Author Topic: Choosing, buying and managing property... from a distance  (Read 9980 times)

more4less

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Choosing, buying and managing property... from a distance
« on: September 10, 2013, 01:27:32 AM »
Here's the deal - I live in NorCal. Idea of buying rental here is quite questionable, especially if you did the numbers. Which makes me think about getting place somewhere else. I'm looking towards Texas since GRM is quite low in certain parts, meaning that one will get more rent income dollars for every dollar spent during purchase. What really worries me in this situation
1) How do I choose property? I can get rent, taxes, price and vacancy rates numbers from Internet - good enough for some basic math. But my biggest fear is to end up with 4-plex somewhere amid housing projects in "neighborhood with bad schools".
2) I have no idea what's going on the local level. For example there's quite lucrative property, but in the last year it dropped 16% of its price (contrary to the national trend). Why?
3) How do I select realtor? How much of my presence will be required for getting loan, signing papers and closing the deal?
4) How do I manage it? Obviously I will get PM for it. How do i choose right one in the city which I never been to before?
MMM-Landlords, I call for your help! Many thanks in advance!

About me:
- I never bought RE before.
- I look at properties which fall into 1-2% rule, mostly multi-family properties under 300k
- I have good credit and some money set aside for the downpayment.
« Last Edit: September 10, 2013, 10:44:06 AM by more4less »

honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #1 on: September 10, 2013, 05:14:46 AM »
If you factor ALL financials then landlording in NorCal blows the doors off pretty much anywhere.  Rent growth AND appreciation should be considered for residential property.  Also Prop 13 is a major benefit to CA landlords.

more4less

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Re: Choosing, buying and managing property... from a distance
« Reply #2 on: September 10, 2013, 10:38:56 AM »
These are valid arguments, honobob, but it's very hard to find a property with positive cash flow in my (or should I say our) area. Plus, RE is quite expensive here - for the price of condo in SF-Bay, you can get like duplex or 3-plex somewhere else.

honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #3 on: September 10, 2013, 07:57:38 PM »
These are valid arguments, honobob, but it's very hard to find a property with positive cash flow in my (or should I say our) area. Plus, RE is quite expensive here - for the price of condo in SF-Bay, you can get like duplex or 3-plex somewhere else.
1.  If you cannot buy a property that is NOT cash flow positive at time of purchase then you probably can't buy in a high appreciating area.

2.  If you cannot buy expensive property then you probably cannot buy in a high appreciating area.

3.  There are ways to accomplish the above but you have to WANT to do it.

4. There are financial reasons the market is willing to invest in initially non cash flowing properties.

5.  But if you have the ASSETS and WILL to buy in SF consider this...
     $200,000 down on a $1,000,000 house will be worth $12,000,000 in 30 years if the property appreciates 9% which is less than what has happened over the last 40 years.  $200,000 down on 10 $100,000 will be worth $3,000,000 in 30 years at 4% appreciation.  NINE MILLION DOLLARS DIFFERENCE!   But you had a hundred dollars each cash flow positive to start but more than likely your rent growth is WAY less than the SF property, say 6%+.   Even with only one property you will have LESS vacancy in SF.  You also will only be replacing one tenth the appliances, carpets, roofs!  Don't believe me?  Go to a good realtor or investor and prove me wrong.  Even with the negative cash flow on the SF property you will do better but I'm not guesstimating starting rents to be nitpicked to death but I will stand by 6-7% rent growth in SF.
« Last Edit: September 10, 2013, 08:00:11 PM by honobob »

Another Reader

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Re: Choosing, buying and managing property... from a distance
« Reply #4 on: September 10, 2013, 08:34:47 PM »
For those of you thinking of following Honobob's advice, I suggest you carefully study the City of San Francisco rent board web site. 

http://sfrb.org/

In particular, read through the historical allowed rent increases 1982 to the present.  And don't forget to gain a good understanding of just cause eviction.

I can't imagine a worse jurisdiction in which to be a landlord.

honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #5 on: September 10, 2013, 10:39:05 PM »
For those of you thinking of following Honobob's advice, I suggest you carefully study the City of San Francisco rent board web site. 

http://sfrb.org/

In particular, read through the historical allowed rent increases 1982 to the present.  And don't forget to gain a good understanding of just cause eviction.

I can't imagine a worse jurisdiction in which to be a landlord.
Actually you can skip all that reading if you're looking to follow my sound advice to make millions in real estate.  Rent controlled units are limited and easily avoided.  At sale they are priced with the restrictions acknowledged, ie. less than market rate units.  The type of properties I am talking about, sfh's and condos, etc. have never been subject to rent control.  I'm surprised another reader is NOT knowledgable of this fact.  See, everyone can learn something new here.
« Last Edit: September 10, 2013, 10:41:52 PM by honobob »

Roses

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Re: Choosing, buying and managing property... from a distance
« Reply #6 on: September 10, 2013, 11:39:14 PM »
Here's the deal - I live in NorCal. Idea of buying rental here is quite questionable, especially if you did the numbers. Which makes me think about getting place somewhere else. I'm looking towards Texas since GRM is quite low in certain parts, meaning that one will get more rent income dollars for every dollar spent during purchase. What really worries me in this situation
1) How do I choose property? I can get rent, taxes, price and vacancy rates numbers from Internet - good enough for some basic math. But my biggest fear is to end up with 4-plex somewhere amid housing projects in "neighborhood with bad schools".
2) I have no idea what's going on the local level. For example there's quite lucrative property, but in the last year it dropped 16% of its price (contrary to the national trend). Why?
3) How do I select realtor? How much of my presence will be required for getting loan, signing papers and closing the deal?
4) How do I manage it? Obviously I will get PM for it. How do i choose right one in the city which I never been to before?
MMM-Landlords, I call for your help! Many thanks in advance!

About me:
- I never bought RE before.
- I look at properties which fall into 1-2% rule, mostly multi-family properties under 300k
- I have good credit and some money set aside for the downpayment.

I have all the same questions.  My market is Seattle - also expensive and not known to be great for landlording.  I'm also looking at Texas but have the same frustrations as you.  I can't seem to get actual advice on the 'how'.  The one thing I get from the seasoned investors is 'know your market' and 'talk to as many locals as possible', 'drive all the neighborhoods'.  This sounds like great advice, but what does that mean for people who simply cannot pick up and go spend a month in another state?  Maybe more4less has a full time job and can't do that.  In my case, I'm a SAHM and can't leave my child for more than a few days.  So, here's my big question: Does that mean that real estate investing is out for us?  Is there no other way to do this?  If you think there are other ways I'd appreciate specific examples. 

