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surveyor
ParticipantRE broker referrals
The network I’m with is fairly selective about the real estate agents we deal with. They have to have taken the classes we took and they are usually investors themselves. In some cases, they are commercial real estate agents.
Because of that qualification, I do have a certain degree of confidence in whom they refer. The real estate agents and the investors in the area are probably the best people to talk to in seeing if the property management is any good.
However, I still took the extra step (and this was certainly recommended by my group) in interviewing the property management companies, taking a look at their contracts, and then talking to other members to see their opinion of them. I even talked to the people who were actually renting the place they were managing.
Sometimes, in certain locations, there will be only one property management company in town and you’re kind of forced to live with them. Those are typically areas I’ve avoided.
The order I’ve gone is researching which area of the country I should invest, deciding which one, and then making the contacts, doing the research, and seeing what team I can put together in the area. That involves interviewing the team members, taking a look at their qualifications, and then checking their reputation with other investors. You also have to ask them what criteria do they use when they select tenants, what is their procedure for repairs and maintenance, etc.
There are a lot of aspects of out-of-state RE investing that will really stretch your abilities. Managing from a distance, writing a $8,000 check which you know you have to do because the hot water went out in the middle of winter (and it was a good thing I did it too because it was right before Denver went through three weeks of blizzards), talking to them every month or so to make sure everything is ok, etc.
It’s hard because we of course can probably do a better job ourselves, but success in real estate is not doing everything yourself, but creating a team that will make you money so that you don’t have to work as hard. If your property management is running smoothly, you have more time to look for other properties and other opportunities (and then the whole cycle repeats).
When I get home, I will post you the recommended questions that my group asks of property managers.
Participantmanagement companies
In my real estate group, good property management companies are very difficult to find and the ones I have employed are ones that I asked my group to refer or were referred by my real estate agents. And from there I interviewed at least three. Not a perfect system, I admit, but at least better than a google search or a search in the yellow pages. For my position, I do have a backup property manager if I decide the one I have is not working out for me. I do have a better position than most, because I have a network of investors that I talk to and we refer a lot of people to each other (mortgage brokers, real estate agents, property managers, attorneys). I would say without this real estate group, I probably would be running into the same problems you’ve been experiencing.
(which is why I have yet to invest in North Carolina, because I have heard that the property managers there are all pretty bad).
I have two property managers, one in Denver, one in South Carolina. The South Carolina one had one unit left vacant for a few months, but I cut them slack because it was the Christmas holidays and there weren’t a lot of people running around trying to get an apartment at the time. The one in Denver, the 30 year old boiler went out on me a WEEK after I bought the property, and replacing it cost $8000. SUCKED. But I had them send me a picture of it, send me the work order and exact scope of what was replaced (as well as talk to the company and checked out the company who replaced the boiler). Every year, one requirement I have for the property manager is to go around and take pictures of the property so that I know what’s going on.
So… it helps to have a network, it helps to have others in the same boat as you, but at the end of it, there are a lot of hassles and risks when you do any investment, stock market or real estate. I do property management myself for my two San Diego properties. My tenants are sometimes late for their payments, they ask me to come by because they can’t light the pilot light, and during Christmas, I had to fix up one property because the tenant left, stiffed me for two months rent, and then left the place in a terrible condition that I had to fix up. I mean, I already have a day job. Pretty much ruined my Christmas. So whether out-of-state or in-state, stuff happens.
But at the end of it, I still do it because it will provide me the best way to use money and there are too many advantages to it otherwise. By at least going to out-of-state, I can diversify out of the “bubble”, continue to make more money.
Bottom line, IMO, is that you are setting yourself up for problems by being an out-of-the-area owner. You might get lucky and never have any problems – or you might be unlucky and end up losing your ass on a property that you shouldn’t have bought in the first place.
No risk, no reward.
So certainly take a look at 4plex’s stories and examine it. If what he goes through seems like too much work, it seems like it’s just too much trouble, by all means, do not invest in real estate out of state. It’s not a get-rich-quick thing at all. It’s a lot of work and a lot of hassle.
But like everything in life, if you prepare yourself, do your homework, work hard, America will reward you for it.
Participantout-of-state out-of-mind
The reason why my group invests in out of state properties is so that we are not dependent on our local area’s real estate market whims. Yes, it totally sucks to be in the San Diego real estate market right now. However, other locations are not on the same cycle and are in fact poised to move up. If you limit yourself to being a “local” real estate investor, then you are much more vulnerable to the market ups and downs, much like being too heavily invested in tech stocks in the stock market. By being out of state, out of town, you can diversify.
Yes, certainly there are a lot of hassles dealing with people out of state. My property manager in South Carolina has not aggressively rented out my last remaining unit for the past few months. I’ve been talking to them about it but ultimately it comes down to being able to choose good people.
sdcellar is totally right that real estate lets you leverage. However, if you are able to keep the property for a long time, using leverage, appreciation, cash flow, and depreciation, you can get 25% to 30% return from real estate.
==update: just called my property manager in SC and they just got it rented. so, my bugging them has had results.
