All Forum Posts by: Michael A.

@Shiloh Lundahl I would say that entirely depends on the location and market. A good thing to do would be to run the numbers on a simple spreadsheet for a property you're interested in (if you dont have one they are all over the internet). See if adding in a 10%/mo. expense for property management makes you any money. If I do that for any of the properties I am analyzing right now then it puts me at a whopping 0-1% return. Not an option! 

I was interested at some point in investing out of state purely passively, but I didn't feel comfortable. If I wanted truly passive income I'd just buy a high-yield dividend stock. For instance, if you found a property that was a gold mine and produced 15% return (!) and you had to have property management for it because it was truly passive, then you'll net a 5% return after their fees are paid. That would be a pretty decent scenario because you'll also have amortization. But I have not found anything like this yet. And I'd probably just buy a stock with a 5% dividend instead. But hey, just my personal preferences. 

Are you able to find anything like this? 

@Shiloh Lundahl I am speaking of active investments in my market. The property management firms here charge a standard 10% of gross rental income. Since 10% is the target rate of return I am hoping to expect right now (plus all of the added benefits of real estate investing of course) it is usually out of the question to go with property management for me at the scale I'm pursuing. 

@Ray S. This is something I have found totally depends on the market. I am looking at 10% in my market, but that is with a fair purchase price (no bidding war, over speculation, etc.) and self-management. In other markets, it is slimmer. However, I am reading posts on here lately where people are generating 20-30% in the Midwest and Ohio. I don't mean to spread misinformation; this is just what I've been seeing here lately. So it all definitely depends. 

What are you using to analyze any potential deals? 

@Ryan Enk I admire this greatly! Perhaps this is why some are successful and some aren’t. Not in a million years would I have the appetite to take on that kind of risk in the 20 day window. I got cold sweats just reading that. Very nice though - congrats!

@Tim Herman This is a good point. My bias was toward this being purely a rental. If you can live for free, why wouldn't you? While the margin is super tight, you're having someone else pay for your home for you. If/when you move out you've got equity in an asset. This sounds like a good move to me. 

@John Fortes This is a good point. But this also depends on whether you can find a passive investment that generates 20% (what a dream!). If you can’t find this magic passive investment that generates that kind of return and you need to invest locally than it entirely depends on your market. Returns are sub-optimal in my market now, and once a good deal comes along it is gone in minutes because of this. At best you’re hoping for 10-12% unless you are a commercial developer. But to me that is still a better long-term bet for all of the reasons you mentioned.

@Steven Clark I would also consider appreciation. You will have MUCH mess headache investing your money elsewhere if all you want to make is 5%. If the property is sure to appreciate then it may be worth the trouble. If it is in a stagnant area that is going nowhere fast then it may not be the best use of your money.

Did you say you were going to house jack and live in one of the units?

@David Stone Agreed! No one is forcing you to close on this particular property. As someone looking for my first property in the town I have moved to I’d be nervous to have any first buy be dramatic or a headache.

@Jacob Gelinas This describes me almost exactly right now. How did you overcome this? Did you manage your expectations so that you realized what a fair offer price might really be?

@Frank Patalano I am starting to get discouraged because I am losing out to cash buyers in the C neighborhoods I’m shopping in. Cash flow looks good on paper in this particular zip code and I think everyone knows it. Houses that are good deals last about 48hrs. I literally can’t even get the paperwork together fast enough. It’s tough because I don’t feel capitalized enough to get a seat at the table. I’m not giving up though.