All Forum Posts by: Jeff J.

I think that rather than looking for the best location, you might be better off defining areas that have good potential to provide solid returns without much outside competition. My observation is that small towns that have relatively strong influx of outside money are good candidates to fly under the radar and provide good business cases. So towns with small colleges, some type of governmental installation, smaller state capitals etc. are all good places to start.

Keep in mind these types of places are not without risk because the economics of the towns are easily bent up or down based on the state of the institution they serve, also you probably are not going to see huge gains in value.

The rental business is like any other business, if you offer a great product at a fair price you will succeed. My wife and I have about 60 rentals. Our buildings are C+ with great bones and our tenant class is solid B to B+. We don't gouge our rents and we also offer a very high level of service. For that we can be picky, we have lower vacancies than our competitors (We almost never have an idle unit, if a unit is down it's because we are renovating it), we get referrals, we don't get many complaining phone calls, our tenants stay a long time, they tend to take pretty good care of the place, they are vocal about trouble tenants, and they are great people to do business with. All-in-all, we probably revenue and profit more than if we pushed costs and expenses and our business is easier to run.

And, by the way, I think it would be difficult to run our business this way with a 3rd party manager.

I've casually looked into Mexico, also in Baja. Non Mexican citizens can't own property in Mexico. They have to set a long term lease situation that can be organized through various financial institutions. Even if you're Mexican the real estate rules are funky.

I decided to pass.

Appraisals would be useful if they were blind, in that the appraiser didn't know the contract price. But, they aren't. As a result they generate a canned number that is supposed to be the independent validation of the transaction, providing no real value but adding considerable expense. It a corrupt process that carried a lot of blame in the 2008 real estate meltdown, and it hasn't been fixed.

If I'm reading this correctly, they rented this place for 5 years @ $2500/mo. Gave you $150k, were good tenants and left the place in great shape. If it were me I would given the entire deposit back. I expect to spend money after every tenant leaves, a pristine turnover saves me money and gets the place back on the market faster.

When we remodel we go with hard surfaces that are easy to clean, last longer than carpet and don't hold smells, and then allow pets. We charge $25/mo for the pet. Its a nice extra income stream and sets us apart from other apartment owners where we live.

It depends on your risk tolerance, and understanding of the market. A business strategy that relies on appreciation is pure speculation. I have a portion of my stock portfolio where I bet on dips or try to anticipate a market. I was up 100% over two years, then I bet on a uranium mining play and I'm 50% down and 2 years in. I still think it will come back and I will have a good return, but if I needed that money I'd have been in trouble. That is your risk, you have no fall back position, so you better be right.

What happened with the 15 unit? From 30k feet it look pretty good.

I own two apartment sets. One cash flows like a river, after upgrades and value adds the other will cash flow even more. I pour capital into both projects to upgrade and I pay all utilities. Both are well under 50% operating expenses. To be fair, when I include capital they drift past 50%, but that trends down as I settle deferred maintenance and modernize. All this said, I draw $100/door, and could do more if I wanted - but I'm reducing entropy now, not contributing to it. A better 50% rule would calculate all your reasonably controllable expenses - mortgage, taxes, Insurance, utilities - and if these are under 50% of revenue you probably have a good deal on your hands, even if the property need a lot of TLC. After this you need to do your own forensics on the numbers.

$10k/mo for $450k is a great deal. Even if they need rehab you can easily cover that through existing cash flow, which will be substantial. You put a little elbow grease into these and in 12-18 months they would likely appraise well north of $700k.