All Forum Posts by: Leo R.

Hey folks!  I'm interested in breaking into a new out of state market (I've been looking at mid-sized, relatively low cost cities like Cleveland and Pittsburgh, and also some university towns like Morgantown, WV and Lawrence, KS).  

However, I keep running into the same issue: I assume that if all I buy is 1 single fam LTR house, it would be a very low priority for most PMs (I assume that most good, experienced PMs want either multi-fam, or a portfolio of multiple single fam houses....if you're a good PM with lots of business, just 1 single fam LTR seems barely worth the effort of taking on a new client).

How accurate is this assumption?

Obviously, it depends somewhat on the market, and it depends somewhat on the owner's ability to manage the PM (I self-manage all my local properties, and I'd probably be OK at managing an out of state PM)    ....in any case, I'm interested in hearing folks' thoughts (especially any PMs out there, and/or folks who have experience working with out of state PMs).

Thanks in advance!

@Robert Ruschak as others have mentioned, scaling up quickly is not necessarily the best approach for a beginner (and in fact, it can come with some serious risks).

RE is just like anything else in the sense that you usually want to start off with the simplest, lowest-risk, easiest to learn strategy (like house hacking).  If you have no experience and you try to start off with a complicated, high risk, difficult to learn strategy (like syndicating a 300 unit portfolio), you'll probably crash and burn.  

...sure, a strategy like syndication could allow some to scale up quickly (if they're a master syndicator), but if you're a beginning investor, you're probably not prepared to take on something like that.

Similarly, starting off with a $10 million self storage facility or 50+ unit multifam portfolio probably has a high likelihood of failure for an inexperienced investor (and the consequences of failing at that scale are pretty serious--e.g.; bankruptcy, and potentially losing a lot of other people's money and thereby ruining relationships in the process).

Beginning skiers should start off on beginner terrain. Beginning drivers should start off in an empty parking lot. Learn to walk before you try to win a gold medal in gymnastics. House hack a single fam house before you try to syndicate rehab flip a 500 unit portfolio.  

House hacking single fam or small multi fam properties is an excellent, relatively simple strategy to get started in RE investing--and it will teach you some invaluable lessons that you can use in the future if you ever work your way up to more advanced strategies (like BRRR'ing). Moreover, there's a ton of good info and resources available to help you successfully house hack your first property (e.g.; BP podcasts, books, forum threads, etc.)

Good luck out there!

@Ken Lim even if you could snap your fingers and bring the rent up to 1200/mo per unit over night, you'd still probably still be bleeding money every month...(if my calculations are correct, even at 1200/mo per unit, you'd be grossing 3,600/mo rent, but your payment would be around 3,400/mo--and that doesn't include property management, capex, vacancy, etc...after the dust settles, you'd probably be running at a loss every month...25% down is a LOT of money to spend just to lose even more money each month...) ...to me, there's probably not enough meat on the bone as just a normal rental, but perhaps there are other ways of extracting value from the property (e.g.; STR, value add, etc., etc.)

Good luck out there!

 @Carolyn Fuller  wow--this is a TON of really interesting and valuable information!  It sounds like you're in the very epicenter of the higher education world--so it makes sense that your model would work so well there.

That's a great idea about contacting the housing department at the university to gather intel--I'll be doing that.

It sounds like you've zeroed in on a niche within a niche within a niche that is lucrative, involves awesome properties, and attracts top-tier tenants--you're basically living the dream as far as landlording goes; congrats!

@Michael Kundrat listen to @Chris Seveney --he's 10000% correct: this property doesn't come close to penciling out. 

Even just eyeballing the numbers for 5 seconds, and I can see that this property would be a complete loser--it's not even close, unfortunately (and that's assuming it's a property with no significant impending capex, when in reality, you're facing serious capex on the horizon--based on your description).

@Robin Simon this is a topic I've been really interested in for the last few months--so I'm glad you brought it up!

Admittedly, I know very little about MTRs (I currently only do more traditional LTRs), but I've been reading up on MTRs in my free time...

