All Forum Posts by: Account Closed

This is mostly for the paralyzed fence-sitters out there...

Once you pull the trigger, you will learn more from your first deal than you will from all the years you spent analyzing up to that point. I promise you. If I could go back and do anything over it would be to start earlier, and not spend the years "learning" about REI, buying the endless books, etc... Try to find a good mentor, and by mentor, I mean like an agent who is also an investor, would be a good person to work with. They want to help you buy homes, but they will also have a ton of useful advice. Or, find a reputable PM company to work with.

I personally started with an extremely low investment mobile home in a pretty bad area.  Cost me $2000.  I learned a lot (especially about how I don't like investing in bad areas:) and probably broke even on that, or if I lost money, it was a small amount, and totally worth all the lessons I learned.

Second property, was a very cheap HUD home, that we rehabbed ourselves (with no experience), and managed ourselves. We made money on it over the course of the two years we rented it and sold for more than we paid. Overall, we made money, learned a LOT MORE lessons than the first deal.

I now optimize my REI for minimizing effort and involvement on my part. I work on finding the deals with my agent, and figuring out what will make sense, once the property is purchased, and the rehabs (if any) are done. At that point, I hand it off to management, because I learned on the second deal that I don't have any interest in "being a landlord". Just a real estate investor. I happily pay 10% of my rents for someone else to deal with all the BS after I own the place. We started over from scratch once we relocated to the midwest, and I'm finishing up my first year of REI since moving here. My baseline goal was one property per year, with a stretch goal of 2+ per year, cash flowing SFR. We are about to close on #2 for the year.

Have some goals, and a plan, know yourself and what you like to do, and what you don't like to do, and optimize for it, IMO. You won't catch me rehabbing or self-managing again. I just don't have the desire to do it. Maybe if I quit my day job someday and have tons of time and need something to do, but even then, I doubt it. But what you will catch me doing is scouting the MLS, analyzing numbers, looking for good deals. I am a number guy and I love doing that. I look at the MLS for fun. REI is fun for me because now I do the parts I like, and I pay someone else to do the other parts. Long term, it should be very lucrative because I'll wake up one day with a bunch of paid off houses.

I have one in Parma.  Pretty happy with it.  I put under contract in January.  In it for ~70k (61k + 9k repairs) and it pulls in 950/mo since April this year.  The purchase market is already higher though with less stuff available, probably expect to be all in on a 3/1 for closer to 80k now for a similar house.  (BTW, just about every house in parma are carbon copies of each other, they all look identical so once you see a few, you've seen most of them.)  But it's a nice area.  Much nicer than I expected having been to crappier areas of Cleveland.  Strongsville is nicer yet, A area but more $$.  Both are towns that I would not have a problem living in most parts of, if I had a reason to live in NE Ohio.  (I don't, though.)

The great deals relative what I mention above is harder to find now.  There are a few houses under 70k.  Some in the 50's and lower, but I'm sure they have major, major problems and would require massive renovation $.  I prefer to find one that is in rough cosmetic shape, but with a good roof, furnace, etc...  Paint / carpet / etc. is easier to do.

I'd consider doing Ohio house hunting once the winter weather hits.  Unless it's a mild winter, Ohio winters suck, and people who have their stuff listed then, REALLY want to sell it.  :)

Edit: More info for you - I have it under mgmt and my after PITI & mgmt cash flow is about $300+ / mo. Closer to under 200 when reserving vacanacy / capex budget. But the monthly payment is like, 250 a month... so even if I had a vacant month, it's not like I'm going to be scrambling for making my own bill payments. :) I'm working on getting #2 really soon. The return is better on these houses than what I'm getting in the stock market (except for 2013 or whatever crazy up year we had somewhat recently.)

I have bought a HUD home before and had an agent who was also an investor and himself owned 50+ rentals that were mostly HUD homes. He helped me through it. He knew whatever ratios that HUD uses to accept offers (they would accept a certain % off list price to a certain date, then a different %.) So he told me what to offer and it was accepted.

That said, the home had a lot of hidden costs because it was vacant and everything was shut off, that it was hard to detect up front.  We spent more than we expected to.  It still was a good learning experience and made money in the long run.

