to us in the Phoenix suburbs in the early 2000's. They penciled nice at first but all of a sudden they were all rentals.

    I like the idea of new homes as they should be low maintenance the first few years.

    On paper they don't cash flow as well as the lower cost properties but perhaps less headaches. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @John P.  mine were in Mississippi   Madison county the wealthiest county in the state.. all bought for 180 to 220k each... top quality renters I could self manage.. so from a management stand point very easy... and no need for turn key.. just bought direct from the builder and me being a broker I got a commish on top of it.

    But there are many home builders in these areas that partner with out of state marketing companies and simply flood the market with rentals.  So just pointing that out one wants to be very cognizant to making sure these homes are being sold to home owners and that no more than 1 in 10 or 1 in 15 is a rental.. other wise the grand scheme will back fire like what happened to you in PhX.. not back fire but you know what I mean.

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  • Joe Kim
    OP
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    10y
    Originally posted by @John P.:

    @Joe Kim - I have bought new homes before as rentals and they required money to be spent on backyards, window coverings, appliances, etc.... Did you have to do any of that? 

     Blinds -$1100

    Refrigerator- $400 (given to tenant as credit to purchase their own refrigerator) - hedging my bets that they may stay a few years.  Tenant is fully responsible for the fridge entirely.

    Nothing else.

    0Reply
  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y

    @Jay Hinrichs how can you determine how many rentals in a subdivision?  It seems the sellers aren't going to be up front with this fact.  I also imagine there are a lot more people investing out of state like this than 10-15 years ago due to internet making it easy and people not liking other investment options.

    0Reply
  • Joe Kim
    OP
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    10y
    Originally posted by @Jay Hinrichs:

    @John P.  mine were in Mississippi   Madison county the wealthiest county in the state.. all bought for 180 to 220k each... top quality renters I could self manage.. so from a management stand point very easy... and no need for turn key.. just bought direct from the builder and me being a broker I got a commish on top of it.

    But there are many home builders in these areas that partner with out of state marketing companies and simply flood the market with rentals.  So just pointing that out one wants to be very cognizant to making sure these homes are being sold to home owners and that no more than 1 in 10 or 1 in 15 is a rental.. other wise the grand scheme will back fire like what happened to you in PhX.. not back fire but you know what I mean.

     Jay, it was nice meeting you at the SF summit.

    Yes, the builder said the amount of investors in the brand new construction was less than 10% but I don't have a way to verify that info.   the builder did not have a quota at the time I bought.

    I agree that is a very important thing to look out for especially when recession hits, investors may sell in droves or finding tenants (competing with other investors in a down market) would be tough.

    Nothing is easy and nothing is without dangers for sure.

    0Reply
  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y

    Thanks @Joe Kim.  You going to buy more there? Or look to some other areas?  Your place looks great. I would be curious if $1,600 rent can be expected or if you got lucky!?  In any event congrats on the nice purchase.

    0Reply
  • Joe Kim
    OP
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    10y
    Originally posted by @John P.:

    Thanks @Joe Kim.  You going to buy more there? Or look to some other areas?  Your place looks great. I would be curious if $1,600 rent can be expected or if you got lucky!?  In any event congrats on the nice purchase.

     Both my friend and I bought properties in the same new construction and both of us got $1600/month rent filled within 2-4 weeks of closing.

    1Reply
  • Joe Kim
    OP
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    10y
    Originally posted by @Jay Hinrichs:

    @John P.  its common for builders to provide a rental package when you know or they know they are selling to investors..

    the one inherint danger in buying form a builder though Is if they get hooked up with a marketing company and the next thing you know 30 out of 40 homes are all sold to landlords.. the neighborhood will erode over time

    My 11 I bought were in 5 different subdivisions which had limited rentals. I was very cognizant of this.. so now on the resale they are all going to home owners.

    Were most folks that buy rentals in cash flow markets will NEVER sell retail to a home owner.. they are forever stuck as rentals and only sold to other investors who will back into the purchase price by running rate of return numbers.

     Jay,

    I plan to contact the builder again now and 1-2 years from to get a sense of how many properties were sold to investors.  

    As part of an exit strategy, if I find out that the percentage of investors is greater than 10-15%, I may sell sooner than later (within 5 years?) or based on market timing?

    I'm beginning to see that a smart/experienced investors do not hold large portions of portfolio for too long.(like yourself).   Market timing is key and re-investing in better returns is also important.