I think the fact that your post got 3 pages (and counting) of responses, and so many interesting and varied perspectives on the topic, shows that--at the very least--MTRs are a topic that folks are interested in discussing...whether MTRs become the "next big thing", I don't know....my uninformed opinion is that there's probably a smaller market for MTRs because I just assume that there are fewer people needing MTRs (compared to STRs and LTRs)...but, obviously that isn't stopping folks from making good returns with MTRs.

Since work-from-home, and MTRs are relatively new trends, I think the MTR space could evolve quite a bit in the future....it will be very interesting to see what's going on in the MTR space in a few years!

@Mike Dymski I'm really interested in the model you're describing (though, admittedly I know very little about it because I'm only involved in more traditional residential models) 

... it sounds like you're doing this at a fairly large scale, which makes me wonder: how does management work for a large portfolio of MTRs? (I assume that at a larger scale, people are constantly moving in / out, repair/replacement of damaged furniture, missing kitchen utensils, etc., etc. is constant, and that there's just a lot going on)...

I'm assuming you have a dedicated property management team--is that correct?

Can you describe some more of the differences between how you manage a portfolio of MTRs versus how a similarly-sized portfolio of LTRs would be managed?   ...I'm guessing you need a larger team to manage an MTR portfolio (compared to a comparably-sized LTR portfolio), and that perhaps your systems of management are more similar to those of a hotel?

Cheers!

 @Carolyn Fuller That IS a niche! (I've been in RE for a while, and it's rare that I hear someone describe a strategy that I've never heard of--but you just did!)

I have a million questions about your strategy of MTRs for visiting professors...

Do you have a rough idea of how many visiting professors are in your area in a given semester? (and roughly how how large is your local university in terms of enrollment?)

...I live near a large state university (probably about 32,000 undergrad students), so I'm wondering how feasible it would be here....

I'm assuming that most visiting professors want an A or B class property--is that correct?

Roughly how much more do you get in rent with this strategy, compared to a standard 12 month unfurnished LTR?

I would think that visiting professors are top-tier tenants (pay rent reliably, easy to work with, mature, don't damage the property, etc.) --is that generally true?

How many br/ba does a visiting professor usually require? (are they usually alone, or do they typically bring spouses / families?)

...and if there's anything else about this strategy that you think is important, I'm all ears!

@Anne W. I'd still suggest moving on to a better tenant.  It's very doubtful that this tenant will ever change their behavior, and the longer you stick with them, the more headaches they will create, unfortunately.

The last time I had a very high maintenance tenant like this, I texted them and said something like "It's clear that you're not satisfied with the property, so let's discuss the options for getting you out of the lease so that you can move on to a property that better suits your needs"  ...long story short, they left, and I found a new tenant who was much easier to work with, and they've been at that property now for several years, and have been excellent. I lost some money in the process, but I gained a large amount of my time back (since I didn't have to spend time communicating with an overly-needy tenant), and I also substantially reduced my stress level--so it was definitely worth losing some money. I'd MUCH rather have a good tenant and make a bit less money than have a bad tenant and make more money.

Good luck out there!

@Kalon Baker I have also been approached by people in Salt Lake City asking to sublease one of my units to Air bnb guests, and I know it's become somewhat common in some areas.

I believe the term for this practice is "STR arbitrage". I think there's at least one Bigger Pockets podcast episode on the topic, and I'm guessing you'll find it discussed on the forums if you search for that term--so it may be worthwhile looking into those items and educating yourself on the topic.

If you do STR arbitrage successfully, you can potentially make more money in rent than if you rent to a typical long term tenant, so it may be worth learning more about it and figuring out just how much more money you could make with that strategy.

Also, if your tenant (not you) is the person renting to STR guests, I wonder whether you personally would be liable for Salt Lake City's ban on STRs? (interesting to think about, but I'm not a lawyer--so who knows how that would pan out).

One word of caution, though: the STR market has slowed down considerably in recent months, and there is some evidence that there is too much STR supply in some markets. Recreational travel usually slows down quite a bit during a recession (and it's reasonably likely that we're in a recession right now). So, if you do decide to pursue STR or STR arbitrage, you'll want to thoroughly educate yourself on the state of the current market and plan for "worst case scenarios" of high vacancy in your financial models.

Good luck out there!