All Forum Posts by: Rafael Ro

@Rafael Ro

There are cash flowing deals on the open market, I'm helping clients find them daily but in some situations it makes sense to go with the turnkeys to minimize your risk. It's just a matter of choosing the right company to work with. Some are offering 5.38% interest rates on a 30 yr fixed rate at no cost to you, couple that with a 1 year maintenance free guarantee and a resident in place at closing and it can be a slam dunk of a deal

 Depending on your goals and how many properties you plan to acquire it could be a decent amount of work. A good agent will vet a deal to some extent, but you will still have to underwrite it yourself to verify numbers. And a good property manager will take care of day to day, but you will still have work to do. Again, that’s all fine just so long as you know what you are getting into. Real Estate is pitched as this “passive” income generator, but even with a team it is never completely passive.

Hi @Rafael Ro,

I completely get where you’re coming from, and it sounds like you’ve done a lot of thoughtful research. Memphis can actually be a great choice for real estate investing, especially for someone with your situation.

First off, property prices in Memphis are much more affordable compared to markets like CA, so with $50k, you can actually make a bigger impact. You can potentially purchase multiple properties, which is a huge plus for spreading out risk. Memphis has a relatively low cost of living, and that’s reflected in the property prices. For example, you can buy properties in the low $100k range that are already cash-flow positive or close to break-even with good tenants in place. Plus, the property taxes are typically lower than in California, which can be a huge cost-saver in the long run.

Another benefit is Memphis’s strong rental demand. With a large and diverse population, there’s a steady demand for rental properties, particularly in the affordable price range. With tenants in place and a property management company handling everything, you’re not having to worry about much hands-on work. A good turnkey company can make things smooth for you, even if you’re out of state.

Regarding the price premium from turnkey providers, you’re right in noticing the markup. But when you factor in the convenience of having everything done for you, it’s sometimes worth the extra cost, especially when you don’t have the time or resources to manage it yourself. That said, if you’re open to putting in some work to build your team and find properties yourself, you might be able to save some money and find deals directly. It just depends on how much time you’re willing to commit.

As for your concern about the economy, it’s understandable. Real estate does have risks, but in Memphis, you’re dealing with more affordable properties, which can help you weather potential downturns. A smaller mortgage means lower overhead, which is crucial if you’re worried about vacancies. Plus, with the relatively stable rental market in Memphis, it’s less likely you’ll face extended vacancies compared to more volatile areas.

Overall, option 2 (buying a few out-of-state properties) seems like a solid choice. It allows you to spread your risk and grow your portfolio without overextending yourself. Memphis offers solid rental returns with less of the volatility you might face in California or other high-priced areas.

Hope that helps! Let me know if you have more questions or want to dive deeper into any part of this.

Cheers!

It sounds like you’re in a solid position, but I get your hesitation. I’d recommend option 2 (buying a few out-of-state properties via a turnkey provider) for scalability and less hands-on involvement. While you’ll pay a premium, it offers convenience and mitigates some risk. Option 3 (working directly with an agent and property manager) can save you money, but it requires more time and effort to manage. Option 1 doesn’t seem ideal given California’s tenant laws and current market. Option 4 (keeping money in savings) is safe, but you may miss better returns in real estate.

Good luck!

Overthinking can be a real brain freeze, and I’m not exactly qualified to speak on the topic.

Switching gears, we just assisted a Californian investor in landing a CA$H COW. A fully occupied Section 8 duplex for $187K that rakes in a whopping $38k yearly. This gem is had vinyl windows, some refreshed baths and kitchens, a newer roof, sleek vinyl siding, and brand-new furnaces and hot water heaters installed in 2023. Now, if $50k is all you've got, I suggest you build up at least six months of reserves before diving into a deal like this. We're currently scoping out a similar duplex in Cleveland Heights and another on Cleveland's west side. For more insights on investing in such properties in Cleveland, click HERE to reach out.

In a market like Kansas City you can get $150 per month cash flow on average with the right multifamily property and right location. Just need a good broker to help find you off market deals and know the area. 

@Rafael Ro some great advice already here!

IF you decide to move forward in Memphis, recommend buying the first one turnkey to get you going.

You'll learn a lot about rentals and the market with the first one.

THEN, if you like results you can look for agents & PMCs to help you buy more and save the 20-30% markup you mentioned.

Recommend you also read below info to set your expectations correctly:

_________________________________________________________________________

We think the Midwest is a GREAT place for OOS investors to consider!

Check out some of things happening in Detroit in 2024:

https://michiganchronicle.com/2024/01/03/major-developments-that-will-define-detroit-in-2024/

Your first question shouldn't be WHERE to invest (that is #2 question), but HOW you will invest!

Many OOS investors set themselves up for failure because they don't invest the time to ACTUALLY understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Let us know if we can help in any other way.😊

@Rafael Ro have you thought about passive investing in syndications?  Sounds like you have a lot on your plate my friend!