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    10y

    I'm surprised by a couple of things in your story. Is it really possible to get a property manager for just 8%? I always thought 10% was the standards. I'm also surprised about getting three months rent up front. When I lived in Georgia you'd never get that. Mind you I was in Rome, not Atlanta. Here in Mississippi if you have three months rent, why wouldn't you buy? 

    0Reply
  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Joe Kim  

    As for your Dallas stuff  TAX's and foundation issues just eat your lunch in Texas.. I personally would not buy and hold anything in that state.. because of these reasons.

     Are foundation problems as common in Texas as they are in Mississippi? 

    0Reply
  • Petra M.
    Investor · Los Angeles, CA · Member since 2015 · 73 posts · 49 votes
    10y

    I think you can get % renter info from the MLS.

    0Reply
  • Chris L.
    Merrick, NY · Member since 2015 · 21 posts · 5 votes
    10y
    Joe Kim - great insight on out-of-state investing via your original article & current post; I'm looking forward to Chicago next. From a logistical standpoint (i.e. maintenance, turnover repairs, oversight of the physical property, etc.) how do you self- manage your diversified SFR portfolio? Do you have current relationships with contractors/handymen that you can call for immediate tenant service calls?
    0Reply
  • John P.
    Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
    10y
    Originally posted by @Susan Maneck:

    I'm surprised by a couple of things in your story. Is it really possible to get a property manager for just 8%? I always thought 10% was the standards. I'm also surprised about getting three months rent up front. When I lived in Georgia you'd never get that. Mind you I was in Rome, not Atlanta. Here in Mississippi if you have three months rent, why wouldn't you buy? 

     Susan- I can't speak for Georgia but out west I pay between 6 and 8% with little or no re-leasing fee.  8% being the standard and 6% for some quantity of homes with the same PM.  I have heard of a lot of 10% quotes in Texas and Memphis though.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Susan Maneck@John P. Susan I live in Oregon and have significant investments in Jackson MS.. I can answer your question.. West coast tenant base by and large is not as management intensive as tenant base in the Deep south.. Now again depends on the assets.. but generally speaking because in our market for instance were you have basically zero vacancy and little to NO HUD or Section 8 management is simply not that intense.. Not that you can't have a tenant from hell but its not nearly like your area..

    NOw when I bought the 11 homes that were new in your area for the go zone.. I bought 2 in Patrick farms ( golf community in Rankin county) 2 in the new developments on the East side of the reservoir out off of Lakeland.. 4 in Madison ( Providence) , and 2 in Pearl ( these are the worst one's)  these all rented at 1200 to 1600.. 

    Whereas if you buy rentals in SOJAC  were there the neighborhoods there have turned to renter dominated your rents are going to e 650 to 800 generally with a ton of hud and older homes that need love and attention.. Your renters in those areas are far more transient and tend to be tougher on the homes.  And in those areas you MUST have 3p property management lest you totally lose your investment.   Whereas my new stuff after a few years I took over management and its been fine.. I have a realtor that leases them up and will bring in the handy man for turn over when that happens.. but he also gets to list them when I sell.. and we are as stated down to 5  two are in escrow so will have 3 by end of month fingers crossed..

    Its one of the lessons many west coast investors learn the hard way.. when your buying in the mid west deep south rust belt its ALL about PM... at the price points these folks are buying at..

    What happens is you will not get any sales traction if you do not provide product that basically meets the 1% rule or a little better.. So you can't buy a 200k home and rent it for 1,600.. investors buy and large will skip over those as not enough cash flow.... even though you could today go into Madison MS.. and right into the neighborhood I am invested in and buy my home from me for 190k that rents for 1600.. and have a great rental.. but investors don't look for those... the bread and butter of turn key is usually the investor who wants to put that 20 to 30k down and if they have a hundred or two hundred grand liquid the want to buy 4 to 8 of them.. and that moves them squarely back into the B C class as opposed to what our new construction is which is A class.

    However there are builders ( think Texas) that will build entire subdivisions and sell them all to investors.. I have done that in Oregon back in the day.. the reality is the subdivision just looks like crap 2 to 3 years in.. and even though new construction cap ex was good the values don't move and erode..

