Author Topic: Where to get 1% in Real Estate?  (Read 6188 times)

Roses

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Where to get 1% in Real Estate?
« on: August 04, 2013, 01:42:45 AM »
I'm wondering if you experienced real estate investors can throw out some good places to start looking for investment properties in the US.  I am looking for a single family house or, better yet, duplex/triplex that would bring in 1% of the purchase price in rent per month.  I live in Seattle and have pretty much given up finding anything around here (any Seattle-area investors out there, I'd love your input!)  At first I thought I might find something in the outskirts or nearby towns, but this whole area seems to be in a mini bubble.  The best I have been able to find are properties that bring in .05% of the purchase price in rent - even with multiple units.  So now that I've determined I need to be a long-distance landlord I'm trying to narrow the search a bit and I'm wondering what cities/towns are worth checking out.  Ideally I would get to know the area well and possibly buy more properties there in the future.  I've heard a lot about investing in Vegas but it seems the market there is getting too hot for a good rental return - is that true?  Is Texas the place to go? 

I have other types of investments but am new to real estate.  I own my home but no investment properties.  I've been reading a lot about it and know I need to budget for a property manager in addition to all the usual expenses.  I'd really like to get into real estate.  Thanks for any advice!

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #1 on: August 04, 2013, 09:13:29 AM »
I started typing out a reply, then realized we had a similar thread before (well several, actually, but my reply was going to be most similar to my replies in this thread):

http://www.mrmoneymustache.com/forum/real-estate-and-landlording/ready-to-rock-(again)/

I also suggest doing a search of the real estate forum for words like "which state" and such to see similar threads.

Hope that helps! :)
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Villanelle

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Re: Where to get 1% in Real Estate?
« Reply #2 on: August 04, 2013, 09:40:48 AM »
Keep in mind that being a long distance landlord is almost certainly going to be more expensive, so make sure the increase in return is going to offset the additional costs. 

Kriegsspiel

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Re: Where to get 1% in Real Estate?
« Reply #3 on: August 04, 2013, 03:54:35 PM »
The most recent BP podcast is with a REI in Milwaukee who is getting 2-3%, going with the Lacking Ambition gameplan. Find ~$20-25k properties, put in a little work, then start renting them out for $700-$1000 a month. This is probably possible in cities throughout the eastern part of the country.

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #4 on: August 04, 2013, 04:20:22 PM »
The most recent BP podcast is with a REI in Milwaukee who is getting 2-3%, going with the Lacking Ambition gameplan. Find ~$20-25k properties, put in a little work, then start renting them out for $700-$1000 a month. This is probably possible in cities throughout the eastern part of the country.

Yeah.  I was annoyed with how much of her podcast they spent on LendingClub/Prosper.. I'd have liked to hear more of her story.

I would imagine that strategy works best in the midwest, rather than east (as the eastern part of the country generally has higher property taxes.. not always, but in general).  Columbus, OH is one place I've been looking at buying portfolio of 13 properties with a median price of around 50k each.   I have a friend doing some stuff in Indy.

Definitely a viable strategy.  But like I said in the thread I linked to above:
Quote
If I were living in a place that wasn't good to invest, I'd more be looking at people to invest with, rather than places.  There's no substitute for boots on the ground, and so I'd target certain investors I know and be loaning them money.

I'd prioritize knowing your market more over getting into a slightly better market that you don't know about.
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.

Kriegsspiel

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Re: Where to get 1% in Real Estate?
« Reply #5 on: August 04, 2013, 05:40:40 PM »
The most recent BP podcast is with a REI in Milwaukee who is getting 2-3%, going with the Lacking Ambition gameplan. Find ~$20-25k properties, put in a little work, then start renting them out for $700-$1000 a month. This is probably possible in cities throughout the eastern part of the country.

Yeah.  I was annoyed with how much of her podcast they spent on LendingClub/Prosper.. I'd have liked to hear more of her story.

I would imagine that strategy works best in the midwest, rather than east (as the eastern part of the country generally has higher property taxes.. not always, but in general).  Columbus, OH is one place I've been looking at buying portfolio of 13 properties with a median price of around 50k each.   I have a friend doing some stuff in Indy.

Yea sorry, when I say east... I just naturally think of the midwest. I'm actually trying to swing a job transfer to Milwaukee so I can get started, but if I want to enact the LA plan, I'm thinking Columbus or Pittsburgh, they both look like they would support it.

honobob

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Re: Where to get 1% in Real Estate?
« Reply #6 on: August 04, 2013, 06:04:38 PM »
I'm wondering if you experienced real estate investors can throw out some good places to start looking for investment properties in the US.  I am looking for a single family house or, better yet, duplex/triplex that would bring in 1% of the purchase price in rent per month.  I live in Seattle and have pretty much given up finding anything around here (any Seattle-area investors out there, I'd love your input!)  At first I thought I might find something in the outskirts or nearby towns, but this whole area seems to be in a mini bubble.  The best I have been able to find are properties that bring in .05% of the purchase price in rent - even with multiple units.  So now that I've determined I need to be a long-distance landlord I'm trying to narrow the search a bit and I'm wondering what cities/towns are worth checking out.  Ideally I would get to know the area well and possibly buy more properties there in the future.  I've heard a lot about investing in Vegas but it seems the market there is getting too hot for a good rental return - is that true?  Is Texas the place to go? 

