All Forum Posts by: Randy E.

@Joe Pearson,

I agree with those that say it's risky and potentially a financially dangerous move to buy now given your circumstances.

But I would do it.  As @Richard Dale-Mesaros said, for me, it was scarier, riskier, and more daunting for me to sit on the sidelines and not get my first rental property than to get one and worry about what might go wrong.

The truth is, you could buy a SFR and something could break in the first six months. I'd rather be in the game, building equity in an investment property, than sitting on the sidelines living in my SFR waiting for the "perfect" time to get in. The perfect time is when you start.

The good news is, you actually have options.  If a furnace broke in the winter and you had no savings, you could charge the replacement to a credit card.  If something else needed repairing, you could borrow on your retirement.  No, not "perfect" options, but beggars can't be choosy.  Soon after I leased my second rental purchase, the old furnace died.  It was a deal that had come along quickly, that I would have been foolish to let get away, and I scrapped and used just about all my money to buy and renovate and had virtually nothing left.  I didn't like it, but I charged $3000 to a credit card so the new tenant would have heat.  Now, years later, I can't imagine my life without that rental and the income it provides.  That rental income helped me get the next property, and so on, and so on ...

One trick to avoiding vacancies is something many landlords advise against: Rent a lower than market rate.  Money talks.  If the going rate for a unit like yours is $700/month, charge $625.  If it's $1000, charge $900.  If you provided a nice unit at below-market rates, your tenants will stay longer.  If you charge market rents, they might leave as soon as they think they see something they like better.  I did this with my first two rentals because I need to ensure I had no vacancies.  The first was leased for 2+ years from the day I put it on the market, then the second tenant stayed almost another 2 years.

I don't know all the specifics of your financial life, so I won't presume to say you should take the risk.  But I am very glad I took the chance.  Sitting on the sidelines was far scarier to me.  If I had waited for the perfect time in my financial life, heck, I might still be waiting.  

Good luck with whatever decision you make.

 Daniel, as far as I know, CCU will allow any NC resident to join, if you meet their other criteria. 

I think the promotion you saw was saying that residents of those cities can join without a member invite.  Usually, new members have to be related to a current member or work for an employer who is a corporate member.  A lot of the cities on the list you mentioned are economically challenged cities and CCU probably wants to be a good corporate citizen and offer banking options to those residents.

 Dan, not as quickly as I would like.  

What I would ultimately like is to find a bank or credit union that will like what I've done so far and just become a regular lender every few months. My 1040 shown income is a barrier most of the time. And probably the fact that financing is by far my weakest point of knowledge in this game of REI. Ultimately, I guess I just haven't knocked on enough doors yet.

 I happily stand corrected!

 Good advice.  Believe me, if I had been able to get $60K via credit back then, I would have jumped at it.  As it was, I was lucky to get $15K.

For the OOS investors like the ones chiming in on this thread, I agree with you.  They should double up and buy a different type of property.  It's probably too difficult to find a trustworthy, competent PM in this segment.  Some may be trustworthy, but totally incompetent.  Some may be competent, but not trustworthy.

I get asked several times a year to manage someone else's properties.  Locals who know what I do trust me to do a good job for them.  I always say no.  I did it once as a favor to a family friend who inherited a house, but it convinced me that it is simply not worth my time.  If I was a professional PM with 100 houses, sure.  Doing one or two units for $70/month?  No, not for me.  Especially when the houses are not nearly as rehabbed as my rentals.  But I digress.

@James Wise Try to remember back in the day before you were big swingin' successful investor.  Finding an extra $10K was probably not something that was possible.  I know it wasn't for me.  I had to get in where I fit in.

 I understand what you and @James Wise are saying, and I agree it would be best to do that.  However, I think you two are looking at it from a much different perspective than most regular-income investors who start out in this segment.

1) We start out in this segment mostly because we don't have the money it takes to buy a more expensive SFR or MFR.

2) That lack of cold hard cash (or access to a larger credit line) is an obstacle to quickly scaling to 5 properties, much less 10.

3) Me personally, I saved for over two years to get the cash necessary to buy my first low-cost high-return SFR. By the time I finished the not-quite-where-I-wanted-it rehab, my accounts were just about tapped out. It took me nearly two years to build back up and get the second. And so on, and so on.

4) Eventually, a larger scale, though probably small going by your standards, a larger measure of success is achieved.

You have to remember, if we could quickly scale to 10 SFRs, we probably would just go out and buy three 4-plexes from the get go.  Nice idea, but real life doesn't work like that for us.  I agree with your statement that have 10 rentals spreads out the risk of a bad experience with one, and is a more advantageous position to be in.  But starting out that quickly simply isn't possible for many of the people starting out in this segment.

 I went to college for Aerospace Engineering but didn't finish with it, and I'm an investor in this segment.  That notwithstanding, I agree with you.  Engineers and Computer Programmers, Dentists and Accountants should all probably avoid this segment.

 Unfortunately, not any more.  There's nothing in the Triangle for $30K.  But there are $30K homes in the Triad and that is also a 1.5M+ MSA. Admittedly, fewer and fewer.

And there is a decent supply of $30K homes in the surrounding areas of the Triangle, which can be more like the burgs you describe.

 It's actually both.  I invest in the Triangle and Triad areas of NC.  Both are MSAs over 1M people.  Not NYC or LA, but not little burgs.  I also have interests in a small burg, but that's not my primary area.  Durham is red hot in population growth and the realty and rental markets.  The market is probably a little like where you invest in SC.

These areas are different than both the large blue collar cities that never appreciate (Cleveland, Milwaukee, Midwest areas) or the small town places with stagnant populations.  

I understand your point about companies like Morris.  While I hate that people got scammed, I have to admit that most of them bear some responsibility.  It sounds like a lot of people were looking for something for nothing.  In a sense, they remind me of all the people who took out second mortgages to inflate their lifestyles before the great recession.  Here are too many people looking to park serious money in some passive investment scheme that promises incredibly high returns, but that requires no knowledge, no effort, and nothing at all.  Just write a check and sit back and wait for all your profits to roll in. It sounds so unrealistic that it makes the Nigerian Prince scam seem like a reasonable scheme.

Cheers

Hi Jay.  I can't speak for other locations, but for everywhere I've looked within 150 miles of me, most of the properties I look at come from elderly family members passing away and leaving behind a house with a good bit of deferred maintenance.

The kids or grandkids who inherit the houses either don't live in the area or they live in the area and don't want to (or can't afford) to repair the houses, and mostly they just want to sell and get enough to take the family on a cruise.

Sometimes, the sellers are the widows of the investor who actually managed the properties and the elderly women have no interest in trying to be a landlord -- it's easier for them to sell the 10, 20, or 30 houses their husbands acquired and live off those proceeds.

I almost never see a current active landlord selling his/her stock in my area.