All Forum Posts by: Becca F.

@Chris Nerio

I did get on a call with two people, one for Martel Turnkey and another for FlipSystem. I considered buying their turnkey rental but I wasn’t familiar with their markets (mostly Ohio, Detroit area and a few Memphis homes). bought in the Indianapolis metro area since I knew that area well (used to live there). 

For FlipSystem I couldn't justify spending the $15,000. I would just use that money towards a down payment - I work with a real estate agent who does deals with many investors and has had a few off market properties (I know many investors don't use realtors but I prefer to). I'm looking cautiously at doing fix and flips with an exit strategy of holding the property as a rental if it didn't sell. Since I only had the one call with FlipSystem she didn't mention taking out a hard money loan. Interest rates with HML and private lenders are higher than bank loans. Did they explain HMLs to you? Did you decide to sign on with FlipSystem?

 Eric I looked up the Neighborhood Scout's List of 100 Dangerous Cities: 

https://www.neighborhoodscout....

Several of the cities that investors are posting about are on this list (in order of highest violent crime rate per 1000 residents) : Memphis, Detroit, Cleveland, St. Louis, Kansas City Missouri. 

I'm surprised that Nashville and Houston are on this list. The Nashville area property appreciation has increased significantly - I visited Brentwood and Franklin a while ago and those were really nice suburbs. I don't have rental properties in any of those 100 cities. My approach is that I'd rather have few Class A properties than buy 50 to 100 Class C properties but I did buy a Class C SFH recently (PM company is screening the rental applicant right now) in Indianapolis. Class A anywhere has a terrible Rent to Price ratio at current prices and interest rates. One of my investor friends said that tenants with higher incomes don't want to live in high crime areas so tenant quality may be lower and they will be rougher on your property and have higher turnover.

Thoughts about that 100 cities list and my investor friend's viewpoint? I'm not sure where I should buy next. 

 It's 1370 sq ft for main living area and has about a 700 sq ft room downstairs. They called it a basement in the appraisal although it's technically not underground. So total sq ft that they rewired was just under 2100 sq ft. The electrician did 3 walk-throughs with me before and after the re-wiring. There were burn marks in the wood frame in the kitchen from the old wiring- that was scary. The contractor did patch up all the drywall and it looks great. 

@Josh Danna

From seeing the other comments, I paid much more for electrical re-wiring on a knob and tube wiring on SFH in San Francisco Bay Area. My total electrical costs were $47,560 (labor and materials including 4 new LED recessed lights, light switches etc). This is including the cost of the permit. Mine is a 3 bedroom 2 bath 1400 sq ft main living area with about 800 sq ft downstairs room and 1 bathroom downstairs. I renovated everything in the kitchen and 3 bathrooms so those rooms were down to the studs/wood frame. They managed to re-wire the living room, dining room, bedrooms and downstairs room by cutting out holes in the drywall and feeding the new wiring in the walls. To pass electrical inspection there were outlets installed every 6 feet in each room.

My new breaker panel with labor was $5815 with labor (included in that total $47,560 above). I had to get a gas stove for the kitchen because the electrician said it would have overloaded the existing electrical power or amps (I'm not an electrician so my terminology is probably incorrect) and it would have cost more if I wanted an electric stove. The original stovetop was electric.

For Indianapolis $25,000 sounds reasonable to me, depending on what is done. I also own SFH rentals in the Indy area, both move in ready so no electrical work done.

@Jordyn Lai

I'm in California and have 2 properties here. I'm buying in Indiana now. It is very difficult to cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rates, capital expenses and repairs at current prices and interest rates. My first Indiana SFH is Class A in a nice suburb with excellent schools - I bought it 10 years ago but it was my primary residence, costs less than a Tesla and it had upgrades. The appreciation has been good, 70% since 2013 as of 2021 (when I did a cash out refi), might be worth a little more.

I recently bought Class C moving up to a Class B in Indianapolis, move-in ready except a few minor repairs. It's listed for rent with a property management company now. I'm ok with the seller getting the equity since I didn't want to do an OOS BRRRR. I did a local renovation and I thought it was very stressful and I was on site every week. Also it isn't cheap to hire a contractor in the Bay Area. I may consider a OOS BRRRR or flip now that she has trusted contractors but I would fly out there to look at distressed property before making an offer. If can send you my real estate agent's info, if you would like. She works with lots of OOS investors. The other markets I've heard were good are Cincinnati, Columbus, Cleveland, Memphis, Kansas City Missouri.

 That's quite a number of real estate transactions. On the Cleveland properties are these Class C or D when you said tenant class isn't appealing anymore? 

I just purchased a Class C potentially moving up to Class B SFH in the Indianapolis area. It's listed for rent by my property management team. My other 3 properties are Class A (two SFH, one in Bay Area, one in very nice Indianapolis suburb with great schools) and multi-unit in Bay Area (with co-investors). I'm not sure if I made the right move by going Class C but I can't give that house back to the seller lol...There's no Class A property anywhere that I've found that will positive cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rate, capital expenses, or repairs)

I don't think I should 1031 exchange the Class A Bay Area SFH to buy 5 to 20 Class C properties in the Midwest (or anywhere out of the Bay Area like Central Valley or Stockton. That was the recommendation by a few investors. That seems like a huge headache. I'm at loss of what to do so I'm not buying anything for now until the Class C house gets rented out and put my money into index funds and a 3.8% premium savings account.

