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surveyor
ParticipantBugs:
Yes, the downpayment was taken from a property here in California. However, I will be using the cash flow from the new property to pay back the downpayment so it is not a big deal.
(A lot of people spend the cash flow or use it to augment their salaries. My household runs a surplus on its own so we just use the cash flow to pay down the borrowed downpayments).
See above post with the “cash on cash” discussion. Important thing: if you are borrowing money to buy a real estate investment property, you have to look at the “cash on cash” value and decide if it is high enough. Since this property’s cash on cash number is 18%, much higher than my requirement of 9%, the property is a good enough deal to borrow money to purchase.
If the cash on cash number is at 9% or less, it is not a good candidate for borrowed money.
ParticipantBugs:
Yes, the downpayment was taken from a property here in California. However, I will be using the cash flow from the new property to pay back the downpayment so it is not a big deal.
(A lot of people spend the cash flow or use it to augment their salaries. My household runs a surplus on its own so we just use the cash flow to pay down the borrowed downpayments).
See above post with the “cash on cash” discussion. Important thing: if you are borrowing money to buy a real estate investment property, you have to look at the “cash on cash” value and decide if it is high enough. Since this property’s cash on cash number is 18%, much higher than my requirement of 9%, the property is a good enough deal to borrow money to purchase.
If the cash on cash number is at 9% or less, it is not a good candidate for borrowed money.
ParticipantLife is a hassle…
Like I said, this post is not to convince people or to encourage people who have “lives” that they should be doing what I’m doing.
Real estate investing is a big hassle. No argument there. One of my tenants had her paycheck money stolen and so is late with the rent. I try to be as kind as I can, but come on, I need my money! I mean, hasn’t this person ever heard of direct deposit?
And I have no real interest in going to Huntsville (or any other place) either. I’m just doing my due diligence. The numbers look good and so we need to see the property and make sure no red flags go off.
I am however just sacrificing some time and effort in order to be financially well off. It’s just like your 401k – you get started early, do a little research, and put your time into maintaining it. In a few years, it will pay off. Now there are some people to whom a 401k/Roth/IRA is a big hassle. It’s fine, it’s up to them.
But I will say this: waiting for the bottom of the real estate cycle here in California will not help advance your real estate knowledge. It is better to just use the time you are spending waiting and use it to your advantage somewhere else. There are people here who have figured this out and are now asking questions. I am at least here to help them.
But bottom line: if you have better things to do or would rather spend your time on something else, go ahead and do so. Trying to get rich is a hassle. It takes a certain amount of sacrifice. If you’re not willing to put the effort into it, don’t.
ParticipantLife is a hassle…
Like I said, this post is not to convince people or to encourage people who have “lives” that they should be doing what I’m doing.
Real estate investing is a big hassle. No argument there. One of my tenants had her paycheck money stolen and so is late with the rent. I try to be as kind as I can, but come on, I need my money! I mean, hasn’t this person ever heard of direct deposit?
And I have no real interest in going to Huntsville (or any other place) either. I’m just doing my due diligence. The numbers look good and so we need to see the property and make sure no red flags go off.
I am however just sacrificing some time and effort in order to be financially well off. It’s just like your 401k – you get started early, do a little research, and put your time into maintaining it. In a few years, it will pay off. Now there are some people to whom a 401k/Roth/IRA is a big hassle. It’s fine, it’s up to them.
But I will say this: waiting for the bottom of the real estate cycle here in California will not help advance your real estate knowledge. It is better to just use the time you are spending waiting and use it to your advantage somewhere else. There are people here who have figured this out and are now asking questions. I am at least here to help them.
But bottom line: if you have better things to do or would rather spend your time on something else, go ahead and do so. Trying to get rich is a hassle. It takes a certain amount of sacrifice. If you’re not willing to put the effort into it, don’t.
ParticipantLife is a hassle…
Like I said, this post is not to convince people or to encourage people who have “lives” that they should be doing what I’m doing.
Real estate investing is a big hassle. No argument there. One of my tenants had her paycheck money stolen and so is late with the rent. I try to be as kind as I can, but come on, I need my money! I mean, hasn’t this person ever heard of direct deposit?
And I have no real interest in going to Huntsville (or any other place) either. I’m just doing my due diligence. The numbers look good and so we need to see the property and make sure no red flags go off.
I am however just sacrificing some time and effort in order to be financially well off. It’s just like your 401k – you get started early, do a little research, and put your time into maintaining it. In a few years, it will pay off. Now there are some people to whom a 401k/Roth/IRA is a big hassle. It’s fine, it’s up to them.
