All Forum Posts by: Leo R.

 @Reggie Smith that's some good feedback, and it sounds like you've been through some challenges...getting involved in a PM company that cooks the books sounds like a nightmare scenario--sorry you had to experience that (though, I'm guessing you learned a lot from it).

What would you say are the biggest lessons you've learned as an OOS investor?

...Also, I thought about your question about Pittsburgh...I don't currently own any property there, but I grew up around the area, and I know the city fairly well... I'd suggest asking some local pros what their thoughts are about the Polish Hill neighborhood. 

Most of Polish Hill has been in pretty rough shape for a while, BUT, it's one of the most central neighborhoods in the city and is surrounded on nearly all sides by pretty desirable neighborhoods, all of which are very nearby (Bloomfield, Lawrenceville, Oakland, downtown, the strip district)...

I've always wondered why Polish HIll has struggled when the surrounding areas have done pretty well, and I've always thought that it could could have potential to make a comeback--maybe a PGH pro on here can fill us in on that....

...for the last couple years, I've been thinking about trying to break into the PGH market myself--it's a great city, with a lot going for it...but adding OOS properties is obviously a big challenge (currently, all my properties are local to me)...and I DEFINITELY wouldn't have the guts to go after C and D OOS properties lol.

I'll be interested to hear which neighborhoods you end up focusing on @Reggie Smith

Good luck!

@Gurjot Grewal in addition to the typical inspection and title work by a title company, I always do the following:

-Sewer scope to check condition of sewer main

-Meth test

-Radon test (this is more necessary in some areas than others)

-Thorough inspection in the basement, attic and throughout/around the house for structural issues (e.g.; signs of significant settling, foundation cracking, condition of structural beams in basement, etc.). I also look for signs of shoddy structural repairs (e.g.; improperly sistered structural beams, excessive use of shims, inadequate attempts at structural reinforcements, etc.).  I personally steer clear of properties with any significant structural issues.

-check age and condition of roof, plumbing, appliances, electric, windows, doors, HVAC systems.

-have inspector run all appliances (dishwasher, stove, etc.)

-if it's a brick/masonry building, check condition of masonry

-check wood throughout building for signs of rot or termites

-check house for lead based paint and asbestos

-have inspector run all plumbing for extended period to check for leaks

-check house (especially basement or crawlspace) for signs of water intrusion/flooding. 

-knock on neighbor's doors to introduce myself and ask them questions about the history of the property and neighborhood. I also ask about their own history in the neighborhood (how long they've lived there, how they like it, what the neighbors are like, whether they've ever had issues with crime, etc., etc.). If the property I'm buying was used as a rental, I ask the neighbors about what the tenants were like (if there were always excellent tenants with minimal vacancy, that's a good sign). I ask whether they have ever had issues with flooding in their basement, or whether the neighborhood has ever had flooding issues. I ask whether they've noticed any recent activity at the house by contractors/plumbers/electricians or other tradespeople.  I cross-reference everything the neighbors tell me with what the seller tells me to see if there are discrepancies.

-walk around neighborhood; assess overall grade of neighborhood. Personally, I usually only buy property in A and B neighborhoods, I avoid C or lower.

-esp. if I'm not familiar with the neighborhood, look into crime stats for the neighborhood.

-have a thorough plan of what to do with the property once it's acquired, with multiple viable exit strategies

-thorough analysis of the local rental market & tenant pool.

-thorough analysis of local economy, employment trends (and employment forecasts), availability of tenants and demand for rental properties versus supply of those types of properties.

-assessment of what types of tenants the property will attract--you need to know who your customer will be before buying the property (for instance, will it be mostly college students, or families, or seniors, etc.?). A property that is appropriate for, and attractive to, one group of people might be completely inappropriate/unattractive to another group of people, so it's very important to understand the tenant pool.

-quadruple checking my financial models, including "worst case scenario" financial models (which include things like extended vacancy, lower than market rent, significant capex, etc.).

Good luck out there!

@Alec DeAngelo there's already plenty of great feedback in this thread--I would agree with most people that $10k is probably not worth it--esp. given that all of the most fundamental info is widely available for free (or for a few bucks for a book).

