Author Topic: Rentals in different states  (Read 3643 times)

Milspecstache

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Rentals in different states
« on: January 23, 2014, 07:36:02 AM »
Everytime we have moved we have tried to buy a home, fix it up, refinance it, and then rent it out as we move to the next destination.  This has resulted in rentals in Georgia and South Carolina while we live in Virginia.  Right now I am finishing a house-build that will either be our retirement home or get rented as a 3rd rental.

Pros:
Market collapse in one area doesn't affect the other 2
Hurricane won't take out more than 1 house at a time
Leases are spread out so I never have more than 1 vacancy at a time
Different property taxes have educated me on future purchases

Cons:
Have to pay a property manager (10%)
Maintenance is generally done by hiring it out which can be very expensive
State income taxes add to the complexity

Any other experience with multi-state rentals?

clarkfan1979

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Re: Rentals in different states
« Reply #1 on: February 16, 2014, 07:34:09 PM »
It's a little against the grain, but that's what this site is all about. I have an out of state rental. I live in Florida and have a rental in Colorado. However, my in-laws live in Colorado. As a result, we make 2 trips a year for vacation, but I get to drop by the rental, fix a few things and write off the whole trip. I do not have any property management. I agree that learning about property taxes from state to state gives you a perspective that is very valuable. I tell my friend in Illinois that my property taxes in Florida and Colorado are less than 1% and they can't believe it because they are around 3%.  Most of them will never move, so they don't know any different. Good luck to you.

arebelspy

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Re: Rentals in different states
« Reply #2 on: February 16, 2014, 07:37:00 PM »
I do not have any property management.

How do you deal with vacancies?  Set below market rents and get long term tenants to not have them?

How about repairs?  Do the tenants call you and you call local tradesmen?  Or do you do a home warranty?

I know different people that have different methods to handle these issues, just curious what you do, and how well it's working.
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Little House

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Re: Rentals in different states
« Reply #3 on: February 17, 2014, 01:33:58 PM »
I'm very curious about how well out-of-state rentals do in terms of keeping them rented and the difficulties of handling common issues, like vacancy and repairs. I'd love to purchase a house somewhere less expensive than where I live and rent it out as an investment.


tryan

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Re: Rentals in different states
« Reply #4 on: February 17, 2014, 02:37:41 PM »
I have rentals in 3 states ... but the first several were within a 5 mile radius.  Its all about property management if you can't do it find someone reliable who can.  Just expect to pay dearly (15% of rents).

arebelspy

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Re: Rentals in different states
« Reply #5 on: February 17, 2014, 03:50:02 PM »
I have rentals in 3 states ... but the first several were within a 5 mile radius.  Its all about property management if you can't do it find someone reliable who can.  Just expect to pay dearly (15% of rents).

Wow, 15 percent is the highest I've seen.

I typically say 6-12%, with 8-10% being the most common.

Still, it can well be worth it.  A property manager who fills vacancies immediately is right off the bat worth an extra 8% or so in comparison to one who takes a month to fill a vacancy.

Absolutely about good property management.  That's always the trick though, how do you get that?  :P

(I'm very open to suggestions on this, tryan.)
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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Milspecstache

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Re: Rentals in different states
« Reply #6 on: February 17, 2014, 04:01:21 PM »
I have 2 different property managers.  One chosen after interviewing and meeting with several different realtors who do rentals and one that is a friend and owns a realty.  Both are fabulous and sometimes save me money on repairs and always put good tenants into the rentals.  I got both when I was very new to real estate and they have taught me much by running those two.

Also having rentals in different states is very educational as to property taxes and insurance.

clarkfan1979

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Re: Rentals in different states
« Reply #7 on: February 27, 2014, 04:16:46 AM »
I do not have any property management.

How do you deal with vacancies? 

I'm just finishing up my third year of it being an out of state rental and things have gone well. The rental is 1/2 mile away from Colorado State University. I have heard from both fellow landlords and students that the local property management companies are not worth their 7% fee. The demand for housing near campus is so high that they can do a terrible job and still get it rented. 

Set below market rents and get long term tenants to not have them?

Yes I believe in below market rents to get the best people and also not wanting to move. My group last year opted to stay for a second year. I think most of them are graduating. However, this week I will email them and ask them what their plans are for next year. About 90% of the leases are August 1 - July 31st, so that is my lease timeline. If the students are moving I will have to fly back sometime in March -May to show the place and interview tenants and then be back again around August 1st. My wife and I typically take two  trips in the summer anyway, so it works for our situation.   

How about repairs?  Do the tenants call you and you call local tradesmen?  Or do you do a home warranty?

I used to have a super awesome handyman. However, he recently moved to Grand Junction. My last repair wasn't great because I had to use someone new. However, it still worked. A stand-up shower stall kit needed to be replaced. I lived in the house for 4 years before moving and renting it out. I pretty much fixed most things that needed fixing. I don't anticipate a lot of repairs. I also have a great electrician that works for a reasonable fee. I do touch up paint before I show the property. The management company has no incentive to keep repairs affordable, so they are going to charge whatever they want. 

I know different people that have different methods to handle these issues, just curious what you do, and how well it's working.

Every situation is different. My situation is going well. If things got to be too complicated I would give 7% to a friend to manage the property. I would never have a management company manage my property in my local area.

[Mod Edit: Fixed quote tags.]
« Last Edit: February 27, 2014, 07:17:40 AM by arebelspy »

clarkfan1979

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Re: Rentals in different states
« Reply #8 on: February 28, 2014, 07:44:59 PM »
When you consider differences in property taxes and other things across states, I become less interested in using the 1% rule. One of my friends from high school bought a 2 bed/2 bath townhouse for 180K. Taxes were original $4500/year, they are now $5,200. I bought a 4 bed/2 bath house in Colorado at the same time in 2007. Taxes were originally 1500 year and are currently 1500 a year. My mortgage payment is 970. Assuming that our insurance is the same, his mortgage payment is $308 more because of taxes and another $150 more for HOA. Same purchase price, but our mortgages payments are completely different (970 vs. 1428). Even if he can get 1% and I currently do not (.8%), I still have more cash flow.   

arebelspy

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Re: Rentals in different states
« Reply #9 on: February 28, 2014, 07:59:20 PM »
When you consider differences in property taxes and other things across states, I become less interested in using the 1% rule. One of my friends from high school bought a 2 bed/2 bath townhouse for 180K. Taxes were original $4500/year, they are now $5,200. I bought a 4 bed/2 bath house in Colorado at the same time in 2007. Taxes were originally 1500 year and are currently 1500 a year. My mortgage payment is 970. Assuming that our insurance is the same, his mortgage payment is $308 more because of taxes and another $150 more for HOA. Same purchase price, but our mortgages payments are completely different (970 vs. 1428). Even if he can get 1% and I currently do not (.8%), I still have more cash flow.   

Absolutely great example of why one should run the specific numbers.

I will say though that if it doesn't meet 1%, I won't bother, even in a low property tax location.  And yes, sometimes you need higher than 1% to compensate for something like that.  In those circumstances I'd be looking for well above 1%.

That doesn't mean though that I'd lower the standard in another location.

0.8% in low property tax place > 1% in high, sure.  But why not at least 1% in that low property tax place! or 1.3% in the high one?

(FWIW, I personally won't even go as low as 1%, the above was just an example.)

Definitely better to run the numbers, I agree you, but I'd shoot for a better return and run the numbers.  ;)
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.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.