All Forum Posts by: Ben Durwood

@Scott Schuetz To me it comes down what interest rate are you paying on your mortgage and what return do you expect to get if you invest? For example, if you have a mortgage at a 5% interest rate and you can invest and expect to get a return of 9%, then you'll do better to borrow at 5% to earn 9%. Since interest rates are still pretty low, I think a lot of people would do better to borrow instead of paying off debt.

It also comes back to your risk tolerance. If you have a mortgage on your personal home and also take out a loan to buy an investment property, you are more leveraged and would stand to lose more if the homes go down in value or you can't make the payments.

Hope that helps!

Hello all!

I am an out of state investor living in San Diego, and I would love to hear about places where people have successfully been able to invest out of state. Specifically, what are you buying properties for, what are you renting them for, and what types of areas are they in?

I'll go first. Two properties I have purchased recently in:

Las Vegas - 2 bdr, SFH for $95K, rents for $1,050. No repairs and maintenance needed at time of purchase. Middle class area, average school system.

Grand Rapids - 3 bdr, SFH for $60K, rents for $1,000. No repairs and maintenance needed at time of purchase. Middle class area, above average school system.

Anyone else want to share?

@Brian Stieler

Just curious how who decided on Michigan as your target spot? Strangely enough, I am also an out of state investor living in San Diego who buys buy and hold cash flow properties in Michigan. I find there are some properties that cash flow very well. You just have to be careful and invest in the right areas.

I know Serge talked about sub-metering in his podcast. Here's the link -

http://www.biggerpockets.com/renewsblog/2014/03/06/bp-podcast-060-serge-shukhat/

Best podcast so far, I think.

Kristy,

I think the fact that you say it would cash flow negatively for the first few years is a sign that it's not a good investment, at least from a cash flow perspective. But it's hard to give advice because you haven't given us much information. What's the purchase price? Monthly rents? What type of area is the property in?

Hi Robert,

Personally, I would stay away from this one. I am not sure how familiar you are with some of the rules that Brandon Turner has laid out on this site but a couple of them are the 1% rule and the 2% rule. I think that at a bare minimum, any investment property that is bought for cash flow, should have monthly gross rents that are 1% of the purchase price + capital expenses, which this duplex isn't even earning (i.e. $2,300 in rents is less than 1% of $250K). I am not that familiar with the Minneapolis market, but I would think that Wendy is right in that you would be able to buy SFHs in Minneapolis that cash flow better.

Also - your projections of repairs and maintenance are low. There will be things that come up like replacing the roof, water heater, furnace, A/C unit, etc. that will make your maintenance costs average much more than $100 a month.

Hey Brian,

Interesting question. I actually live in SD too and some of these are relevant questions for myself.

As far as 1), there are so few duplexes in SD that I think you'll have a really hard time finding the right place. Given our market, I think buying, say, a 2 or 3 bedroom, living in one bedroom and renting out the rest makes a lot more sense. If you plan to live in SD for the long-term, I like this option. You'll be investing in a property as opposed to losing your $950 of rent every month and using your tenants to pay off your mortgage.

As far as 2), I am not a huge fan of the Phoenix market right now, even for cash flow. Prices have come up quite a bit there, and it is not that easy to find properties that cash flow very well and are also in decent neighborhoods. I still like this better than 3) which is the most complicated option and probably doesn't make sense given your experience level. 2) isn't a bad option though, you would just have to really do your research and make sure you are investing in the right place.

Hope that helps,

Hey Sam,

For your first investment, I would avoid diving into an apartment complex. That's a completely different animal than a duplex/ triplex/ quad in terms of financing, insurance, maintenance, etc. Because apartment buildings are more complex and involve much more due diligence, I would recommend starting out with 4 units or less.

Another thing to keep in mind as a new investor - generally properties cash flow better the less expensive they are, but that doesn't mean you want to be buying the cheapest properties in the worst neighborhoods. I'm a relatively new investor myself and don't want to deal with vacancy, bad tenants who don't pay rent or maintain the property well, so I try to say in decent areas (B-, B, B+) and avoid the war zones, even though they can look good from a cash flow perspective.

Hope that helps!

Welcome to BP, Nick! I am an investor living in the San Diego area, and like you I invest out-of-state given how expensive the market is here.

Hi Ben,

I am in somewhat of a similar situation as you and would be curious to hear other feedback you get from the rest of the forum.

I live in San Diego, and even hitting the 1% rule is next to impossible here. I have been looking at other cities like Kansas City, Indianapolis, Atlanta, and Grand Rapids (Michigan). In each of those cities it is very possible to get 1.5% to 2%, especially if you are looking at multi-family homes and lower income areas.

I would tend to stay away from the $20 - $50K price range though if you are looking to buy and hold. Those will be low income areas, you'll have tenants who won't pay, more vacancy, and the homes won't appreciate as much as nicer areas.