Having said that, I do think that having a mentor of some type can be extremely valuable, and that a truly experienced mentor can provide value above and beyond what forums, books, podcasts, etc. can provide.  The reason being: a mentor who actually knows you and your circumstances can provide feedback that's far more personalized than what you'll get from podcasts, books, etc.

When I was first starting out, my main "mentor" was my agent--who has a TON of experience buying, selling, rehabbing, maintaining and managing properties. ...back before I had any experience of my own, he was an incredibly valuable resource who helped me navigate some pretty complex problems that podcasts, books, etc. don't address...real estate is a complex business, and every time I think I've seen it all, I encounter a new problem/challenge that just isn't fully addressed in books/podcasts etc.

I didn't pay my agent directly for his mentorship, but he realized I was a serious customer (especially after I bought my third property with him), and so he was willing to provide a lot of guidance because he knew his time would be paid for the next time I bought another property...today, I'm his best client, and we regularly have multi-hour long discussions about countless issues/challenges/problems we encounter in REI.

So no, I wouldn't suggest paying $10k for a guru, but I WOULD suggest surrounding yourself by highly experienced, highly competent people, and figuring out a way for you to bring value to those people so that they're incentivized to bring value to you!  ...as the saying goes: "you alone can do it, but you can't do it alone."

Good luck out there!

@Diara Campbell I see your post is about 4 months old--I'm wondering if you've been able to progress toward your investing goals? (and if so, what have you learned...and if not, why not?).

In response to your question, I'd say the best way for a beginner to get their start in RE investing is to house hack (either a single fam or small multi fam property). This strategy has many advantages--one of the big advantages being you can use an owner occupant mortgage with excellent terms and a minimal downpayment.

Good luck out there!

@Alaura Mannor I'm not sure if I'm completely understanding...

Are you saying that you want to buy a property right now, immediately put a tenant in that property, stay at your current rental until your lease ends, and when your lease ends move in to the property that you bought? 

If so, are you planning to buy this property with cash, or with financing? If you plan to finance it, the plan I just described doesn't make much sense to me--because you would have to buy the property with an investment loan, which has much worse terms than an owner occupant mortgage...since you plan to move into the property eventually anyway, it would make more sense to buy it with an owner occupant mortgage and just move in immediately...

If you're worried about the timing with your current lease, and you don't want to have holding costs of the new property while you continue to rent, I'd say that you can probably eliminate this problem by working out an early lease termination with your current landlord...what is the early vacate fee in your current lease? Usually it's only a few hundred or maybe a couple thousand bucks--a few hundred or a couple thousand bucks usually shouldn't be enough to derail a real estate deal....

Good luck out there!

@Reggie Smith I don't have an answer for you, but I do have a question...

You mentioned that you've had some success with OOS investing in C and D areas.  Normally, the biggest trainwreck stories we hear on BP forums are from OOS investors with properties in C and D areas (e.g.; we hear stories about non-paying tenants, trashed properties, crime, etc.). One of the most common stories we hear from OOS C and D investors is that their PM is non-responsive (which makes sense when you consider no PM in their right mind would put in the serious amount of work it would take to correctly manage a D property in exchange for the minimal management fee that a single fam or small multifam D property would produce...it's just not worth the effort to most PMs).

So, my question is:  how were you able to succeed as an OOS investor in C and D properties, when most people fail?  ...it sounds like maybe you've learned something valuable that we could all benefit from...

Thanks!

@Edwin De leon try starting with this:  https://www.biggerpockets.com/...

and then study up on the many, many resources about how to analyze properties. There are plenty of bigger pockets forum posts, articles, podcasts, youtube videos, blog posts, etc. about this topic--and I'm sure you can find even more if you google things like "how to analyze a rental property".  

Good luck!

@Shalaye Camillo my first reaction is that $17k to add a bathroom and re-do a kitchen sounds cheap. If you've worked with this contractor before and you trust their numbers (or if you personally know the numbers really well), great...but if you haven't worked with them before, I'd suggest getting additional quotes just to make sure the $17k number is right ( @Bruce Woodruff also mentioned it sounds low, and he has more contracting experience than me).

