All Forum Posts by: Matt J.

@Ishan Puri, I've seen Cincinnati and Cleveland appear in many 'best places to invest' lists. We're looking at both ourselves. Indianapolis is also interesting, if you can find the right neighborhood - but that's true almost anywhere.

As for Kansas City, thanks for the tip, @Mike D'Arrigo! We'll add it to our list as well. 

And I have to second the book recommendations by @Ronald Morris. Both of those guys know their stuff.

No, I don't know much about him, Draven. 

While there are some really good gurus out there, you can learn a lot from books, podcasts, forums (BP is one of the best), RE professionals (PMs, lenders, agents, etc.), and other investors. If you haven't yet read it, @Brandon Turner wrote a great piece on the "guru trap." It's well worth the read, as it gives some additional perspective and confidence in your own abilities.

Hi Christopher,

One of the seasoned lenders on here can do a much better job of explaining this than I can, but I will pass along some information we've gathered on conventional financing.

As of today, Freddie Mac will lend up to 75% LTV (loan to value) on a 2-4 unit investment property (meaning you don't live in any of the units) for the initial purchase and up to 70% LTV on a cash-out refinance. That means you need to come up with 25% for the down payment plus closing costs (typically 2-4% of the value). Then, when you refinance it to pull out the cash in six months (loan "seasoning" time required by many lenders before you can refinance), you need the property to appraise for considerably more than the initial purchase price plus what you have into it and you'll pay another set of closing costs.

To get a quick idea, calculate: (initial purchase price + rehab costs + purchase closing costs + refi closing costs) / 70%

That will tell you for about how much the property must appraise to extract your down payment, rehab costs and both sets of closing costs, leaving none of your own cash in the deal. Keep in mind this is a quick calculation. You likely will buy down a little bit of the principal during the six month seasoning period. Also note that your monthly debt service will increase, as you are borrowing more money. 

To get a better idea, use the BP calculators. They are far more sophisticated. You might also consider non-conventional lending options.

For more on the conventional options, see Freddie Mac LTV Rates and Understanding cash-out refinances.

Hi Draven,

We're working through the process right now ourselves. Many of the gurus suggest building a "power team" in the remote area. In that team, you need a trusted contractor to evaluate potential purchases and estimate rehab costs before you make an offer. The "trusted" part can be a challenge. We find lenders and property managers are great sources for local talent. They have worked with these people, know their skill level and reliability, and they have an interest in maintaining a long term relationship with them as well as you. However, finding them is only half of the strategy. You need to keep them honest. @David Greene recommends leveraging the other members of your "Core 4" team to act as checks for the rest. Even with the best people, things can slip. Asking your PM or even a trusted agent to check on rehab progress adds another layer of accountability.

Best of luck!

Hi Katrina. Have you listened to anything by @David Greene? He is great at articulating his system for long distance investing. We've moved forward using several of his techniques. I highly recommend listening to anything you can find by him. He's been featured as a guest on some of the BP Podcast episodes and he has his own YouTube channel - definitely worth investigating.

We are looking in some of those markets as well right now. However, we didn't seriously consider OKC. Thanks for the tip, @Alyssa Dyer!

It also seems Ohio appears frequently in the 'best places...' lists these days. Like many other areas, there certainly are pockets with favorable numbers. I would be curious what other investors, familiar with OH, think of Cincinnati, Cleveland, Columbus and Dayton in 2019.

@Tony Castronovo You might have some legal recourse if you can prove breach of contract - especially if it occurred over the long term. A good attorney can help you navigate your options. However, good attorneys are not cheap. As others have said, this might best be considered an inexpensive education. 

You learned an extremely valuable lesson. Sure, you know a bit more about working with PMs and you will probably have a lawyer review your future contracts, but the real nugget here is motivation. What motivates PMs to keep you at max occupancy? What motivates tenants to pay rent on time? What motivates agents to find you deals? Decipher those and your business will grow exponentially.

I would love to know how you fair over the next few months. Keep us updated!