All Forum Posts by: Rob Cee

 Hi James, do you have experience yourself being a distance landlord over the long term (10+ years)?

Hi Jeff,

How long have you owned the Louisville properties? What were the numbers on your purchases (purchase price and rents)? SFR's? 2-4's? That is key that you used to live there. You are lucky in that you used to live in a cash flow area. Most people on the expensive coasts buying out of state will not have previously lived where they are buying. I'm especially interested in hearing from folks who have owned properties out of state say at least 7-8 years (better even 10+ yrs), enough time to go though issues with tenants, major repairs, etc...

I have one friend in CA who owns a duplex in Michigan he has $30k total into.  He gets about $800 in rent.  Theoretically a $30,000 property that gets $800 in rent you could make money on.  But over 8 years he has barely broke even if not lost money on it.  The "cash flow" properties in the Midwest are older properties that require a lot of repairs.  They are also not in the best neighborhoods.  The combination of tenant turnover, bad tenants, vacancy, repairs, high property taxes and not being local to keep and eye on things eats up all his cash flow.  One new roof and there goes 2 years of cash flow.  One bad tenant who trashes the place and you have to evict and there goes another year of cash flow (along with a lot of mental anguish).  This is why I'm really curious to hear from some folks who have made out of state rental buy & hold work for a good return over the LONG TERM.  10+ years.  

 $185k for a duplex that gets $1,600 in rent doesn't seem like exceptional numbers for a buy and hold rental property in TX.  That doesn't even meet the 1% rent to price ratio rule.  And TX has such high property taxes that are cash flow killers, so you need to be even above the 1% rent-to-price ratio I would think for a good return on a buy and hold rental.  Could you just buy and existing duplex cheaper and for better cash flow and not have the whole hassle of building new?    

In my experience the way investors make money with rentals is knowing their area really well, finding bargains after looking at a ton of stuff, adding value, and being able to keep an eye on them.  There is so much you lose in not being local to your properties.  You are totally at the mercy of those PM's when you are thousands of miles away.  Until you go though it for say 5+ years it's hard to know.

Living in CA for many years and attending many investment clubs over the years I saw so many salespeople pitching out of state properties at these clubs.  These salespeople would go to some Midwest state, make connections with local Realtors, and then sell these "turn key" properties to CA investors by pitching them at the investment groups.   They would "wow" the CA people at the investment clubs with these $50k houses that get $750 or whatever in rent (it seems like these houses were still $50k 10 yrs ago too!).  I really would like to catch up with some of these CA investors 10 years later and see how these Midwest cash flow investments turned out.  

A lot of people suggested buying cash flow houses in the Midwest (and a lot of those people that made those suggestions are actually selling properties in the Midwest to out of state investors!)  I would like to hear from far away out of state investors that have had cash flow houses for 10 or more years in places like Ohio, Indiana, KC.  How has it gone for you?  Do you get a good return?  Hassles?   My personal experience has been MUCH better with owning local rentals.  The PM costs add up on out of state properties and can serious eat into your cash flow.  You are at a major disadvantage when you can't inspect for yourself what needs to be fixed and what doesn't, you need to rely on someone else to tell you that (I don't mean you need to do the fix up yourself, but it is a huge different to be able to see for yourself).  Also, it is more difficult to get good prices for repairs from a distance since you can't be there locally to shop bids and network to find low cost handymen to do your repairs.  Also it is frustrating not being able to inspect the work done on your house to your satisfaction.  A ton of out of state investors get ripped off here.  I just think you lose a ton of control landlording from a distance.  And you are at the mercy of local PM's that do not care about your house as much as you do.  All of the really successful investors I have ever met invest locally.  I have yet to meet someone who has been really successful small time mom & pop investor in another state over the long term.  But I have met a ton of people with horror stories investing out of state in cheap areas.   That's why I would really like to hear from a smaller mom & pop type landlord that has done well over the LONGER term (10 or more years) investing in low cost houses in the midwest.

I'm curious about the same thing.  Looking for a new market for cash flow rentals.  I bought rentals in SoCal from 2008-2012 when the market was crashed.  Wondering if anyone has had success over the LONG TERM owning a portfolio of houses out of state for cash flow?    Any idea of some good locations?

Where I owned and still own some rentals in Coastal SoCal people thought you would never even hit the 1% rule again, but there was a brief window from late 2008 to early 2012 it was do-able even in Coastal CA.  The window closed a few years ago.  But I have found the 1% rule has give me solid cash flow.  But 1% on a $150k property ($1,500 rent), is different then 1% on a $30k house ($300 in rent).  The lower the price the higher the % should be.   On another note, I'm curious how out of state investors do over the long term with these low priced houses as rentals?  Are you able to make it work?  Get good income and cash flow being so far away?    

I have always like the 1% rent-to-price ratio. If a house is $100,000 it needs to get at least $1,000 in rent. Whenever I stayed within that rule I have had great cash flow. I think any neighborhood that is not a war zone type is OK. Of course the best neighborhood and best school district you can find and make the numbers work the better. A good school district is a gold mine for a rental. You will get families that will stay for a long time. I'm a contrarian in that I like condos (& most seem to not like condos). Of course I bought my condos after the market crash in 2008 in SoCal when you could get them for STEEP discounts when they were out of favor. But I have loved my condos as they rent really well, are in great locations that SFR's would be cost prohibitive as rentals, and they are so low maintenance (smaller, hoa takes care of roof, exterior, landscaping, a lot of pest, garage doors, etc...). I have had zero issues with the HOA, all these warnings people told me about HOA's none turned out to be true, mostly BS by people who never owned condos. Also, in more expensive coastal areas of the U.S., condos appreciate really well. My older SFR rentals on the other hand have been MONEY PIT's with never ending maintenance and updating.

I'm curious if anyone on this forum has had success with out of area or out of state rentals over the long term.  Investors in expensive parts of the county often have to go far away to find good cash flow and good numbers.  And I know there are many, many horror stories of people losing their shirts buying out of area (and especially out of state) rentals.   But I was wondering if there are any success stories?  Where investors get solid cash flow over long periods with out of state rentals.  It is tempting when you live on the coasts in see the numbers for rentals in other areas.  I have personally owned rentals both locally where I live and out of state.   I found out of state very tough to make work.

After looking into this more and thinking about it more, I think a LO would be the best solution for this property and there could be a way to fix the situation and reduce my loss considerably with a LO.  And I would be more likely to try this if I lived there locally where the house is.  But another challenge is just being a thousand miles away from the property and not having a lot of local connections there.  Having to find trustworthy people to do everything for me, not being able to check myself to see if things are done correctly, not being able to see for myself the condition of the house, etc... all makes me lean towards just cutting it loose and taking the big loss.