But I will say this: waiting for the bottom of the real estate cycle here in California will not help advance your real estate knowledge. It is better to just use the time you are spending waiting and use it to your advantage somewhere else. There are people here who have figured this out and are now asking questions. I am at least here to help them.
But bottom line: if you have better things to do or would rather spend your time on something else, go ahead and do so. Trying to get rich is a hassle. It takes a certain amount of sacrifice. If you’re not willing to put the effort into it, don’t.
ParticipantLife is a hassle…
Like I said, this post is not to convince people or to encourage people who have “lives” that they should be doing what I’m doing.
Real estate investing is a big hassle. No argument there. One of my tenants had her paycheck money stolen and so is late with the rent. I try to be as kind as I can, but come on, I need my money! I mean, hasn’t this person ever heard of direct deposit?
And I have no real interest in going to Huntsville (or any other place) either. I’m just doing my due diligence. The numbers look good and so we need to see the property and make sure no red flags go off.
I am however just sacrificing some time and effort in order to be financially well off. It’s just like your 401k – you get started early, do a little research, and put your time into maintaining it. In a few years, it will pay off. Now there are some people to whom a 401k/Roth/IRA is a big hassle. It’s fine, it’s up to them.
But I will say this: waiting for the bottom of the real estate cycle here in California will not help advance your real estate knowledge. It is better to just use the time you are spending waiting and use it to your advantage somewhere else. There are people here who have figured this out and are now asking questions. I am at least here to help them.
But bottom line: if you have better things to do or would rather spend your time on something else, go ahead and do so. Trying to get rich is a hassle. It takes a certain amount of sacrifice. If you’re not willing to put the effort into it, don’t.
ParticipantLife is a hassle…
Like I said, this post is not to convince people or to encourage people who have “lives” that they should be doing what I’m doing.
Real estate investing is a big hassle. No argument there. One of my tenants had her paycheck money stolen and so is late with the rent. I try to be as kind as I can, but come on, I need my money! I mean, hasn’t this person ever heard of direct deposit?
And I have no real interest in going to Huntsville (or any other place) either. I’m just doing my due diligence. The numbers look good and so we need to see the property and make sure no red flags go off.
I am however just sacrificing some time and effort in order to be financially well off. It’s just like your 401k – you get started early, do a little research, and put your time into maintaining it. In a few years, it will pay off. Now there are some people to whom a 401k/Roth/IRA is a big hassle. It’s fine, it’s up to them.
But I will say this: waiting for the bottom of the real estate cycle here in California will not help advance your real estate knowledge. It is better to just use the time you are spending waiting and use it to your advantage somewhere else. There are people here who have figured this out and are now asking questions. I am at least here to help them.
But bottom line: if you have better things to do or would rather spend your time on something else, go ahead and do so. Trying to get rich is a hassle. It takes a certain amount of sacrifice. If you’re not willing to put the effort into it, don’t.
ParticipantLisa Vander
Lisa Vander is the one who coined the term “return on equity” because you were taking equity from your California properties here and investing them elsewhere. Most people don’t have the necessary cash to invest in real estate but can tap into the equity of their homes and property.
Risky, yes. Still, I think it is better than letting the equity sit here in San Diego/California doing nothing but decreasing.
From the research I’ve done, the BRAC (Base Realignment and Closure Commission) has recommended moving military jobs into Huntsville and many defense related jobs are staying and expanding as well. Even with that, the Huntsville market, while not as strong as San Diego, does have a strong rental market. The demand for units is strong but the prices are reasonable, even ridiculous by San Diego standards ($375 rent for a 2 bedroom, come on…). While the military itself is not my primary target demographic, the growing economy of the military base is promising.
In any case, this property is an ideal example of how you can use a little money or equity here from California and put it out there to work for you.
When you are borrowing money to make money, the important number is “cash on cash”. Let’s say you take money out of your property, borrowing at an interest rate of 6%. Your “cash on cash” needs to be at 9% or better. This property’s “cash on cash” is about 18%.
When looking for out-of-state properties, these are the numbers I look for:
ROE greater than 30%.
Cash on Cash greater than interest rate +3%.
Expenses (excluding mortgage) < 1/3 of gross income Cash flows Keep those numbers in mind when looking for properties and you will be ahead of most other real estate investors (most of whom do not run these numbers).ParticipantLisa Vander
Lisa Vander is the one who coined the term “return on equity” because you were taking equity from your California properties here and investing them elsewhere. Most people don’t have the necessary cash to invest in real estate but can tap into the equity of their homes and property.
