Buying investment rental property not local

amother

Tue, Feb 07 2023, 5:28 pm

If I want to buy an investment rental that’s not local how does that work?
How much do management companies cost?
How do I find tenants?
Must I fly to check out the home? Or collect rent?
Is it much simpler to just buy local even though it seems better deals can be found in GA Idaho or TX?
Is the 1% rule in fact a good rule? Does that take into account what I’ll need to spend on repairs taxes etc?

amother

Mauve

Tue, Feb 07 2023, 6:36 pm

amother OP wrote:

Every place is different. I have in a few places. I do go a couple.rimea a year but otherwise I am in close contact with my managers.

amother

Darkblue

Wed, Feb 08 2023, 3:52 am

I am the Op who put that link to the dallas house

I think you need a management company and I would go in for two/three weeks, run around with realtors, and interview management companies, and contractors if it needs repairs, cosmetic up.

I haven't done this yet because I don't have enough money yet, but I am actively researching. And I also believe prices will drop soon, and am waiting for that.

In my head, you purchase such a property when you have enough to put down cash, not a mortgage, so that worst come, its sits empty for a few months. The idea is to create passive income, and then when that goes up you can take a mortgage or helloc for future properties, but I would not want to risk my home....

That's why I suggested downgrading to a smaller home or moving to a cheaper area and then using cash to fund a purchase with cash.

Just saying - even if the management company takes 300$ a month on a 3.3 k rental property, you still have a monthly income of $3000 which is 36k a year before tax. Even if half goes to tax that's 18k a year, which is a lot.

Plus, property appreciates over time.

amother

Darkblue

Wed, Feb 08 2023, 3:54 am

amother OP wrote:

If you can afford to buy local it is more simple, but for me the local prices are out of reach. I live in Israel....

We are doing this as a passive income stream.

amother

Mauve

Wed, Feb 08 2023, 6:42 am

amother Darkblue wrote:

That's a nice way to think bit most ppl who buy investment properties buy them with a mortgage. The bigger money is when it is refinanced or sold. My properties are all.short term rented like Airbnb and VRBO and I have a specific manager who specializes in that. Bh even after expenses there is usually a profit at the end of the month. Sometimes more than others because it depends on the nightly rate and how many nights it was rented.

DustyDiamonds

Wed, Feb 08 2023, 7:33 am

The trick is to use other people’s money, not your own, to make money! I’ve never heard of anyone buying investment properties for cash.

Instead of putting 100K into buying a property for cash, put in 10-20k, get a mortgage, and keep another 10-20k in your business reserves, in case you have a few vacant months. This way, you have another 60-80k (cuz you didn’t spend cash buying for 100) with which to buy a few more properties and multiply your money.

Obviously, the process isn’t as simple as that; there’s loads of good books and podcasts where you’ll get great info from experienced investors if you want to get into this business.

amother

Wed, Feb 08 2023, 8:09 am

amother Mayflower wrote:

We do this. The management company takes 10% of the rent monthly. They take care of everything, we never have to go visit the property.

We would probably use a loan/mortgage vs cash so it’s important to us that rent should be substantial enough to pay down the loan quickly.
Do you find the investment worthwhile despite the management fee? How do you find a good management company and how do you find tenants?
Do they collect rent for you?
Are you not hesitant to buy a property without seeing it?
Which’s states are best for this type of investment?

amother

Wed, Feb 08 2023, 8:11 am

amother Mauve wrote:

Is there a lot of wear and tear? where is a good location to get an airbnp property?