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  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    10y

    Rents have gone up considerably in South Jackson over what you are saying, at least in the 39212 area. My houses all rent between $740-1000.  My son, who invests in northeast Jackson is finding he can get $1200 for 3 bdrm 2ba homes as old as mine and in no better condition. Usually he pays twice as much for them but buys them with conventional mortgages whereas I pay cash and get HELOCs down the road. I find the ones I rent out Section 8 require the least management, so I welcome vouchers. What you can't do is expect people here to pay rent via a website or mail it in. They either show up at my doorstep to pay or more often I go out to collect. And so far I have never gotten a tenant who paid by check even though a few have checking accounts. There are a couple who get a money order. I don't have vacancy issues though. As soon as they see someone moving out they are on my doorstep to rent. Since I have a good reputation for upkeep I get a lot of calls out of the blue from friends of current tenants. They last time I had to advertise was for a 2bdrm 1ba house, the only one I own in the 39204 zip code. It is now rented by a disabled couple via Section 8 for $770. HUD gave me 10% over the market value in exchange for my putting in a ramp. Of course these are all older homes built in the 50's and 60's. Renters can be transient and hard on the homes, as you say. As for credit scores, right now the only one with a credit score over 600 has a HUD voucher! I usually just use credit checks to make sure they haven't shafted other landlords and that most of the negatives are in unpaid medical bills. Also, I'll charge a larger deposit if their credit is poor.

    But what about the foundation problems you mentioned in Texas? Is that worse than Mississippi? One of the reasons I buy older homes is because if it hasn't moved in fifty years it probably won't. In contrast people buy these 300K houses in Madison County and have foundation problems in a couple of years partly because they just had to get a place on that beautiful lake. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Susan Maneck for locals like you Sojac works.. its the out of state folks that find those challenging.. one of my vendors owns 200 plus in So jac and I owned a couple hundred over the years.. so am familiar .. if your totally hands on it works.. but the subject of this thread is turnkey and passive.. which by and large so jack is not.. hard for a Apple engineer in Cupertino to go collect rent each month and or try to deal with tenants with no checking accounts ( which your right very few do and that's because they bounced to many checks LOL and cannot get one). HUD is super strong there my vendors with the 200 homes probably 170 of them are hud..

    I am sure we know the same people if you go to the RIG meetings I am well known, not sure well liked but well known :)

    and you know your tenants if they new for one minute the landlord lived out of town you can imagine how collections would be ..

    There is another PM in your fine town.. that took on one of my old portfolios and managed it right into chapter 7 banckruptcy.. because he tried to make the SOJAC tenant act like a Madison tenant.. NO cash.. all calls for maintenance through eh computer .  front door at his office locked.. and he thought he was doing good going into the field 1 time a week.. LOL.. he is a nice guy and you could do that with your N. Jack or Madison , rankin rentals but not SoJAC.

    so stand by we peeled 100 of the two hundred this guy fouled up off.. there will be another 100 homes coming up.. I am sure its been talked about at rig...

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  • Susan Maneck
    Investor · Jackson, MS · Member since 2014 · 1k+ posts · 769 votes
    10y

    I know how it is when I go on vacation for a month or two to California. I try and collect rents before I go but am not always successful. Most of them will send me the money within a reasonable time but there is always one tenant who does not pay at all knowing I can't begin eviction until I get back home. So no, south Jackson would not work for Turnkey. Since this is really the only place I've had more than one investment property at a time, I'm pretty dubious of Turnkey working anywhere. From what I've seen, people end up paying so much more for the property than they could hope to sell it for.  I'm not just talking about South Jackson but I checked out the records on some of the properties being sold elsewhere. My one out-of-state property, a condo I just bought in South Lake Tahoe, is managed by my mother.  She had it rented within five days of the close. I live in walking distance from most of my properties here in Mississippi. Five of my houses are on the same street where I originally bought my home. When I retire to California I will either sell off my portfolio or hand it over to my real estate agent to manage. She also lives nearby and her husband already does most of the maintenance.  The fact he comes out the very night their AC stops working is one of the reasons I have such a good reputation as a landlord. 

    i heard that your portfolio in sojac went belly up, but I wasn't sure why. I've not been to the RIG meetings but a few Californians who bought your notes have contacted me. 

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  • Hersh M.
    Engineer · Carlsbad/San Diego · Member since 2014 · 285 posts · 97 votes
    10y
    Originally posted by @Jay Hinrichs:

    @Joe Kim  I was buying those same homes in 2011 for 60 to 70k putting 25k into them renting at 1200.. I bought 54 of them.. they about doubled and I sold to a hedge fund 2 years later.. I like Atlanta.. I would not count on a lot of upward movement from here on out though I think many markets are at the top.. demand is still there no doubt but we are seeing push back on raising prices anymore.