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Re: Choosing, buying and managing property... from a distance
« Reply #7 on: September 11, 2013, 05:57:57 AM »
Real estate investing is a business.  A complicated business full of risks and one that cannot be understood completely by reading a couple of books.  It's not like buying stocks or mutual funds.  If you are not willing to put in the time, it's probably not for you.  You can try to research and buy through a turn-key investment company, but that's akin to buying high load, high expense mutual funds from someone that's looking to make a commission.  Chances are the you will be disappointed in the performance of your investment.

I own in the Phoenix suburbs and live in Silicon Valley.  Most of what I own was bought before the mania of late 2004 through 2006 or in the 2009 to 2011 window.  With 30 years in real estate, I still made mistakes.  Because I was knowledgeable and conservative, I weathered the storm.  Many folks did not.

If you want to get involved in this business, start by reading the investing and land lording books.  Attend your local real estate investors association meetings.  Ask your friends, relatives and associates about their experiences.  Make friends with a few successful small scale investors locally.  Once you understand the business in theory, you need to go to the places you think might be good investing markets and do some "boots on the ground" research.

If you cannot make this level of effort, then the business of rental real estate is not for you.

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Re: Choosing, buying and managing property... from a distance
« Reply #8 on: September 11, 2013, 06:18:11 AM »
I don't watch television, so I must have missed Honobob's late night infomercial about how to make millions in real estate.  Yes, the rent control provisions do not currently apply to SFR's, but there's no reason to conclude they won't in the future, given the local government attitudes.  And the just eviction rules do apply.  Before anyone writes that $200,000 check, I suggest they talk to a number of landlords in San Francisco.  You will likely get a somewhat different view of the prospects.
« Last Edit: September 11, 2013, 06:20:02 AM by Another Reader »

honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #9 on: September 11, 2013, 10:31:21 AM »
I don't watch television, so I must have missed Honobob's late night infomercial about how to make millions in real estate.  Yes, the rent control provisions do not currently apply to SFR's, but there's no reason to conclude they won't in the future, given the local government attitudes.  And the just eviction rules do apply.  Before anyone writes that $200,000 check, I suggest they talk to a number of landlords in San Francisco.  You will likely get a somewhat different view of the prospects.
Another Reader, you are either out of the loop or just FEAR MONGERING!  The percentage of residential units covered by rent control has decreased EVERY year since it was implemented.  I can only guess that you have some underperforming properties to unload that you are so invested on getting West Coast investors on a plane to Phoenix where of course there are NO vacancy and collection problems and people politely leave when asked.  It must upset you when you have to pay ever increasing airfares to deal with another problem in Phoenix. There goes my hunnerd dollar cash flow!  Bay Area rentals..coulda...woulda...shoulda!

But yes, anyone thinking of investing should talk to area investors, but in SF make sure you are talking to market rate investors. 

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Re: Choosing, buying and managing property... from a distance
« Reply #10 on: September 11, 2013, 11:23:06 AM »
Honobob is assuming facts not in evidence again....

The purpose of this forum is to ask questions and to provide information and feedback to assist others.  You are touting the San Francisco market as a great place to invest.  Maybe as an educational exercise you could select an example of a San Francisco property currently on the market that would interest you and lay out the acquisition costs and the annual anticipated income and expense (including mortgage payments) over the period you would hold the property, including all your assumptions about growth in income, expenses, and the future value at time of sale.  Let's see what return comes from cash flow and what return comes from the resale under your appreciation assumptions.  Then everyone will have some numbers to look at and consider.  Plus a pretty good idea of the risks involved in your assumptions. 

arebelspy

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Re: Choosing, buying and managing property... from a distance
« Reply #11 on: September 11, 2013, 11:24:12 AM »
I don't watch television, so I must have missed Honobob's late night infomercial about how to make millions in real estate.  Yes, the rent control provisions do not currently apply to SFR's, but there's no reason to conclude they won't in the future, given the local government attitudes.  And the just eviction rules do apply.  Before anyone writes that $200,000 check, I suggest they talk to a number of landlords in San Francisco.  You will likely get a somewhat different view of the prospects.
Another Reader, you are either out of the loop or just FEAR MONGERING!  The percentage of residential units covered by rent control has decreased EVERY year since it was implemented.  I can only guess that you have some underperforming properties to unload that you are so invested on getting West Coast investors on a plane to Phoenix where of course there are NO vacancy and collection problems and people politely leave when asked.  It must upset you when you have to pay ever increasing airfares to deal with another problem in Phoenix. There goes my hunnerd dollar cash flow!  Bay Area rentals..coulda...woulda...shoulda!

But yes, anyone thinking of investing should talk to area investors, but in SF make sure you are talking to market rate investors.

(Emphasis mine.)

MODERATOR HAT ON

Please don't level false accusations at other members.

AR has - in fact - steered other people away from Phoenix recently, as the numbers don't make sense there right now. 

Making up lies and attacking another member just because they disagree with you about viable locations for rental properties is not okay.

/TAKES OFF MODERATOR HAT
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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Re: Choosing, buying and managing property... from a distance
« Reply #12 on: September 11, 2013, 11:52:52 AM »
Guess I should quit baiting the troll....

I do think it's reasonable if you are going to throw out these numbers, you back it up with a detailed cash flow analysis of a sample property so those folks that are not experienced can understand the basis of your claims.  Understanding how much of the return on your investment comes from the assumed appreciation vs the cash flow and how much negative cash flow would have to be eaten in the early years will give potential investors something to think about.

honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #13 on: September 11, 2013, 12:08:03 PM »
Arebelspy,  another reader started with the "infomercial" jab.  I took it in stride.  He also gave misleading information about SF real estate several times.  I corrected him.  If the OP was living in Phoenix I would have made appropriate suggestions for investing there.  I was merely pointing out some of the downside of I vesting out of state just to get a little cash flow.  I know you do this and would hope your bias would not be reflected in your moderation but here it has.

I have stated before that I would be happy to participate in a thread comparing investing in immediate cash flow properties and high appreciation & rent growth proprietors (remember I have property in Vegas).