I have other types of investments but am new to real estate.  I own my home but no investment properties.  I've been reading a lot about it and know I need to budget for a property manager in addition to all the usual expenses.  I'd really like to get into real estate.  Thanks for any advice!
Why do the properties in your area bring in .05% of the purchase price in rent?  Was it the same 5 years ago, 10?
Why do you think 1% in Indiana is better than .05% in Seattle.  Don't invest until you can answer those questions.

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #7 on: August 04, 2013, 07:02:26 PM »
Why do the properties in your area bring in .05% of the purchase price in rent?  Was it the same 5 years ago, 10?
Why do you think 1% in Indiana is better than .05% in Seattle.  Don't invest until you can answer those questions.

Despite my disagreement with Bob on real estate investing philosophy (me preferring a solid cash return, him preferring appreciation), these are good questions one ought to have an answer to regardless of their investing philosophy (and in fact in order to help define it).

I think 1% in Indy is better than 0.5% in Seattle, all else being equal (I.e. neighborhood and tenant quality), but I can see why one might disagree.

Make sure you know what you are investing for.
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.

Roses

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Re: Where to get 1% in Real Estate?
« Reply #8 on: August 04, 2013, 11:22:22 PM »
Thanks for your responses! These are good places to investigate. I'll check out the podcast as well!

I also looked through previous threads but I may not be putting in the right key words.  I suppose I was hoping someone in a great market would pipe up and say "come invest over here" :)  I also thought this was a time sensitive issue since in my market things have changed pretty dramatically in the past six months (my own house appreciated by almost 75K).

Like I said, I'm a newbie who wants to add RE to the portfolio.  Looks like I have lots more reading/learning to do!

Roses

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Re: Where to get 1% in Real Estate?
« Reply #9 on: August 04, 2013, 11:28:13 PM »

Quote
If I were living in a place that wasn't good to invest, I'd more be looking at people to invest with, rather than places.  There's no substitute for boots on the ground, and so I'd target certain investors I know and be loaning them money.

So how does one go about doing this?  I mean, if you don't know any specific investors in other areas?  Are there forums or organizations that bring investors together for this?  Is there a vetting system?  Would the Bigger Pockets website do that?  I admit to being a bit lost when I go to that site.  I need to study it more.


arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #10 on: August 04, 2013, 11:29:12 PM »
Thanks for your responses! These are good places to investigate. I'll check out the podcast as well!

I also looked through previous threads but I may not be putting in the right key words.  I suppose I was hoping someone in a great market would pipe up and say "come invest over here" :)  I also thought this was a time sensitive issue since in my market things have changed pretty dramatically in the past six months (my own house appreciated by almost 75K).

Like I said, I'm a newbie who wants to add RE to the portfolio.  Looks like I have lots more reading/learning to do!

It absolutely is a time sensitive thing, since all real estate is local and the market is constantly changing.

That's why you should educate yourself on how to find markets that are a fit for you, rather than just look for the hot market of the moment and jump in there with no knowledge of it.

Let us know as you have follow up questions!
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.

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #11 on: August 04, 2013, 11:31:55 PM »

Quote
If I were living in a place that wasn't good to invest, I'd more be looking at people to invest with, rather than places.  There's no substitute for boots on the ground, and so I'd target certain investors I know and be loaning them money.

So how does one go about doing this?  I mean, if you don't know any specific investors in other areas?  Are there forums or organizations that bring investors together for this?  Is there a vetting system?  Would the Bigger Pockets website do that?  I admit to being a bit lost when I go to that site.  I need to study it more.

Yes, beginning to networking with other investors is a good way to do that.  BiggerPockets has a few useful places to visit: the blog and the forum.  They have a decent podcast you can find on iTunes (if you can get past some of the quirks by the hosts).

Definitely get anyone you're going to work with (their experience level, past partners, etc.) as well as the due diligence on the project itself.

Otherwise, even if you're doing it on your own, you'll want to network with investors in that area to get recommendations on property management companies in the area, contractors, etc.

Either way, knowing people who are local to the market you are investing in is crucial, IMO.
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.

Roses

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Re: Where to get 1% in Real Estate?
« Reply #12 on: August 04, 2013, 11:39:14 PM »
Why do the properties in your area bring in .05% of the purchase price in rent?  Was it the same 5 years ago, 10?
Why do you think 1% in Indiana is better than .05% in Seattle.  Don't invest until you can answer those questions.