I wouldn't dissuade anyone from buying a HUD home, I'd just say, go in with your eyes wide open, get a good inspector / contractor maybe to walk it with you. If you plan on living in it, that gives you a lot of time (2+ years) to fix things a little at a time, but you want to make sure it is actually livable to begin with (does the electric all work, does the plumbing work, etc... We had issues with all of those on ours.)

That home was not in Cleveland, but was in Dallas where I lived at the time.  I do have a home on the west side of Cleveland area too, though.

Also, I would consider property management company as both a pro and a con.  Con, yes you pay a slice of the pie to them that you could possibly pocket otherwise.  Pro, you don't ever have to deal with toilets clogged, collecting rent, evicting, etc.

I have a property that's a couple hours away from where I live.  I have a property management company, so I don't have to do anything other than collect my income they deposit and approve larger expenses.  Even with the extra cost, it's more profitable than if I invested where I live because the purchase prices are too high to support the rental market rates here.

The out of town area I invest in is, however, in proximity to family that we visit every few months.  So we have a reason to be there, and it lets me both shop the houses in person before buying, and attend to business matters in person if necessary.

I personally was not comfortable investing in an out of town area that I would never visit otherwise.

I suspect a few things:

1.) A lot of users here being people who have never, and never will pull the trigger on anything, so they aren't actually ever taken by or encountering any scams and therefore don't have much to add on the topic.

2.) A lot of the users here who have pulled the trigger on something being those who first spent time educating themselves, or are already long-time, experienced REIs so they aren't actually taken by any scams.

3.) A lot of people who do get taken by scams aren't doing REI anymore.

@Kevin Phu The utility company can probably give you an idea of the previous monthly/annual averages.  If you are in an area with a lot of similar houses, or working with a property management company, they should have a lot more data if they are any good.  My Cleveland house for example, is in a suburb where there are tens of thousands of houses, which are more or less identical to one another.  The water usage in that case, is a lot easier to get a ballpark estimate on when every house is a 3/1 or whatever it might be.

Of course, averages are averages and individual houses can vary from the average.

It definitely varies by region.  In fact, I've seen both styles within areas 100 miles apart in Ohio.

I have a property with @James Wise in the CLE area and I was pretty surprised at this practice when it was explained to me.  However, it turned out to not a big deal in reality because the profitability calculations factored this in.  The tenant water usage & bill has been right in line with estimates, so the numbers aren't negatively affected.  If you are in an area where utilities usually go with the house, make sure you have a good idea what those bills are going to be and factor it in.

On the flip side, it's always nice if the tenant pays the utility bills, because it's less of an expense for you.  However, that doesn't mean it not a huge hassle too.  Where I actually live (further south in Ohio) it's not as common.  My parents rented out my childhood home for several years after they moved to a different one, and all the utilities are put in the tenants name.  So my parents were constantly getting calls from the water company that the tenants were late / not paying on the water bill and it was going to be shut off.  They then had to go bug the tenant to pay the water bill.  Ultimately, they may have preferred to pay the bill and just charge a higher rent.  I don't think anything ever got shut off and required a reconnect fee, because they were right on top of it, but I could see that being a big problem with a chronically late tenant or one where the utility company won't notify you ahead of time.

@Jerry Shen agree with those who said why RE?  If the primary goal is $ there are other ways.  That said, if you are passionate about real estate, even as a secondary interest to technology, I find it to be a rewarding topic and goal.

IF you are definitely set on RE: Take it slow and watch out for sales pitches.  I started out once before in RE while in the tech world, and didn't do enough absorbing of information.  While it was great to jump in with both feet, I made early mistakes that I should have avoided.  I consider that period a learning phase where I was paying for education.

I am working on it again in a new location and took a more measured approach. I'm investing where I am 1.) local or 2.) have reason (other than RE) to visit regularly. I am working with established partners to deal with the aspects I don't want to deal with (like... tenants:) I am sticking with "boring" classes of RE: SFH 3/1, 3/2 bread & butter that I can get cheap relative to what they will bring in rental wise. Not trying to chase 20% returns in rougher neighborhoods. Not dealing with apartments / commercial yet that may be hard to sell at times.

If you are really keen on apartments, I might consider something like smaller 8 unit buildings.  Do one where it isn't going to use up too much of your $ so you can work out the kinks.  If you get a year into it and its just not working out how you hoped, your $ is not all tied up in it.

Good luck this is a great place to learn and see what others are doing.  Also great to connect with people in the area you are interested in.