Also, you must be aware that a major component of RE Investing IS psychology.  I was merely pointing out a possible motivation for AR's  misleading information on SF real estate as I have seen this type of sour grapes behavior before.




honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #14 on: September 11, 2013, 12:17:25 PM »
Guess I should quit baiting the troll....

I do think it's reasonable if you are going to throw out these numbers, you back it up with a detailed cash flow analysis of a sample property so those folks that are not experienced can understand the basis of your claims.  Understanding how much of the return on your investment comes from the assumed appreciation vs the cash flow and how much negative cash flow would have to be eaten in the early years will give potential investors something to think about.
Name calling again!  Where's a moderator when you need one?
AR. You did not address the $9, 000, 000 EXTRA in my example.  That would maybe cover some of the negative initial cash flow don't you think?  Let's set some rules and put our big boy pants and have an honest discussion. 

DoubleDown

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Re: Choosing, buying and managing property... from a distance
« Reply #15 on: September 11, 2013, 01:11:17 PM »

5.  But if you have the ASSETS and WILL to buy in SF consider this...
     $200,000 down on a $1,000,000 house will be worth $12,000,000 in 30 years if the property appreciates 9% which is less than what has happened over the last 40 years. 

I'll wade in.

- I would not consider in any way a $1 million property with $200,000 down to be a prudent investment for a first-time investor (as is the OP, apparently). What a huge downside risk, so much could go wrong.

- I think expecting/hoping for a 9% average rate of appreciation for the next 30 years is exceedingly optimistic, to the point of being unrealistic. That whole "past performance does not guarantee future results" thing.

-SF is great, but who can say what the future holds in the long term? I mean, I haven't gone through any thought exercise over it, but can we really say it is only upside?? Couldn't silicon valley go the way of the rust belt one day? Heavy taxation driving people and businesses out? An earthquake levels the whole place causing widespread fear and drastically falling prices? Other threats?

The only way I would even consider such an "investment" is if I was already quite wealthy with tons of cash and a reliable income stream to back up long periods of unemployment or whatever, was buying a home like this as my primary residence, expected to stay there a long time, and could sleep at night if I had to sell my million-dollar house one day for $500 - 600,00 because of falling prices (for whatever reason). Then I might hope that over the course of a decade or so, I'd see some appreciation. Even small percentage growth on such an expensive property would of course translate to a lot of money.

I do enjoy your contrary opinions honobob, and it's obviously worked very well for you! I just think this is way too much to bite off for a first-time investor.

arebelspy

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Re: Choosing, buying and managing property... from a distance
« Reply #16 on: September 11, 2013, 01:28:38 PM »
I was merely pointing out some of the downside of I vesting out of state just to get a little cash flow.  I know you do this and would hope your bias would not be reflected in your moderation but here it has.

Actually I don't currently have any buy and hold properties I landlord out of state.  So your accusations of my "bias" towards investing out of state "just to get a little cash flow" are flat out wrong.

The line you crossed was directly attacking another member with lies.  If you can point out to me where AR did that, he will be reprimanded the same and given a warning as well.

For now, consider this your warning.

Have a great day.
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honobob

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Re: Choosing, buying and managing property... from a distance
« Reply #17 on: September 11, 2013, 06:11:55 PM »

5.  But if you have the ASSETS and WILL to buy in SF consider this...
     $200,000 down on a $1,000,000 house will be worth $12,000,000 in 30 years if the property appreciates 9% which is less than what has happened over the last 40 years. 

I'll wade in.

- I would not consider in any way a $1 million property with $200,000 down to be a prudent investment for a first-time investor (as is the OP, apparently). What a huge downside risk, so much could go wrong.

- I think expecting/hoping for a 9% average rate of appreciation for the next 30 years is exceedingly optimistic, to the point of being unrealistic. That whole "past performance does not guarantee future results" thing.

-SF is great, but who can say what the future holds in the long term? I mean, I haven't gone through any thought exercise over it, but can we really say it is only upside?? Couldn't silicon valley go the way of the rust belt one day? Heavy taxation driving people and businesses out? An earthquake levels the whole place causing widespread fear and drastically falling prices? Other threats?

The only way I would even consider such an "investment" is if I was already quite wealthy with tons of cash and a reliable income stream to back up long periods of unemployment or whatever, was buying a home like this as my primary residence, expected to stay there a long time, and could sleep at night if I had to sell my million-dollar house one day for $500 - 600,00 because of falling prices (for whatever reason). Then I might hope that over the course of a decade or so, I'd see some appreciation. Even small percentage growth on such an expensive property would of course translate to a lot of money.

I do enjoy your contrary opinions honobob, and it's obviously worked very well for you! I just think this is way too much to bite off for a first-time investor.
DD  I was just throwing out some simple numbers so I could have just as easily said $100,000 down on a $500,000 property which is doable in SF but definitely harder.  It's not a rare occurrence for first time home buyers to be shelling out $400,000-$800,000 for a condo in SF.  A starting out investor in SF will be in the same market.

Appreciation Rate???  What will it be?  Over the last 5 decades I've been telling people about properties doubling every 10 years AND in, you guessed it, every decade I've been told it can't go on. BUT it has!  Although I have experienced 9-11% appreciation over 35 years and 6-7% rent growth I'm conservative and only project 8% appreciation and 4% rent growth.  The point is for a NEW investor is to know those rates.  I think that is more important than doing some guesstimated crap rate and declaring a property profitable but I seem to be the only one pointing out the fallacy in that.  The same type of things you mention happening in SF could also happen in a LOW appreciating area.  If there are specific things to SF then you should consider them.  I thought the whole internet thing would spread more workers to remote locations but if you look at all the new apartment construction around Twitter you'd see I'm proved wrong.

I also won't argue for being overleveraged.  You should be able to keep afloat during the inevitable downturns. 

But all in all, SF is still strong. Don't discount it JUST because it is expensive.  There is a financial reason for that.  Reminds me off the Lou Gehrig quote about his favorite restaurant, "Oh, nobody goes there anymore, it's too crowded."

dragoncar

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Re: Choosing, buying and managing property... from a distance
« Reply #18 on: September 11, 2013, 06:46:50 PM »

5.  But if you have the ASSETS and WILL to buy in SF consider this...
     $200,000 down on a $1,000,000 house will be worth $12,000,000 in 30 years if the property appreciates 9% which is less than what has happened over the last 40 years. 