Participanthistorical data
Rich actually put up a pretty good graph a few weeks ago.
It’s inflation indexed, so take it as you will, but you will notice that rents went down 10% in 1997, considered a market low for San Diego. So there is a cycle for rents. I don’t really consider it a big deal to lower rents myself because it is better to lose $50 to $100 than to lose $100 to $1800. As long as the property cash flows, you’re in good shape.
Participantdownturn values
Multi-families tend to follow the overall residential market. During a downturn, they will tend to lose about 20% of their value (and most residential properties tend to lose that much peak to trough). There are many on this board though who say that this peak to trough will be more this time, so take all this with a grain of salt.
Commercial property (pure commercial properties, those that rely on business rent) will go down about 30% peak to trough.
Rents can increase or decrease in a downturn (they tend to increase in a downturn). If rents do go down, they usually go down 10% (absent some major catastrophe).
All this information I learned from my real estate class. Other investors may have other perspectives.
Participanthousing/real estate/history
Housing was and has NEVER been anything other than an investment of a neccesity.
While I do not advocate buying houses in this current San Diego market, I’m going to have to disagree with you there. I believe there are studies that show that homeowners and people who own real estate tend to be more successful and more affluent. There is a reason why there is a prestige attached to “owning” your own home, ever since the U.S. was created, and our laws and taxes reflect that value. For a long part of our history, only the rich owned homes and property.
Certainly I would applaud the movement away from a materialistic society, but the great success of the U.S. was innovating land ownership and its citizens use.
Most rich people have made their fortunes using their homes and real estate.
(…) For any flamers, please note the first part of my first sentence…
ParticipantYou won’t find any positive cash flow multi-family properties in California, Nevada, Florida, New Jersey, and New York.
The positive cash flow properties can be found in North Carolina, South Carolina, Georgia, Tennessee, Missouri, Colorado, and Idaho.
Go to loopnet.com to find them (no i do not work for loopnet). Stick to major cities.
ParticipantAssuming your four-plex is here in the San Diego area, i’ve been seeing four-plexes for around $700k to $900k. There are quite a few variables so I would suggest going to loopnet.com and take a look at properties similar to that four plex and see what their values are.
780 is a very good fico score, similar to mine. I’ve been getting around 6.875% to 7%. With that kind of score, you can probably get any kind of loan you want, from negative amortization to interest only to fixed rate.
If you were able to get an owner occupied loan, the rate would go down to around maybe 6.5%. As for the difference between owner occupying an office and owner occupying a home, I can’t help you there.
Hope that helps somewhat.
ParticipantThe Crusades were a response in part because of Muslim cruelty towards christian pilgrims, something that has been undernoted by most historians.
Also, christianity does not have at its core beliefs scriptures calling for violence. Islam does.
ParticipantIt’s not about Clinton.
They hated us a long time ago, before Clinton, before the U.S. even existed.
January 4, 2007 at 11:12 AM in reply to: Shoddy Construction of 2000-2005 Housing Boom: Beware of National Builders #42678ParticipantMy rental property/SFR in Mira Mesa was built in 1997, but has held up pretty well. No major problems.
My in-law’s place in 4s ranch (which they are renting), the sprinkler system has gone awry four times (the house itself is almost 4 years old) and each time they have to tear up the sidewalk and the driveway to solve the problem. I haven’t heard any other problems with 4s ranch houses, though.
ParticipantTax Deductions
In terms of tax breaks, there are few that are bigger and better than the ones found in real estate. It is probably too late for you to do at this point of the year, but if you are thinking about investing in real estate, I recommend going to Lisa Vander’s workshop and reading her book. Go to http://www.pacblueinvestments.com.
I do not know what your business is, but if you can somehow classify or qualify as a real estate professional, you can offset a nearly unlimited amount of taxes using real estate.
Good luck.
December 22, 2006 at 8:48 AM in reply to: nesting young 4s Ranch experiences and puzzling questions #42258ParticipantRental/Investment Properties
So now you have 3 properties, one the same SFR you are considering, and 2 rental properties to own long term.
Aside from ocrenter’s excellent advice, I would like to note that it is probably not a good idea to buy rental properties that cost more than $100k per unit. If you go to other locations, you can get more profitable properties that are in the range of $30k to $70k per unit, which is more reasonable and at least diversifies you away from southern california.
For $70k, you could get maybe up to 7 units.
Anyways, think of the possibilities.
December 21, 2006 at 8:16 AM in reply to: nesting young 4s Ranch experiences and puzzling questions #42190ParticipantBy my very rough calculations, I am getting a difference of about $1860 per month difference between buying and renting, which adds up to a screaming $22k per year.
I have family who live in 4s ranch, and while I do like the area myself, I really dislike the mello-roos.
I recommend at least renting there and don’t choose a huge condo or house. Just choose a modest place. I’m sure if you showed your wife the hard numbers, she’d agree with you that buying a house at 4s ranch at this point of time is not a good idea. Continue to examine the numbers every year around this time.
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