You said you're not excited about the increase of 300/mo...admittedly, 300 bucks a month isn't going to make you rich, but if it really can be done for $17k, and if it adds $300/mo to your cashflow, that's a 21% cash on cash return--so in that scenario, I'd say go for it!

Also, the cash on cash return isn't the only consideration--adding a bathroom often makes a unit much easier to rent, because most tenants prefer to have an extra bathroom...so, it could make it easier for you to find tenants whenever there's turnover--which, to me, is worth a lot in itself. 

Also, sometimes adding a bathroom can change who you can rent to, which can change the income. For instance, I had a 2 br 1 ba place that I could only rent to couples or fairly well-off single people. I added a bathroom (making it 2 br 2 ba), and now I'm able to rent it by the room to two housemates--which substantially increased my gross rent (while also making the property viable to a larger pool of potential tenants). And lastly, adding a bathroom can increase the value of the property.

One other consideration is holding costs--how much lost rent you'll miss as the work is being completed...so, just factor that into your numbers...

Good luck out there!

@Nader Hachem  GREAT question.

I'm not familiar with the Detroit market, but I can tell you about my experience buying and managing property on busy(ish) roads in my own market.

I have several properties that are on busy-ish roads (one step busier than quiet 15-20 mph residential streets). These roads are one lane in each direction, and have speed limits of 25-35 mph, and a pretty constant flow of traffic. On those streets, the fact that there was a bit more traffic was actually an ADVANTAGE to me, because it turned off retail residential buyers who wanted to be on the quietest streets--and this allowed me to get the properties at a lower price. However, these properties are still in A and B areas, and because of that, the fact that they are on busier streets hasn't affected my ability to get tenants, or my rent at all. Plus, these roads are bus routes, so there are bus stops very close by--which the tenants like  ...now, if I ever sell those properties, I will take a bit of a hit compared to my properties that are on the quietest streets...but, I'm a long term player, and I bought the properties at a discount, so that's fine to me.

Another strategy I've used: buying a property that is on a quiet 25 mph street, but one or two houses away from a very busy street (40 mph, two lanes in each direction). In that scenario, the proximity to the busy street meant that the house was heavily discounted, but since it was a house or two away from the busy street, it wasn't so noisy that it bothered tenants or created any other problems for tenants...

Now, I do think there's a point where a street could be too busy...I probably wouldn't buy a house directly on a street that had a speed limit higher than 35 or 40 mph, and I probably wouldn't buy on a street with multiple lanes going in each direction--that's probably too much noise for a lot of tenants, and areas like that are often less desirable for tenants, anyway...I might consider it if it was in an A or B area and the house had a major discount, and the house was insulated well enough so that the noise didn't bother tenants....

And, like you said--you have to consider parking and ease of access to that parking...you probably don't want tenants having to back out of a tight parking space into 45 mph two-lane traffic...

Other considerations: will the tenants be all adults, or will the tenants be families with kids? (you probably don't want children residing in a rental right next to 40 mph two-lane traffic--that sounds like a tragedy waiting to happen).  Similarly, will the tenants have pets?  (I wouldn't want a tenant's dog or cat to get hit by the traffic). What TYPE of traffic is on the street? (if it's all cars, that's less noise than if it's a main route for tractor trailers and dump trucks).

Also, just like everything in real estate, the grade of the area is incredibly important...a property on or near a busy street in a D area will often see a lot of foot traffic, and potentially a lot more exposure to crime...whereas crime concerns near a busy street might be less in a B or A area.  Similarly, a busy street in an B or A area might have desirable amenities (trendy restaurants, bars, other things tenants like), whereas a busy street in a D area might have nothing but pawn shops and auto salvage shops...

So, in summary--yes, there can be both pros and cons to a busy street.

Good luck out there!

@Antonio Cardenas  yes, there are many experienced pros on the forums who can provide insight.  Just FYI: house hacking is not the same as air bnb, and air bnb is actually illegal in most parts of SLC (although that doesn't necessarily prevent people from doing it).