I'll wade in.

- I would not consider in any way a $1 million property with $200,000 down to be a prudent investment for a first-time investor (as is the OP, apparently). What a huge downside risk, so much could go wrong.

- I think expecting/hoping for a 9% average rate of appreciation for the next 30 years is exceedingly optimistic, to the point of being unrealistic. That whole "past performance does not guarantee future results" thing.

-SF is great, but who can say what the future holds in the long term? I mean, I haven't gone through any thought exercise over it, but can we really say it is only upside?? Couldn't silicon valley go the way of the rust belt one day? Heavy taxation driving people and businesses out? An earthquake levels the whole place causing widespread fear and drastically falling prices? Other threats?

The only way I would even consider such an "investment" is if I was already quite wealthy with tons of cash and a reliable income stream to back up long periods of unemployment or whatever, was buying a home like this as my primary residence, expected to stay there a long time, and could sleep at night if I had to sell my million-dollar house one day for $500 - 600,00 because of falling prices (for whatever reason). Then I might hope that over the course of a decade or so, I'd see some appreciation. Even small percentage growth on such an expensive property would of course translate to a lot of money.

I do enjoy your contrary opinions honobob, and it's obviously worked very well for you! I just think this is way too much to bite off for a first-time investor.

I'd love to be able to justify landlording in SF.  It would be brilliant to buy in during one of those aforementioned tech busts (I believe that the SF Bay Area will continue to do well overall, but that tech busts/booms will continue to be cyclical), or after a large earthquake (some amazing deals were to be had in 1989).  Unfortunately I can't predict those things.

It would be cool to find a duplex or something similar but I just don't think it can work without depending on capital appreciation... In which case you need an exit strategy to cash out.

Roses

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Re: Choosing, buying and managing property... from a distance
« Reply #19 on: September 11, 2013, 09:05:56 PM »
Real estate investing is a business.  A complicated business full of risks and one that cannot be understood completely by reading a couple of books.  It's not like buying stocks or mutual funds.  If you are not willing to put in the time, it's probably not for you.  You can try to research and buy through a turn-key investment company, but that's akin to buying high load, high expense mutual funds from someone that's looking to make a commission.  Chances are the you will be disappointed in the performance of your investment.

I own in the Phoenix suburbs and live in Silicon Valley.  Most of what I own was bought before the mania of late 2004 through 2006 or in the 2009 to 2011 window.  With 30 years in real estate, I still made mistakes.  Because I was knowledgeable and conservative, I weathered the storm.  Many folks did not.

If you want to get involved in this business, start by reading the investing and land lording books.  Attend your local real estate investors association meetings.  Ask your friends, relatives and associates about their experiences.  Make friends with a few successful small scale investors locally.  Once you understand the business in theory, you need to go to the places you think might be good investing markets and do some "boots on the ground" research.

If you cannot make this level of effort, then the business of rental real estate is not for you.

Hi Another Reader,
I'm not sure if your response was directed at my comment or the OP.  But either way, I don't think anyone said anything about not putting in the time and/or effort.  I'm sure the OP is reading and researching, and posting here is just to supplement that.  In my case, I'm reading as fast as I can.  You should see my reading list.  I'm going to meetings and talking to all the experts who will listen to me (again, posting here is just a small piece of this research).  You know, every time I read an RE thread on this site I get this vibe that if you're not a pro already then you won't be taken seriously (besides the fact that an argument always breaks out that detracts from the main question).  I hope you don't mind my saying this - I'm not trying to start yet another fight on this thread - but your assumption that we newbies are not willing to work as hard as others, or not interested in reading/researching, not putting in enough effort, is just a teeny bit condescending.  The only thing I said was that I couldn't spend a lot of time physically out of state.  If you were to respond that in that case there is no way to invest in RE long-distance, well, that would be fine.  But to extrapolate from there and say that we're not willing to put in the effort - that's a real stretch.  Is it because I said I'm a stay home mom? 

Another Reader

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Re: Choosing, buying and managing property... from a distance
« Reply #20 on: September 11, 2013, 09:48:31 PM »
Hi Roses:

That's not my intent at all.  I apologize if it came across as condescending.  I do want to discourage people that think that buying a rental property is just a little bit more complicated than buying a stock or mutual fund and are not willing to put in the effort.  It's a business, or a side job, and not a passive investment.

Reading and going to investing association meetings are what I advocate for new investors that are not already involved in some aspect of real estate as a career.  Getting to know successful investors and how they operate is very helpful.  Learning how to run the numbers to see if an investment is profitable is part of the process.  It sounds like you are doing these things and you understand that writing checks before you educate yourself is foolhardy.

Going out of the area to buy an investment property adds another layer of risk for the first time investor.  Not only are you just learning about operating a property, you are buying in an area where you have to evaluate a lot of factors to determine which if any properties to buy.  The only reason I was comfortable buying outside my home market was that I had valued income properties as part of my work for almost 15 years.  I had spent time in the Phoenix area while valuing a commercial investment portfolio and I saw the beginnings of a turnaround there in early 1995.  I made several trips out there and talked to numerous agents, investors, lenders, and others before I took the plunge.

Personally, I would not buy a property without spending time in the area and looking at the property.  It does not matter to me if it's a $50,000 condo or a $50,000,000 shopping center, I need to "sniff the dirt."  I have seen more than a few properties that looked great on paper that had major issues when I looked at them in person.  You may be more confident than I am and better at making investment decisions from a distance.  Or maybe you would be more comfortable working with someone that specializes in out of state investments.  An example that you might want to look at is here.

http://bawldguy.com/

Jeff is a pretty knowledgeable guy and reading his blog entries from awhile back may convince you that someone else's "boots on the ground" are good enough.  If you pick up the phone and call him, he will happily tell you what he does to find properties for his clients.

Hope what I said is helpful.

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Re: Choosing, buying and managing property... from a distance
« Reply #21 on: September 11, 2013, 10:10:51 PM »
Another Reader - Thanks for the response!  That's kind of what I was looking for and very helpful.  I will add that blog to the reading list.  Sorry if I overreacted a bit. 

