All Forum Posts by: Rob Cee

I'm doing some passive investing in trust deeds and thankfully have never had any issues with defaults yet.  I'm not setting up my own trust deeds, I'm investing though hard money lenders who do everything and I write the check.  I'm doing this in the Western U.S. in trust deed non-judicial foreclosure states.   I'm curious, are their any investors out there that had to go through a foreclosure on a trust deed they owned?  What were the total costs (property taxes, insurance, foreclosure processing fees)?   Did you recoup your principle?

Any other stories of bad experiences?  Like having to take back a half-finished property or having the market go south on you when you had to take back a property?  I'm investing mostly on trust deeds that are fix & flip properties and some rental properties.  I have not ventured into funding spec building yet. 

 I totally agree.  I made a big mistake on my first out of state rental about 10 yrs ago at the peak of the market back then.  I got bad financing, had negative cash flow, overpaid, house had way too many big ticket items that needed updating (roof, furnance, etc...).  Suffice to say I took a major bath on it.  But if I would have went out and gone nuts and bought 10 of these at once, it would have bankrupted me.  Good thing I went slow and only bought that one mistake, so I still had money and good credit to be able to scoop rentals after the crash in 2008 when things were going dirt cheap and be able to live to learn from that first mistake.  Many people I know went out and bought tons of rental property all at once back 10 years ago lost entire life savings, went bankrupt, etc...  Catastrophic.  And even worse those people were broke with bad credit post crash so they also missed on one of the best buying opportunities in a lifetime (2008-2012) in many prime areas of the U.S.  So you are right.  Take it slow at first.

I've only started posting a lot recently on BP.  But I'm quickly learning you have to be very careful who's advice you take seriously on this message board.  It seems like a large percentage of the members posting on this board have hidden agendas since they are trying to sell properties in their area (or they may be affiliated with people that are selling, and that may not be so obvious at first).    There aren't as many members posting who are actually real investors with nothing to sell but their real personal experiences.   You may not always be getting unbiased advice here.  Anyway, just an observation. 

Let's look at this out of state property you bought. Your property taxes are what about $350/mo? Insurance maybe about $60/mo? Do you have an HOA? Do you pay 10% of rent to a PM? Maintenance, repair, vacancy, etc.. will be at least $200/mo over the long haul. So that means if you paid cash your costs are probably at least say $750/mo. You probably had some closing cost when you bought and small fix costs to make rent ready so let's say you have $147k total into it. So you are getting about a 5.7% return on your money. And Texas doesn't appreciate in value much, and if it does your taxes will only go up (the only part of TX that really gets a lot of appreciation that I have seen has been the older inner core hipster areas of Austin). If you wanted to sell even in 5 years you would probably lose money or just break even due to Realtor commission, closing costs, fix costs to prepare to sell, and vacancy while waiting to sell. So you best bet is a 5.7% return on rental income. My question is why would you buy this house and have the hassle of tenants when you can get 10-12% investing in trust deeds right in your home state and have no tenants and toilets? If you 1031X into that DFW house that could be a decent reason for taking this rental over trust deeds as you cannot 1031X into trust deeds.

There is a reason houses are still only $150k in DFW after years of economic boom there.  They can build forever and the high property taxes will always keep a lid on appreciation.  Prices will never go up much, b/c if they did no one could afford the property taxes.

@Jay Hinrichs and @Aaron Mazzrillo are kicking down some serious wisdom on these posts!  LISTEN TO THEM.  Those are some hall of fame all star type posts.  Couldn't agree with both of you more.  Too many newbies from the coasts have been lured into false illusions of out of state cash flow over the years.  And many, many dead bodies lie along that trail.  This has all been done before and often hasn't ended well.  Not saying you can't be successful, but be careful and try local first.

Thanks Jeff.  It sounds like you own in an area you used to live in when you were buiying and since moved to another area?  Where do you own?   Do you own apartments or 1-4's?  What price points?

I know I'm going to talk to Jay.  He has had some great feedback.   It's amazing though,   other then Jay not one long term out of state investor has stepped up.  Or even a long term local landlord in these areas.

 Andrew, how long have you owned these properties?  I'm looking for feedback from someone who has owned for 10 yrs+ and has gone though all the tenant turnover, repair issues, PM issues, that come with being a landlord in lower income out of state areas.   There seem to be lots of people who post on BP who have just owned out of state older lower end properties 1-3 years and are still in the giddy excited "honeymoon phase" of being a landlord.  I want to see if over 10+ years these older lower end properties in the midwest & south have provided the return expected for the smaller time investor (say 10-20 properties).   Also I would love to hear from actual local landlords that are long term in the business (10+ years) in the Midwest and South and own these lower end properties to chime in.  I'm talking real landlords with nothing to sell, only advice, not local people that are selling turn key properties in these areas.  

 I'm curious how long have you owned these properties?  I'm trying to find an investor on BP that has owned for say 10+ years as an out of state cash flow investor in low cost Midwest and Southern areas.  To see how their cash flow numbers have held up over the long term with these properties (after turnover, repairs, PM issues, etc.. that come with long term ownership).  It seems like there are a lot of out of state investors that post on BP that have only owned for 1-3 years (still in the "giddy" honeymoon phase), or there are turn key salesmen promoting their areas.  But I have yet to find even one actual long term out of state landlord in these areas that posts on BP.  Really curious to hear about the long term with these areas.  Also, there are not many long time local landlords in the Midwest/South that post on BP (not counting turn key salesmen who own, actual real landlords not trying to sell or wholesale properties on BP, just here posting and giving advice).  I would be curious to hear from them. 

Some more from that housingwire article.  Food for thought anyway.  Purely numbers based though, no info on health of local economies.