Rubber Ducky

Wed, Feb 08 2023, 8:22 am

You must have a good manager and you must have some familiarity with local laws. Several months ago an out of town investor purchased the house next door to us to use as an AirBNB and was not aware that his idea is illegal in my City. That didn't work out too well and he is now having to resell the property or find a longterm renter.

amother

Mayflower

Wed, Feb 08 2023, 8:25 am

amother OP wrote:

You need to really do your research before investing. Make sure that the rental market supports rents that will cover your mortgage, and leave you with a profit even after paying the management company. We did go house hunting in person, and made sure that everything was in working order in person before renting it out. The management company does collect our rent, takes 10%, and then deposits the rest in our bank account. They did rent it out for us, but that was a separate fee of half a month's rent. Personal advice, only buy in a place that you have some personal knowledge of, so that you know where the desirable locations are and what a good property is. Check zillow daily for houses for sale and rent in that location to get a real feel of the market. Pay attention to how long different types of properties take to rent. After a few months of doing that, go house hunting. Also make sure you can afford surprise repairs and a few months of paying the mortgage without rental income.

amother

Mauve

Wed, Feb 08 2023, 8:25 am

Rubber Ducky wrote:

That's for sure. Always check out the town and make sure that you could do Airbnb over there. Some places you also need to have special permits to do an Airbnb property. Also, just by the way a lot of managers are more than 10%. A lot of them are in the 20% range.

amother

Stone

Wed, Feb 08 2023, 8:26 am

Rubber Ducky wrote:

Several years ago my parents (who live out of town) got a call from someone who had bought a house in their city for super cheap and wanted to flip it. Turned out the house was in a neighborhood most people avoid even during the day. Oops …

amother

Darkblue

Wed, Feb 08 2023, 8:32 am

DustyDiamonds wrote:

For sure, that's what most people do, I am well aware. they also do this as a primary source of parnassa. My goal is to create low risk streams of passive income. This is the Dave Ramsey method, btw. We couldn't do that when purchasing our primary residence, because the market here is insane, but in Israel the mortgage penalties for paying your mortgage off early is significant. And purchasing a second property is 50% down, which is not doable. And makes us jump 2 tax brackets.

I am just not comfortable taking a loan on my primary home in such a volatile market. I know people who have made a killing like this, and people who have lost their pants.

The way I see it, we are gong to need to hold on t properties for the long haul, as in 10-20 years or else risk loosing tons of money, because although over long periods of time real estate always appreciates, the US economy is headed in a bad direction, and it will take a long time to recover.

To me, low risk means I am not risking my home or the property if we don't have renters or if the market changes and we can't get enough to cover the mortgage, we don't need to sell at a loss.

Every person needs to evaluate the level of risk they are comfortable with.

amother

Darkblue

Wed, Feb 08 2023, 8:43 am

amother Mauve wrote:

This is what people have been doing for the past 10 years or so. Its a good way to make a lot of money quickly, and it is very high risk if the economy crashes.

That is the projection for the next few years. What happens if the economy crashes and people don't have money for airbnb's or vrbo's. No problem, you say, I'll just sell. Problem is that everyone is selling at the same time and the market value crashes. So if you bought long enough ago, you make a slight amount of money because of appreciation. I you bought recently, you bought high, and you loose a lot. if it happens with all you properties at once, you foreclose.

this may never happen, and many people are comfortable with the risk.
I am old enough to remember 2008 ( was a teen but well read and followed what was going on), and I remember homes that where being sold for 600k a few months earlier being sold for 200k. I remember the biggest gvirim loosing every single dollar. There where no jobs.

The projected recession is expected to be much worse then 2008. Some economists think that if the US ends up in a war with china, which seems more and more likely, we will end up with a crisis as bad as the great depression. I am trying to prepare for that eventuality

DustyDiamonds

Wed, Feb 08 2023, 8:50 am

amother Darkblue wrote:

There’s risk in everything. I also think about the dollar/US government going bankrupt… if the next couple of administrations keep raising the debt, and the dollar hasn’t been backed by gold in many years… historically all currencies not backed by gold didn’t last a century… anything can happen! We all need to know our tolerance for risk regarding our money!

amother

Darkblue

Wed, Feb 08 2023, 2:47 pm

DustyDiamonds wrote:

Yes things are looking very similar to the 1930's globally in a lot of ways.

amother

Khaki

Wed, Feb 08 2023, 3:35 pm

All our investments are within driving distance so we can go often enough if need be so about 3 hours away. We do all the managing and renting out ourselves but have maintenance staff in the area. For example, we'll post on Zillow of FB marketplace about a property for rent and do all the legwork about the applicants but our maintenance guy will do the showing.