Also, I agree with going to check out the property in person.  When I said I couldn't spend time there physically, I meant for an extended period of time.  I've heard of people flying out and spending a few weeks getting to know an area outside their market.  That's what's impossible for me right now.  But I fully intend on travelling there at least for a few days to evaluate the property myself before buying it.  Even so, there are so many things that might go unnoticed by an out of state investor.  Which is why I'm still trying to decide if it's the right path for me.  Thanks again for your input!

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Re: Choosing, buying and managing property... from a distance
« Reply #22 on: September 11, 2013, 10:40:14 PM »
Thanks for the link, Another Reader. Looks like very useful piece of information.

Roses, I'm pretty much in the same situation here. I do reading, attend local RE-events, look at houses for practice so to speak, but unfortunately I don't think I will be able to afford anything here. Technically, I could, but it would put all my golden eggs in one basket. Just as you do, I read about RE and landlording. Every property goes through excel spreadsheet. Also I drive by in my mustachian "Google Street View" car (it gets crazy MPG too) to get at least some idea about neighborhood.
« Last Edit: September 13, 2013, 12:14:12 PM by more4less »

iris lily

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Re: Choosing, buying and managing property... from a distance
« Reply #23 on: September 11, 2013, 10:48:55 PM »
For those of you thinking of following Honobob's advice, I suggest you carefully study the City of San Francisco rent board web site. 

http://sfrb.org/

In particular, read through the historical allowed rent increases 1982 to the present.  And don't forget to gain a good understanding of just cause eviction.

I can't imagine a worse jurisdiction in which to be a landlord.

My friends got out of their 3 plex in SF for that reason--the increasingly difficult landlording local laws

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Re: Choosing, buying and managing property... from a distance
« Reply #24 on: September 11, 2013, 10:52:27 PM »
Real estate investing is a business.  A complicated business full of risks and one that cannot be understood completely by reading a couple of books...

This is such excellent advice, your entire post.

I can't grok anyone getting their toe in the water of real estate investment deliberately doing long-distance investing, but whatever.

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Re: Choosing, buying and managing property... from a distance
« Reply #25 on: September 11, 2013, 11:07:39 PM »
I can't grok anyone getting their toe in the water of real estate investment deliberately doing long-distance investing, but whatever.

On the other hand, I can't understand people who will only invest in real estate locally even when it's a far inferior investment.

To each his own.

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Re: Choosing, buying and managing property... from a distance
« Reply #26 on: September 12, 2013, 12:01:37 PM »
I am in the seattle area and have a story to share. Some friends of ours had a house in Mountlake Terrace for 30 years. It never did well for them as an investment, the rents are pretty low in Mountlake Terrace compared to other cities around Seattle. There are neighborhoods filled with cinderblock homes there. So he finally gets the place cleaned out (gutted rather) sells it and buys two properties in Arizona. No mortgages mind you, he bought them outright so they are cash flowing fine. He's in his 80s now and had done research on a good place to buy. One unit has been rented for all three years and the other has had 1 year leases. He is struggling with the one property because he thinks the PM is nickle and diming him to death. He specific example is this: they charged him $1 per outlet face plate x how many the tenant broke. My husband's response was, that's a great deal if all the PM is charging is a buck for the plate AND labor.

You never know what you are going to get, so be ready for anything and count your lucky stars when tenants are good and stay for a long time!

I buy in Everett and with the interest rates up over 5% right now I don't like the cash flow, I can find $200/door, but its of course not as appealing as the $350/door when the rates were 3.875 and lower. I still think you can make it work in the Seattle area, if you look hard enough, but likely you will need to put more down or buy outside your ruleset.  We buy multi's not SFRs, SFRs you can put less % down. I have seen some that need work that would CF nicely, but that's not my target and my DH is adamant we stick with multi. It is definitely a gamble! Good luck on your hunt:)

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Re: Choosing, buying and managing property... from a distance
« Reply #27 on: September 12, 2013, 12:20:07 PM »
Thanks for your input, Zinethstache!  That's funny about the $1 for outlet plates.  Sounds like an ok deal to me too.

My grandmother owns several properties in Mountlake Terrace and Brier and she's very happy with the area.  She only gets about .5% in rent but it works for her.  She's 90 and not interested in changing her strategy or location.

I've also looked in the Everett area but found rents to still be too low compared to purchase prices.  I know I could put more money down but then I might be forcing cash flow and I wanted to stay away from that.  I'm sure it would help if I were looking at multis rather than SFR's.  I'm actually looking for duplexes ideally.  But I'm hesitant to get into anything bigger than that for my first property.  I think you're right, there are deals to be had if you look hard enough.  But they are few and far between.  I am always looking though!

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Re: Choosing, buying and managing property... from a distance
« Reply #28 on: September 12, 2013, 04:15:08 PM »
 At the beginning of the year good deals were getting snatched up with multiple offers the first day. Today in Everett and vicinity there are 42 duplexes under 400k. Its triple what the inventory levels were. I can SEE the affect of the higher interest rates. We are under contract for a place in Everett that was not well listed by the realtor. It was priced so low it was the top of my list for weeks and after two price drops it finally passed the 1% test. I sent my posse to look at it and they gave the thumbs up. I hope it works out. If you are at all serious about trying for Seattle I think you will need a good realtor to help you sniff out those early breaking bargains.  Through my realtor, I have a web page that lists all actives in my area and price range in a nice sortable single line table. I skim the price and SF and if its not about $100/sf or less I ignore the listing. Most of those 42 duplexes are WAY overpriced. Its almost laughable, Im not sure what people are thinking. I also see the same type of results on the Homepath reports I get. In the last two days, over 30 properties in Everett have had prices reduced. I figure if the interest rates stay up, some prices will get adjusted down and there might just be some low hanging fruit, like the bargain I am pursuing. It's definitely like finding a needle in a haystack.

I lived in Brier for many years and one of my close horse friends still lives there. I would have stayed if I hadn't changed jobs. Now my commute is less than 10 minutes. I would think at 90 your grandmother is pretty well set with what she has property wise.