Risky, yes. Still, I think it is better than letting the equity sit here in San Diego/California doing nothing but decreasing.
From the research I’ve done, the BRAC (Base Realignment and Closure Commission) has recommended moving military jobs into Huntsville and many defense related jobs are staying and expanding as well. Even with that, the Huntsville market, while not as strong as San Diego, does have a strong rental market. The demand for units is strong but the prices are reasonable, even ridiculous by San Diego standards ($375 rent for a 2 bedroom, come on…). While the military itself is not my primary target demographic, the growing economy of the military base is promising.
In any case, this property is an ideal example of how you can use a little money or equity here from California and put it out there to work for you.
When you are borrowing money to make money, the important number is “cash on cash”. Let’s say you take money out of your property, borrowing at an interest rate of 6%. Your “cash on cash” needs to be at 9% or better. This property’s “cash on cash” is about 18%.
When looking for out-of-state properties, these are the numbers I look for:
ROE greater than 30%.
Cash on Cash greater than interest rate +3%.
Expenses (excluding mortgage) < 1/3 of gross income Cash flows Keep those numbers in mind when looking for properties and you will be ahead of most other real estate investors (most of whom do not run these numbers).ParticipantLisa Vander
Lisa Vander is the one who coined the term “return on equity” because you were taking equity from your California properties here and investing them elsewhere. Most people don’t have the necessary cash to invest in real estate but can tap into the equity of their homes and property.
Risky, yes. Still, I think it is better than letting the equity sit here in San Diego/California doing nothing but decreasing.
From the research I’ve done, the BRAC (Base Realignment and Closure Commission) has recommended moving military jobs into Huntsville and many defense related jobs are staying and expanding as well. Even with that, the Huntsville market, while not as strong as San Diego, does have a strong rental market. The demand for units is strong but the prices are reasonable, even ridiculous by San Diego standards ($375 rent for a 2 bedroom, come on…). While the military itself is not my primary target demographic, the growing economy of the military base is promising.
In any case, this property is an ideal example of how you can use a little money or equity here from California and put it out there to work for you.
When you are borrowing money to make money, the important number is “cash on cash”. Let’s say you take money out of your property, borrowing at an interest rate of 6%. Your “cash on cash” needs to be at 9% or better. This property’s “cash on cash” is about 18%.
When looking for out-of-state properties, these are the numbers I look for:
ROE greater than 30%.
Cash on Cash greater than interest rate +3%.
Expenses (excluding mortgage) < 1/3 of gross income Cash flows Keep those numbers in mind when looking for properties and you will be ahead of most other real estate investors (most of whom do not run these numbers).ParticipantLisa Vander
Lisa Vander is the one who coined the term “return on equity” because you were taking equity from your California properties here and investing them elsewhere. Most people don’t have the necessary cash to invest in real estate but can tap into the equity of their homes and property.
Risky, yes. Still, I think it is better than letting the equity sit here in San Diego/California doing nothing but decreasing.
From the research I’ve done, the BRAC (Base Realignment and Closure Commission) has recommended moving military jobs into Huntsville and many defense related jobs are staying and expanding as well. Even with that, the Huntsville market, while not as strong as San Diego, does have a strong rental market. The demand for units is strong but the prices are reasonable, even ridiculous by San Diego standards ($375 rent for a 2 bedroom, come on…). While the military itself is not my primary target demographic, the growing economy of the military base is promising.
In any case, this property is an ideal example of how you can use a little money or equity here from California and put it out there to work for you.
When you are borrowing money to make money, the important number is “cash on cash”. Let’s say you take money out of your property, borrowing at an interest rate of 6%. Your “cash on cash” needs to be at 9% or better. This property’s “cash on cash” is about 18%.
When looking for out-of-state properties, these are the numbers I look for:
ROE greater than 30%.
Cash on Cash greater than interest rate +3%.
Expenses (excluding mortgage) < 1/3 of gross income Cash flows Keep those numbers in mind when looking for properties and you will be ahead of most other real estate investors (most of whom do not run these numbers).ParticipantLisa Vander
Lisa Vander is the one who coined the term “return on equity” because you were taking equity from your California properties here and investing them elsewhere. Most people don’t have the necessary cash to invest in real estate but can tap into the equity of their homes and property.
Risky, yes. Still, I think it is better than letting the equity sit here in San Diego/California doing nothing but decreasing.