Despite my disagreement with Bob on real estate investing philosophy (me preferring a solid cash return, him preferring appreciation), these are good questions one ought to have an answer to regardless of their investing philosophy (and in fact in order to help define it).

I think 1% in Indy is better than 0.5% in Seattle, all else being equal (I.e. neighborhood and tenant quality), but I can see why one might disagree.

Make sure you know what you are investing for.

Ok, that's an interesting question.  I want to buy and hold for the long term.  I'm not looking to bet on quick appreciation in a gentrifying area (that would be a bonus if it happened).  Is this what your question meant?  Besides that, I am very drawn to real estate.  I have a lot of fun studying my own market (in vain, since now I know I won't be investing here).  I know that's not a great reason but I want to redirect my investments a little to something that I'm interested in. 

When I compare getting .5% in Seattle to 1% somewhere else, even including managers fees, flying out to the place, etc, it seems like a no-brainer.  Of course, I could be missing something.  Every time I read a new blook or blog on RE I learn something new, but at a certain point I have to figure out what is valid for me and what is just one person's bias or personal investing philosophy.

Roses

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Re: Where to get 1% in Real Estate?
« Reply #13 on: August 05, 2013, 01:06:01 AM »
Thanks for your responses! These are good places to investigate. I'll check out the podcast as well!


It absolutely is a time sensitive thing, since all real estate is local and the market is constantly changing.

That's why you should educate yourself on how to find markets that are a fit for you, rather than just look for the hot market of the moment and jump in there with no knowledge of it.

Let us know as you have follow up questions!

Sorry to bombard you with questions!  Just a couple more....  I'm wondering why a market has to be a good fit for me.  Do you just mean a market where my strategy will work?  For instance, if I wanted to be a flipper Seattle would be great, but if I want to buy and hold somewhere else would be more favorable.  Is this what you mean?  That is what I'm trying to find.  I was overwhelmed with options since the US is such a large country.  I figured getting tips on good markets and then investigating those markets thoroughly (rather than just jumping in) would be much more efficient than going down a list of cities and working from there.  I'm not sure how else to go about doing this since my only criteria for location is that it have a strong rental market and reasonable purchase prices - meeting the 1% requirement.  Are there other criteria I'm not considering?

Also, I see you're a Vegas investor.  When I met MMM a the Seattle meetup a few months ago he told me to look into Vegas for rental properties and that he was thinking of doing that himself.  A few months later I started hearing that it wasn't such a good market for that anymore.  I go to Vegas relatively frequently (via my husband's job) so it appeals to me for that reason.  What is your opinion on the market there?  A quick internet search for properties shows a lot of short sales and rental prices (based on craigslist search for comps in same areas) that just barely make 1%.  I'm wondering what a local thinks.

Thanks!

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #14 on: August 05, 2013, 08:09:50 PM »
Also, I see you're a Vegas investor.  When I met MMM a the Seattle meetup a few months ago he told me to look into Vegas for rental properties and that he was thinking of doing that himself.  A few months later I started hearing that it wasn't such a good market for that anymore.  I go to Vegas relatively frequently (via my husband's job) so it appeals to me for that reason.  What is your opinion on the market there?  A quick internet search for properties shows a lot of short sales and rental prices (based on craigslist search for comps in same areas) that just barely make 1%.  I'm wondering what a local thinks.

I am not currently buying in Vegas, as declining rents and increased prices has made the numbers not make sense here for me personally.  I have been looking into other markets.

As for the rest, it will really depend on your investing strategy and what you're looking for (things like cash flow versus appreciation, neighborhood quality, risk tolerance, management, age of properties, FINANCING, stability, economic conditions, landlord/tenant laws, property tax rates, quality of tenants, building type, roi, etc. etc. etc.)

Defining your exact investment criteria (niche and notch) will help narrow down and out your research list first and let you target areas and begin networking there (as described earlier).
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.

elbhdb

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Re: Where to get 1% in Real Estate?
« Reply #15 on: August 23, 2013, 08:33:39 AM »
Short answer: go tiny and low-income or big multi (6-10 units at a minimum).

arebelspy

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Re: Where to get 1% in Real Estate?
« Reply #16 on: August 23, 2013, 12:05:12 PM »
Short answer: go tiny and low-income

Not sure by what you mean by "tiny and low income," can you elaborate?

big multi (6-10 units at a minimum).

I'd call anything under 50 units small multi, not big, but that may just be a  semantics thing (and possibly why I'm not understanding the tiny, as we may have different definitions of that as well).

One thing I do want to point out for anyone doing multiplexes: it better be getting closer to 2% than 1%.  The 1% being asked about in this thread (and hopefully a bit higher) is more suitable for SFRs in good areas.
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.