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Re: Choosing, buying and managing property... from a distance
« Reply #29 on: September 12, 2013, 07:39:46 PM »
At the beginning of the year good deals were getting snatched up with multiple offers the first day. Today in Everett and vicinity there are 42 duplexes under 400k. Its triple what the inventory levels were. I can SEE the affect of the higher interest rates. We are under contract for a place in Everett that was not well listed by the realtor. It was priced so low it was the top of my list for weeks and after two price drops it finally passed the 1% test. I sent my posse to look at it and they gave the thumbs up. I hope it works out. If you are at all serious about trying for Seattle I think you will need a good realtor to help you sniff out those early breaking bargains.  Through my realtor, I have a web page that lists all actives in my area and price range in a nice sortable single line table. I skim the price and SF and if its not about $100/sf or less I ignore the listing. Most of those 42 duplexes are WAY overpriced. Its almost laughable, Im not sure what people are thinking. I also see the same type of results on the Homepath reports I get. In the last two days, over 30 properties in Everett have had prices reduced. I figure if the interest rates stay up, some prices will get adjusted down and there might just be some low hanging fruit, like the bargain I am pursuing. It's definitely like finding a needle in a haystack.

I lived in Brier for many years and one of my close horse friends still lives there. I would have stayed if I hadn't changed jobs. Now my commute is less than 10 minutes. I would think at 90 your grandmother is pretty well set with what she has property wise.

So good to hear from someone who is doing this here!  Glad to know it's not impossible, even if it is difficult.  Thanks for inspiring me to keep looking here!

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Re: Choosing, buying and managing property... from a distance
« Reply #30 on: September 12, 2013, 07:40:23 PM »
Start rant...

I can't tell you how many posts i read here about real estate that are like this.

OP starts with a want to know where or how to invest in rental properties...

Then a "fight" breaks out between "someone" (you know who you are) and whomever has a difference of opinion.

I quit reading.

Please, please please Stop fucking arguing back and forth about who's right and who is wrong!!!

If you really want to educate us students, please give formulas, examples, math equations, facts etc.

And leave your petty who's right who's wrong BS for some other forum!!!

And please..i really am NOT trying to point the finger at one specific person...but come on man!!

Rant over..

AMEN!

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Re: Choosing, buying and managing property... from a distance
« Reply #31 on: September 12, 2013, 08:43:49 PM »

Start rant...

I can't tell you how many posts i read here about real estate that are like this.

OP starts with a want to know where or how to invest in rental properties...

Then a "fight" breaks out between "someone" (you know who you are) and whomever has a difference of opinion.

I quit reading.

Please, please please Stop fucking arguing back and forth about who's right and who is wrong!!!

If you really want to educate us students, please give formulas, examples, math equations, facts etc.

And leave your petty who's right who's wrong BS for some other forum!!!

And please..i really am NOT trying to point the finger at one specific person...but come on man!!

Rant over..

A large part of the problem is someone starting a topic with a very broad question because they don't know what they want (haven't narrowed a focus) and it leads to two very different investing philosophies, each legitimately answering the question but coming into conflict with each other.

If you'd like to learn something, ask.  Be specific.  But a broad "how do I get into real estate investing" is likely to lead to the above every time.  To then complain that it happens is silly.
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Re: Choosing, buying and managing property... from a distance
« Reply #32 on: September 12, 2013, 11:45:01 PM »
Yes, i agree Spy. I tried to delete my comment, after cooling off a bit, but i was already quoted!! I think it actually happened at the exact same time. Sorry for my bitchin'

But, it still makes for a very frustrating read. (The constant bickering back n forth) and while still in the "gathering info stage" I don't really have any specific questions just yet.
« Last Edit: September 12, 2013, 11:48:10 PM by Mazzinator »

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Re: Choosing, buying and managing property... from a distance
« Reply #33 on: September 13, 2013, 01:02:28 AM »
Arebelspy, are you really blaming the questioner for this?  There are so many questions on other threads that are so much more broad.  Often times people will ask the OP to provide more details or something along those lines.  But I don't think it's accurate to say that the way someone phrases a question causes the argument.  Part of being a beginner is not always knowing the right questions to ask.  I think a forum like this should make beginners feel welcome and maybe guide them to the right question rather than making them feel like if they don't know how to ask something that it will be a problem.  I've followed a lot of the RE threads but often feel intimidated to jump in for this very reason.  And most of the time it is not a too broad question that starts the argument.  In this case I think the OP actually had some really specific questions.  Some of the responses are often really broad but that's another issue.

Mazzinator, sorry I quoted you before you before you had a chance to delete the comment.  But I thought it was totally right on.  So many times there is an interesting question and by the 2nd or 3rd response it is already completely off topic and hostile.  It looks like as soon as a certain person comments everyone piles on.  There must be some history there that I missed so I'm not sure why the more seasoned folks here bother to engage in those arguments.  It completely hijacks the conversation to the point where it is no longer a useful resource.

Anyway, the non-RE part of this forum is great so maybe things in these threads will get better soon.

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Re: Choosing, buying and managing property... from a distance
« Reply #34 on: September 13, 2013, 04:10:24 AM »
These discussions seem to have lost sight of the fact the OP asked about "NorCal", which is a vast area of many jurisdictions and rules regarding renting.  SF and Berkeley are the most difficult (and potentially most rewarding) but if that doesn't work there are literally dozens of other jurisdictions in which to do business, from Oakland to Sausalito, Martinez to Palo Alto.  Local knowledge will allow the buyer to find the right place and manage it properly.

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Re: Choosing, buying and managing property... from a distance
« Reply #35 on: September 13, 2013, 07:08:30 AM »
Yes, i agree Spy. I tried to delete my comment, after cooling off a bit, but i was already quoted!! I think it actually happened at the exact same time. Sorry for my bitchin'

But, it still makes for a very frustrating read. (The constant bickering back n forth) and while still in the "gathering info stage" I don't really have any specific questions just yet.

I completely understand, and actually share your frustration despite being one of the people involved in that argument that is frustrating.  Still, when you saw someone posting things misleading and potentially dangerous to new investors, it's hard not to say anything (though recently I haven't, just to avoid the same argument and have felt quite bad).

But I don't think it's accurate to say that the way someone phrases a question causes the argument.

Unfortunately it is accurate, and if you understood the two investing philosophies at play, you might be able to see why.

Let's see if this example helps it make more sense.

Imagine someone going on a politics forum and asking "how should I vote?"  That will lead to people on opposite sides rehashing the same argument (their viewpoint versus the other side's - say, Republican posts, then Democrat posts, they argue, etc.).

If instead the OP in that scenario went on and said "I support A, B, and C.  Avoiding taxes is important to me, but I also understand the need for a social safety net. I live in County XYZ.  Which of these (links to websites) people should I vote for for my state senate?" - That will garner a lot more helpful responses, I guarantee you.