From the research I’ve done, the BRAC (Base Realignment and Closure Commission) has recommended moving military jobs into Huntsville and many defense related jobs are staying and expanding as well. Even with that, the Huntsville market, while not as strong as San Diego, does have a strong rental market. The demand for units is strong but the prices are reasonable, even ridiculous by San Diego standards ($375 rent for a 2 bedroom, come on…). While the military itself is not my primary target demographic, the growing economy of the military base is promising.
In any case, this property is an ideal example of how you can use a little money or equity here from California and put it out there to work for you.
When you are borrowing money to make money, the important number is “cash on cash”. Let’s say you take money out of your property, borrowing at an interest rate of 6%. Your “cash on cash” needs to be at 9% or better. This property’s “cash on cash” is about 18%.
When looking for out-of-state properties, these are the numbers I look for:
ROE greater than 30%.
Cash on Cash greater than interest rate +3%.
Expenses (excluding mortgage) < 1/3 of gross income Cash flows Keep those numbers in mind when looking for properties and you will be ahead of most other real estate investors (most of whom do not run these numbers).Participantloopnet.com, http://www.pacblueinvestments.com
To see what properties are available in certain areas, you can use loopnet.com. The lookup service is free and some listings post the financials. If you know how to run the numbers, you can make at least a semi-informed analysis of how well the property will perform.
My realtor was referred to me by Pacific Blue Investments (www.pacblueinvestments.com). They hold real estate classes and is a good resource on how to start out in real estate investing out-of-state. You can use the realtor referral service without having to take their classes, but I recommend taking the classes. They taught me a lot. They do have a service where you can basically give them the money and they will invest the money in real estate for you (or at least guide you on where to go).
I prefer to do the dirty work myself because it allows me to use the real estate professional tax deduction.
Personally, I don’t like any real estate investment that is more than 2 hour’s drive. The travel and the hassle is just too much.
The post is not supposed to argue that “you should be in real estate investing out of state”. There are many people here who have lives and would prefer to do other things with their time. I can tell you that it does not take as much time as you think, but you are correct that real estate investing is a lot of hassle. Still, it has many rewards so I can only offer my testimonial that the real estate investing I am doing is going to pay off HUGE.
I will say that most people are comfortable with their real estate near them (my own dad uses the ‘two hour rule’), but anybody on this blog can tell you that there is no good real estate investment property here in California. In order to make maximum use of my money, I had to go out-of-state. Does the fact that my money will generate a 43% rate of return offset my uncomfortableness of the property being a few states away? ABSOLUTELY. If you want to invest in anything, real estate or stock market, you have to be able to use math, use reason, and keep emotion out of it. Take reasonable risks, do your due diligence, but ultimately educate yourself. Certainly don’t limit yourself by saying “the travel and the hassle is too much”.
Participantloopnet.com, http://www.pacblueinvestments.com
To see what properties are available in certain areas, you can use loopnet.com. The lookup service is free and some listings post the financials. If you know how to run the numbers, you can make at least a semi-informed analysis of how well the property will perform.
My realtor was referred to me by Pacific Blue Investments (www.pacblueinvestments.com). They hold real estate classes and is a good resource on how to start out in real estate investing out-of-state. You can use the realtor referral service without having to take their classes, but I recommend taking the classes. They taught me a lot. They do have a service where you can basically give them the money and they will invest the money in real estate for you (or at least guide you on where to go).
I prefer to do the dirty work myself because it allows me to use the real estate professional tax deduction.
Personally, I don’t like any real estate investment that is more than 2 hour’s drive. The travel and the hassle is just too much.
The post is not supposed to argue that “you should be in real estate investing out of state”. There are many people here who have lives and would prefer to do other things with their time. I can tell you that it does not take as much time as you think, but you are correct that real estate investing is a lot of hassle. Still, it has many rewards so I can only offer my testimonial that the real estate investing I am doing is going to pay off HUGE.
I will say that most people are comfortable with their real estate near them (my own dad uses the ‘two hour rule’), but anybody on this blog can tell you that there is no good real estate investment property here in California. In order to make maximum use of my money, I had to go out-of-state. Does the fact that my money will generate a 43% rate of return offset my uncomfortableness of the property being a few states away? ABSOLUTELY. If you want to invest in anything, real estate or stock market, you have to be able to use math, use reason, and keep emotion out of it. Take reasonable risks, do your due diligence, but ultimately educate yourself. Certainly don’t limit yourself by saying “the travel and the hassle is too much”.
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