For right now she said she recommended that I don't sell it since this area (San Francisco) is not getting high demand or it's more difficult to find renters now - people are leaving the city as a product of the pandemic, remote work and other reasons. Depending on what part of the Bay Area you are in your market may be seeing different activity. Her recommendation was to look at doing a 1031 exchange in the future. I gave her all my numbers, mortgage payments (PITI) on all rentals and primary residence and rental income. We didn't get into a deeper analysis with property taxes for California and other states, which have no Proposition 13. The property tax on my Indiana SFH rental (that I bought 10 years ago) has gone up another $500 a year (no renovations done). At this rate the property tax will be the same as my California property taxes if it keeps increasing in the 10% to 25% range. My property tax rate there for that county is 2.771%. Indiana is a landlord friendly state and the home prices are much lower than the Bay Area. It seems like property taxes in the Bay Area are in the 1% range. I'm seeing around 0.62% average property tax in Arizona unless you have a different number.

 If you look strictly at purchase prices and rent to price ratios on the surface it looks like it's better to buy OOS. I'll agree on the California not being landlord friendly which is big factor with investing here. Factor in Proposition 13 and how long you've owned your home, your property tax can be relatively low to super high. Her recommendation was to sell the S.F. house in the near future (not this year or next year) and 1031 exchange and buy a multi-unit, an apartment building out of state to get a higher return but I would need to talk more to her about this. I also don't know much about commercial loans. 

I recently purchased another SFH rental (move in ready, not a rehab) in the Indianapolis area, Class C but moving up a Class B and it was just listed for rent by the property management company so I'll see if that turns out to be a smart purchase. I worked with a realtor that works with many out of state investors and also got feedback from other local investors before I had put the offer in. I also used to live in Indiana so I know most of the areas, not down to the street but which are Class A, B and C areas and good/bad school districts. If I continue to buy anymore this year, it won't be from selling the S.F house and doing a 1031. I'll use my own money which will be a financial sting (or find a private lender and do a BRRRR) if buying in Arizona, Nevada, Florida or Nashville Tennessee which are appreciation markets vs. Midwest which is more cash flow with low price points.

@Jacob Munson

I agree with above comments, hold onto the condo and rent it for 2 to 3 years so you still fall within the 5 years of ownership for the capital gains tax exclusion then maybe sell at that point. Another investor and realtor in San Diego told me that STRs are doing well (as far as people buying property now) so maybe consider STR or MTR. Unless you really don't want to deal with a PM or managing it far from Colorado then sell it.

My thought is if you own a California property with a good amount of equity to hold onto it. Once you sell it you won't get it (or similar property type) back and since you had in since early 2021 your interest rate is much lower than 2023 interest rates.

@Kelly Cynamon

I'm in the San Francisco Bay Area. I haven't done STR but I'm buying LTR in the Indianapolis area. Recently purchased a Class C SFH potentially moving up to a Class B for $130,000 (move-in ready). It will be put in the rental market soon. Projected cash flow $200 a month. I didn't want to do an out-of-state BRRRR. I may consider that now since my realtor has been great and knows contractors, etc. I'm a pretty cautious investor - I bought through a real estate agent. I haven't purchased off market, through wholesalers, tax liens or done any type of creative financing. I have all conventional loans. I'm not seeing anywhere which would replicate the appreciation on my Bay Area SFH. My property tax basis is reasonable for California because of Proposition 13. There's no Prop 13 in other states.

I bought a SFH in 2013 (my primary residence) in an Indianapolis suburb, Class A with great school district. When I rented it out, property taxes skyrocketed because I lost the homeowner's exemption, supplemental deduction and mortgage interest exemption (for 2023). I was cash flowing $400 a month. It's now closer to $162 a month but I'm keeping it since I have a low interest rate 3.875% and tax write offs and there's no way I could buy in a Class A neighborhood anywhere in the U.S. now.

I would have preferred to invest in an appreciation market such as Nashville Tennessee, Florida Panhandle, Arizona or Nevada but just from my brief searches my mortgage payment would be much higher than the rent I could charge (and that's not counting vacancy rates, capital expenses, and repairs). I'm not sure if I'll continue buying SFHs in the Indianapolis market. I've had other investors suggest multi-family but an apartment building will cost way more than a SFH.

I'm not seeing how anyone can cash flow $500 to $1000 a month buying at current prices and interest rates - if this happening, someone enlighten me :-) The key word being current prices not prices from 5 to 20 years ago. 

@Kristina Rogers

Welcome to the world of real estate investing! I think building 7 homes or 10 condos is very ambitious for a first time investor. I agree with Bruce on this one - buying a SFH or duplex is much more do-able. If you don't have a primary residence you could house hack (rent out rooms in SFH, buy a duplex and live in one side, rent out the other) and get an FHA loan at 3.5% or conventional at 5%. When you said you have no money does that mean literally no money for a down payment?

With partnering with someone I think you need bring something to the table, like Bruce and Sebastian commented. I'm just now starting to be a little okay asking someone to partner and I have 4 properties. I've used my own money, leveraged with cash out refinances so I have some skin in the game. I could show my prospective partner how my investments are performing and here's my proposed deal. If I had $0 or no skills (I'm not a licensed contractor) would someone trust me to invest thousands or a million dollars of their money? 

You could also look into out-of-state investing where prices are much lower than California but you would need a good trustworthy team in place and get to know the local market there. Keep on learning and networking. Good luck!