    I also bought 11 New constructions in the mid 2000's for go zone bene's  and I had them put in scored concrete floors and they were brick homes.. other than hail damage these have been worry free .. the Go zone tax bene's sunseted on the recapture so I am selling them all.. they never went up and I am breaking even.. which is pretty good since I bought at almost the peak in 2006 ish.

    I read you other post.. your issues as is all issues with rentals is in PM it looks like and maybe you did not pick the more expensive less headache properties its common for many to pick the one's that look best on paper but then you soon realize they only do because they are not in the greatest areas.

    As for your Dallas stuff  TAX's and foundation issues just eat your lunch in Texas.. I personally would not buy and hold anything in that state.. because of these reasons.

    And it also appears your turn key out fit up front did not do a great rehab job.

    did you get properties inspected prior to closing?  this is important.

    wish you the best of luck with it.. and yes us Note guys are going to tell you to buy some notes.. much less headache and return is higher frankly.. but no tax' bene's but I prefer write on's not write offs.  ( with the exception of the GoZone that was a brilliant play)

     Thanks again Jay for sharing your wisdom and experience.

    Looks like the values more than doubled, almost tripled in last 5 years. You bought around 70k and currently selling for 200k. Is that mainly investor driven or there are strong fundamentals to back up such an increase? Also did you foresee such an increase coming when you bought in 2011 or was cashflow the motivation? 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Hersh M.  these were owner occ areas not flooded with rentals but of course we bought for rental purpose's in 2011 just like everyone else in Atanta did.... our properties would not bring what JOe is paying for new construction but they went up 30 to 50% or more in the 2 years I bought them.. so we exited.. it was a nice profit and we moved on.

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  • Joe Kim
    OP
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    10y

    Property #2   Chicago  (not a big fan of the chicago area but you will see why I bought this property - see below)

    when: 3/2016

    $200,000 purchase price, Rent $2000

    5bed, 2 bath, 2161 sqft living area, 1117 sqft basement 

    Sale price: $92.51/sqft    Comps:  116.75/sqft, 94.85/sqft, 128.44/sqft    Final appraised at $215,000 at purchase.

    25% downpayment at 4.25% fixed for 30 years. Downpayment from HELOC loan (so essentially 100% financed)

    TK company : MACK (one of the largest operations in Chicago)

    Guaranteed Rent for 1 year and No maintenance fees for 1 year - worry free for 1 year.

    "Fully" renovated - new electrical, new plumbing, new hardwood flooring addressed all the issues on home inspection except for HVAC...which was 18 years old!!!    I fought hard to get HVAC replaced but seller refused but then got it "certified" that it's functional and good life for 5+ more years!  

    Cash FLOW:

    Rent: $2000/month

    PITI : $1029/month

    property management: $95/month!  (super cheap fees)

    Maintenance: $0 (1st year)

    Vacancy: $0 (1st year)

    Positive cash flow: $876/month!!!

    Performa predicted cash flow: $732/month! (given to me by TK provider), predicted IRR 22%, Cap rate 9.25%

    I'm hoping for regular cash flow around $700-$800 in the coming years.

    One of my favorite two sites to evaluate properties - Trulia (crime map).  Nearly all green (Safest)

    www.city-data.com (See below) gives demographics, incomes, un-employment -neighborhood by neighborhood - color coated!  Solid safe working class neighborhood with Median income $66,000. Unemployment 6%

    CONCLUSION:

    This property does not meet my current goal of Appreciation > cash flow.   It's actually a killer cash flow property.  I'm not a big fan of chicago (not landlord friendly, high taxes,etc)

    MACK sends a list every friday with about 10 properties each week.   Cash flow is in the range of $400-500 typically.   This was the first property at $700+ !   Granted most of their property values range from $120-160K.    So 200K was at the very high price range.   But who can argue with appraisal price of $215K. ($15K automatic equity)  Mack thought comps were easily 220K in the same are.

    I spent months looking at their list (learning the different areas, seeing what kind of cash flow/returns are available and only inquired about their top10% of the best performas and landed a GEM!)

    Lesson learned: spend time looking the inventory sent to you by TK providers and do not rush to buy until you know their market and know what products are "average" and which few are "gems".

    Not all properties will fit into your criteria.   Having SUPER high cash flow properties is nice to have in anyone's portfolio.

    Oh yeah, the prop management is not so good at communicating so their strong point is finding deals and rehabbing them but prop management is average at best (But super cheap!) 

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