Now your point that new people don't know what they don't know is a fair one, but that's also the case in our hypothetical, and I would absolutely say someone going to a politics forum and asking "How should I vote?" will stir up an argument every time.

Similarly a "where should I invest" will do the same on a real estate investment forum. 

Until members agree to avoid that argument (unlikely based on the type of people typically involved in it) or enough complaints occur such that members get banned (unlikely based on our community's stance about open discourse) it will continue to be a problem.

Really unfortunate, I realize.

My solution is community-driven: it's up to the users to help out and support the forum they'd like to see and be a part of.  For example:
Quote
So many times there is an interesting question and by the 2nd or 3rd response it is already completely off topic and hostile.  It looks like as soon as a certain person comments everyone piles on.  There must be some history there that I missed so I'm not sure why the more seasoned folks here bother to engage in those arguments.

If it's a particular person causing an issue, report them.  If an issue gets off topic with that discussion, quote the part of the OP that you think is interesting, and get it back on track.  Those are the two ways I can think of that a member can help fix this problem.  But when everyone ignores the person being an issue, or closes the thread that got off topic, rather than trying to steer it back, the problem remains.

If you have a solution, I'd love to hear it.
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Roses

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Re: Choosing, buying and managing property... from a distance
« Reply #36 on: September 13, 2013, 12:03:31 PM »
Interesting.  I'm aware of the different investing philosophies.  But is it really as bad as republicans and democrats?  That's pretty bad :)  Anyway, I still think the OP or a newbie shouldn't be held responsible for the arguments of the veterans.  Otherwise we're advocating only politically correct or bland questions for this forum and I don't think that's helpful to anyone.

If you go back to the OP's question, it was not 'where should I invest'.  It was, 'I can't invest in my area so what tools do I use to evaluate another area, short of moving there'.  I'm paraphrasing of course but it was pretty clear to me that's what he meant.  I think that's a pretty specific question.  I immediately thought of some online tools he could use.  I also would have suggested going down for a scouting trip for a week to pick out some neighborhoods and then maybe go back later to view specific properties, etc, etc...  I didn't say that because what do I know, I haven't done it myself.  But I know some people have and was wondering if they'd chime in.  Anyway, my point is we shouldn't point the finger to the OP and ignore the problem.  These broad questions, as you call them, will continue to come up as long as there are new members in the forum.  I think that's a good thing, and we should be able to deal with them effectively rather than letting it degenerate.

I'm intrigued by the last part of what you said.  On the one had you say there should be a community driven solution (love that idea) but you also say it's unlikely that it'll happen.  So this is where moderation plays a role, right?  You said 'if enough complaints occur such that members get banned'.  Are you saying there is a specific quota of complaints that needs to be met before this happens?  I understand you can't ban someone right off the bat like a dictator so I'm wondering if you are referring to a particular policy on this that I'm not aware of.  And I assume this means hitting the 'report to moderator' button?  I admit I've seen lots of inappropriate comments but never did that.  I guess nobody wants to be the tattle tale!

Anyway, this is not a comment on your moderation.  I think you guys do a great job and I know it's a fine line.  Just want to get an understanding of what we concerned members can do, so we don't just throw up our hands and abandon the threads altogether.

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Re: Choosing, buying and managing property... from a distance
« Reply #37 on: September 13, 2013, 12:25:56 PM »
Are you saying there is a specific quota of complaints that needs to be met before this happens?  I understand you can't ban someone right off the bat like a dictator so I'm wondering if you are referring to a particular policy on this that I'm not aware of. 

Not a hard and fast number, because that opens itself up to abuse (i.e. certain members deciding they don't like someone, all reporting them, and getting that person banned just based on complaints that aren't even valid).  It's a case by case basis, but certainly if a member is getting multiple people frustrated with the way they approach the forums and their posts, it indicates to the moderators that the person in question may need some sort of "warning" and then, if nothing changes, a removal from the forum.

  And I assume this means hitting the 'report to moderator' button?  I admit I've seen lots of inappropriate comments but never did that.  I guess nobody wants to be the tattle tale!

Yes indeed.  Many times it may not lead to direct action, but (as above), if there's a pattern or history with a certain poster, that will be taken into consideration.  We don't want to ban someone for one or two posts, especially with how easy it is to misread tone online, so filing a report is a good way to let us know that poster may be being less than helpful.

Just want to get an understanding of what we concerned members can do, so we don't just throw up our hands and abandon the threads altogether.

Gotcha.  Yes, the report to moderator button or else trying to get the thread back on track via a helpful "Going back to the OP's question..." type post are the two main ways I can come up with, short of a dictator like moderation policy, which we are against for obvious reasons.
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Re: Choosing, buying and managing property... from a distance
« Reply #38 on: September 13, 2013, 12:35:06 PM »
Thanks for the explanations, Arebelspy!

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Re: Choosing, buying and managing property... from a distance
« Reply #39 on: September 13, 2013, 01:24:11 PM »
Roses - no need to apologize for quoting me. I only deleted it because i felt embarrassed for voicing my concern as a "rant" although i still think it needed to be addressed, just felt like i did it wrong.

OP - sorry for taking your thread even more off topic and for highjacking it!! And now keeping it off topic..

Arebelspy - i think a better example would be a vague question like "where should i invest my money?" Also broad, and can have many many different answers...but from reading MMM blog he comes right out and says vanguard total stock index fund. And THIS is why i love his style so much. I have read so much where people just pussy foot around which specific thing to invest in (and i get why, nobody wants to be responsible for leading tons of people in the wrong direction)

So with that, i guess we're just looking for the quick and easy answer (i could be wrong) like people are just going to say Nashville or pittsburgh (just random cities) and then i can follow up and focus my efforts on one of those cities. But i'm guessing people just hoard thier insider info so they can make money off those areas. Because of the limited quantity. I don't know..i could be wrong...

Also, thanks for the info on the etiquette on how to handle trolling behavior.

Back to the topic!!

If there's more than one way to calculate rental properties, can you share a link that breaks them down?

If there is a list of good cities to invest in, can you share that link too? I find biggerpockets forums somewhat hard to navigate and read.

Thanks!!

