[quote=HLS]Suggestion:
Look out of state and get a good property manager for SFR or 2-4 unit properties.
The depreciation is much better than in CA and the cash flow can be too.
This method is not for everyybody, especially control freaks who want to drive by the property everyday, and be able to fix everything themselves.
It is amazing what can be bought for less than $99,000 in many areas.
At $99K, 25% down P&I payment is just over $400 a month for a REAL house, no HOA.
Add taxes/ins/maint and mgmt fee.
MANY houses are much less.
It’s easier to sleep at night if the property is vacant compared to $2K a month expenses.
I suppose it’s about the risk/reward potential.
There will ALWAYS be tenants to rent to at some price.[/quote]
I agree with HLS here, except that I favor investing in CA properties.
Yes, properties are cheaper in some areas of the south and center of the country, but so are rents. It’s not uncommon to be able to rent a 3/2/2 SFR in the midwest, south or southwest part of the country for $350 – $650 mo. As a landlord, you will also have to service A/C. Many jurisdictions in these states do not have zoning, esp. in smaller communities which have the asking prices that HLS is talking about. For example, your SFR may have a 1958 rusty John Deere tractor or cab from an old tractor-trailer that has been parked 4″ on their side of on the property line next door SINCE IT WAS NEW and that is legal. It’s not uncommon for multiple dilapidated “mobile-home” parks to be mixed in with “middle-class” SFR tracts. Many of these older trailers have old tires on their roofs in attempt to keep the wind from blowing their roof off. Mobile home parks typically are NOT fenced or walled off, like they are here in O’side, Spring Valley and Chula. This is prevalent in WY, OK, TX, NM, AZ and MO.
Your tenants won’t care about this because they are “used to it.” But conditions such as these keep property values stagnant, so if you ever need to sell, it will actually cost you to sell in the form of a RE commission.
Minor hijack: I don’t mean to come off as a “snob” – I’m actually headed on a road trip to 4 of the above-mentioned states next week. I have made this 3000+ mile round-trip many, many times. The citizens in those states are, for the most part, nice, friendly and helpful. But they are not people who purchase RE purely as an “investment.” They purchase it to live in, get rental income, operate their business on and put their livestock on. I have one relative who has been a REMAX broker since 1961 and is still working. I have another relative who has been a medium-sized tract builder since 1958 and is now retired and has deeded hundreds of acres of land to his children. I have another relative who is 85 now and still managing her 6-unit “court” apt. complex and drives her imron maroon 1976 Caddy convertible w/white leather (always been garaged) to collect the rent – LOL! (She also has a white [frequently mudstained] late-model Cad. Northstar that “talks.”) I have a half dozen other relatives there who became multimillionaries selling oil-drilling rights on their land or operating long-time well-established businesses. Several own large, lakefront vacation homes w/private boat docks, which are ONLY OCCUPIED sporadically by family members (left unoccupied when not in use because they don’t need the rental income). All have beautiful large newer brick homes, many on 5+ AC lots. But all these properties are worth as much (or LESS) than my home here in Chula on a 6800 sf lot. No one cares about this there. All their needs are provided for – in fine style, I might add. Their values regarding RE are different than ours.[end of hijack]
Concho, do you speak Spanish?? 91911 (Chula) and 92154 (Otay Mesa/Nestor) have many older 3/2/2 SFR’s in the $175K – $275K range. There is no MR or HOAs in the SFRs on the WEST side of the 805. Many tenants in those zips pay cash every month for rent and expect the landlord to come by and pick it up and give them a receipt. You can manage and do the repairs yourself.
An area out of county I am watching is South Lake Tahoe, city proper, in El Dorado Co. (CA side). There have in recent months been 30-50 year old 3/2/2 SFR’s on 6,000 – 12,000 sf lots avail (mostly “ranches”) from $175K to $275K. Most are on the free bus line to Heavenly Resort. You can turn the property over to mgmt. because this area is zoned for day/week/month rentals. Your mo. mgmt. fee will likely be higher than the customary 10% however, due to frequent tenant turnover, cleaning/linen service and utilities (which could be high in the winter). If the snow is good, you could very well get $5K or more per mo. rent for 3-4 mos. year minus expenses (mgmt. fee, repairs/replacements and cleaning/linen svc.)
In the summer, you can get boating-family tenants because public boat-launches are very close by. Hopefully, you could get $4K to $8K rent minus expenses for the summer months. In the spring or fall (more likely Apr/May), you may have a two-week vacancy block and can go up and stay there yourself, go hiking and smell the pines and do repairs for the next ski season. You will never have to wrap the pipes if it is a cold winter, because the house will be filled. If it’s not a very snowy winter, it won’t be filled as much but it won’t be cold enough to have to wrap the pipes. If you purchase the property without a hot tub, you will have to at least purchase a portable one and set it out on the deck or patio. Skiing tenants there expect this.
If you snag a cosmetic-fixer foreclosure, make sure the deck and any stairs leading to it are safe and termite free. You may have to fix and paint. Put ceramic tile or “pergo” on the flr. and rubber-backed rugs. DON’T INSTALL CARPET! Put the TV on a wall shelf, stand or armoire and lock it down. Chain the DVD player to a wall stud or armoire. Get newish clean furn/futons and spray the upholstered pieces with scotchguard. Attach 12 pegs to the wall to prop up six sets or skis/boards if not already done. Buy new “closeout” mattresses (pillowtop in MBR). Your mgmt. co will tell you what to buy or what they do about the rest of the stuff. Bring from or buy all the big stuff here or in LA/RIV/SanBern and haul it in. There aren’t those kinds of stores up there except in Reno, which is about 47 mi. away.
If you find yourself hassled by the day/week/mo. thing, just rent it to a local family or retirees (yr. round) or ski-area employees (5 mos. yr).
Sorry for the long post. Just wanted to get you started “thinking outside the `condo’ box”
When you retire from work, Concho, your Tahoe property will hopefully be paid off and you can tell everyone you’ve been long meaning to to take a flying leap and move in there yourself 😉