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Re: Choosing, buying and managing property... from a distance
« Reply #40 on: September 13, 2013, 01:52:39 PM »

DD  I was just throwing out some simple numbers so I could have just as easily said $100,000 down on a $500,000 property which is doable in SF but definitely harder.  It's not a rare occurrence for first time home buyers to be shelling out $400,000-$800,000 for a condo in SF.  A starting out investor in SF will be in the same market.

Appreciation Rate???  What will it be?  Over the last 5 decades I've been telling people about properties doubling every 10 years AND in, you guessed it, every decade I've been told it can't go on. BUT it has!  Although I have experienced 9-11% appreciation over 35 years and 6-7% rent growth I'm conservative and only project 8% appreciation and 4% rent growth.  The point is for a NEW investor is to know those rates.  I think that is more important than doing some guesstimated crap rate and declaring a property profitable but I seem to be the only one pointing out the fallacy in that.  The same type of things you mention happening in SF could also happen in a LOW appreciating area.  If there are specific things to SF then you should consider them.  I thought the whole internet thing would spread more workers to remote locations but if you look at all the new apartment construction around Twitter you'd see I'm proved wrong.

I also won't argue for being overleveraged.  You should be able to keep afloat during the inevitable downturns. 

But all in all, SF is still strong. Don't discount it JUST because it is expensive.  There is a financial reason for that.  Reminds me off the Lou Gehrig quote about his favorite restaurant, "Oh, nobody goes there anymore, it's too crowded."

I hear you hobonob, and thanks for the clarification. As has been pointed out above, I guess it's just two different but complementary philosophies being played out here -- appreciation and cash flow. As a moderate in just about everything in life, I tend to value both sides in moderation (that is, I find the "completely ignore appreciation, focus on cash-flow positive properties only" position to be overly conservative for my tastes, just as I'd say putting too many eggs in the appreciation basket is overly aggressive to my tastes. But I get that it's very much a "to each his own" prospect. No doubt the cash flow approach is a winner with less risk, while the appreciation bet is generally riskier but with opportunities for larger gains.

I definitely don't discount the SF market, I agree it very well could continue to appreciate very healthily for years to come, and that kind of growth in such an already expensive market can make people wealthy very fast. Like I said, I'm actually glad you're voicing the other (appreciation) side of the argument, since the cash-flow side is already well-represented on this site (and also valued by me, by the way -- I've learned from Another Reader and Arebelspy). I live in an expensive area too (Wash. DC suburbs) and largely through dumb luck have benefited from the higher appreciation phenomenon. I've also known some would-be investors here who took a bath betting that prices here could only go up back in 2005-2006.

You clearly made some great investments over the years! If I was advising a first-time investor, I'd probably recommend sticking to cash-flowing and lower-priced properties until they get some experience under their belt. Then once they've accrued some capital (through increased equity etc.), they might be in a better position to make more speculative investments.

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Re: Choosing, buying and managing property... from a distance
« Reply #41 on: September 13, 2013, 02:05:51 PM »
Quote
Appreciation Rate???  What will it be?  Over the last 5 decades I've been telling people about properties doubling every 10 years AND in, you guessed it, every decade I've been told it can't go on. BUT it has!  Although I have experienced 9-11% appreciation over 35 years and 6-7% rent growth I'm conservative and only project 8% appreciation and 4% rent growth.

Can you help a rookie out?? Where do i find these rates?? Is there a reputable website to search other cities??

DoubleDown - thanks so much for clarifying the two different approaches!!!

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Re: Choosing, buying and managing property... from a distance
« Reply #42 on: September 14, 2013, 10:32:35 AM »
I have all the same questions.  My market is Seattle - also expensive and not known to be great for landlording.  I'm also looking at Texas but have the same frustrations as you.  I can't seem to get actual advice on the 'how'.  The one thing I get from the seasoned investors is 'know your market' and 'talk to as many locals as possible', 'drive all the neighborhoods'.  This sounds like great advice, but what does that mean for people who simply cannot pick up and go spend a month in another state?  Maybe more4less has a full time job and can't do that.  In my case, I'm a SAHM and can't leave my child for more than a few days.  So, here's my big question: Does that mean that real estate investing is out for us?  Is there no other way to do this?  If you think there are other ways I'd appreciate specific examples.

How about just hiring a realtor? Whenever you buy you'll pay the seller's agent 6% (or whatever it is in Texas) anyway, so you might as well hire a buyer's agent who'll get paid half of that 6% to work on YOUR behalf, instead of you paying the seller's agent the full 6% to work on the seller's behalf. So do some online research of realtors in that area, talk to a few on the phone and pick one who gets what you're trying to do and is reasonably experienced. That realtor will steer you clear of bad neighborhoods and so on, will have a good idea of (or can easily find out) rental rates in each area, and she or he will also have a ton of contacts for the vendors you're going to need (the plumber your tenants will call, for instance, when their toilet stops working at 2AM).

SnackDog

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Re: Choosing, buying and managing property... from a distance
« Reply #43 on: September 15, 2013, 05:54:56 AM »
Quote
Appreciation Rate???  What will it be?  Over the last 5 decades I've been telling people about properties doubling every 10 years AND in, you guessed it, every decade I've been told it can't go on. BUT it has!  Although I have experienced 9-11% appreciation over 35 years and 6-7% rent growth I'm conservative and only project 8% appreciation and 4% rent growth.

Can you help a rookie out?? Where do i find these rates?? Is there a reputable website to search other cities??

DoubleDown - thanks so much for clarifying the two different approaches!!!

California has averaged abut 8.5% appreciation of median prices the last 40 odd years.  Coastal areas and the Bay area have been higher. Also, there have been dips such as the early 90s which had a correction and of course 2006-2010 or so.  But last year Bay area median prices increased about 25% over 2012.   That is a lot, but during the 1970s California median prices increased around 20% a year for quite a few in a row. 
Bay are has a significant influence from tech (Google, FB, Apple) and from investors.

Past results are no guarantee of future performance, but long term trends are likely to persist and hot spots tend to continue to be hot over many decades.  California has been robust despite: high cost of living, high taxes, poor governance, earthquakes, wild fires, etc, etc.   Part of the benefit is international interest in the state.  In most countries I have lived or visited, the locals are familiar with California and if they have visited, wish they would live there. I visited a doctor here a few weeks ago and she sighed "You are from California?! Why on earth do you want to live in Rio?"
« Last Edit: September 15, 2013, 05:57:38 AM by SnackDog »