Not like other markets - Long Island

[TMCG]

I want to purchase property to own it.  I want to own properties that produce cash flow on a monthly basis.  I want to purchase real estate using a very good amount of leverage.  I want to purchase properties that either I can manage along with my partners, or, that a property management comp can handle.

Now, as I can see, if you're doing this in states like Ohio, TX, SC, NC, WV, LA, AZ, etc - it's very doable.  But...

I live in New York, not upstate, Long Island.  Now, I'm not whining about that.  But when I talk with people about purchasing real estate out of my area, they recommend investing in "your local area".  Even REI courses recommend it.

I do not have that luxury.  Sure there are "distressed properties" but they'll run you 190k minimum.  Sure there are "preforclosures and foreclosures" but they'll run you upwards of 175k - minimum to start.  Taxes - average I'd just guess and say 4500 a year.  Avg home costs over 300.  Sh*t holes like you wouldn't believe cost 285k, without blinking an eye.  

So, I want to purchase real estate outside of this area. I've decided that my real estate strategy for long island - will be to flip properties primarily...like every other damn RE investor in the area!

So I'm doing what the books say not to do...starting out investing OUT of my local area...

Thoughts?

[propertymanager]

In my experience, out of state real estate investors are a great source of deals for us locals.  I don't know of a single person that has out of state rentals and actually makes money.  Most of these out of state "investors" are newbies who have big ideas but don't have a clue about the actual expenses involved with rentals.  Even in the midwest, it is nearly impossible to have a significant positive cash flow if you have to pay others to do everything in connection with your rentals - specifically maintenance and management.  Combine that with the fact that you won't be getting the great deals if you don't live here, and you're destined to fail if you're "investing" out of state.  Locals will always have the connections to get the best deals.  It's very hard to build great relationships without actually being somewhere.  You can only do so much on the internet.

So, my advice is that if you really want to be a full time investor and really want to invest in the midwest - MOVE!  

Good Luck,

Mike

 

[Bluemoon06]

Avg home costs over 300

It appears that you are stressing over the size of the numbers you are dealing with there in Long Island.  You need to try to get a good understanding of the market there in Long Island.  There are people making money in Long Island.  You just have to figure out how they do it and imitate them.  If you make 5% on the purchase of a $60k house in Ohio or a 5% on a $300k house.  It is still 5%.  The key to investing anywhere is finding a deal and getting it financed.  I would find a local real estate investor's club and figure out your market.

[aak5454]

I have holdings that are out of state from where I live, but only in places where I have lived in the past and have personal connections still there.  With that said, the relationship building does take a lot of time and effort.  Yes, there are higher expenses, but money can be made; however, it is very challenging.  Also, I had (and still have) stuff local to me as well and it is much easier.  If you are just starting out, non-local investment is really asking for trouble.  You will end up buying the leftovers that the local guys passed over.  That's most of what is on the MLS.  My best deals have always come about via private connections; not stuff listed on the open market.

[ryanpal]

TCMG,

just curious...what part of NY?  My family owns a place in queens, and I'm open to the possiblity of expanding to doing investing in neighboring states.

Ryan

[yrush2000]

I really want to  disagree with the out of state investing or at least out of area. I have done well with investment properties in Pittsburgh (you can buy a duplex for $20K and still cashflow it $300-400 a month with property mgmt or getting it on section 8) and I have apartment complex's in Alabama that are doing great for cashflow.  Yes all this were acquired from other investors looking to assign there deals but still leave room for cashflow and equity.  In fact, I have a 25unit apartment complex I have never seen except for pics...makes me about $3100 a month after all expenses and a 15% reserve for expenses that might happen....evenutally that money will be leveragedto something esle though..

As for NY, it's tough., I am in SoFl and our market is actually worse since rents are lower, taxes and insurance are higher and incomes are lower on avg...i gave up on rentals ..check into rehabs...go into middleclass neighborhoods and look for the crappies house and  buy it...then flip it..if its a buyers market give some incentives to buy...I do that with my rehabs.. I prepay 1 yrs insurance policy now (avg policy is $13-16,000 a yr in my rehab area) which gives a great incentive for the buyers looking to get into a home with little out of pocket.  Sometimes I will toss in some other incentives as well when advertising a home.. Its gone good so far, in a market where avg homes is sitting for about 120days , I am selling them in about 45-60days with incentives...

[TMCG]

yrush,

thanks for the encouragement.  i like the incentives idea.  

interested in selling any of your out of state REI's?  

 

how did you determine which prop mgt to use...in out of state area and end up doing so well?

Thanks for the input.

[propertymanager]

yrush,

How about posting some numbers on those out of state rentals?  It would be a great opportunity for all the newbies to see how you're getting this to work.  I've posted a challenge many times for anyone to post actual numbers of rentals that will still cashflow with paid management and paid maintenance and you're the first one to have out of area rentals that are cashflowing.  Inquiring minds want to know!

Mike

[yrush2000]

Here you go guys..some secrets for out of state buying(rentals).  
Call the We BUY GUYS and see what they have, get on there calling list, remember they generally assign good properties to other investors as well.
Find some local realtors they deal with investors and have them find you properties that will cashflow.  Many realtors also have inhouse property mgmt co or deal with one to find and manage the properties.
Look for sellers who currently have the property being managed by a property mgmt co. From what I have found, they just want to keep the property so when title changes they will not charge you a new fee to have them manage the property as they will just change the contract to your name...
Be able to set aside at least 10% for misc. fees..
Get properties with 20-30% equity of course...
Apartment complex's are generally easier to buy since they are larger, good cashflow and generally have property mgmt in place..

Now for some deals..Here is one now...

Located in Alabama...
25 unit apartment complex..
Purchase price                        $400,000
Appraised                               $590,000
Repairs needed                      $  30,000
Downpayment  (10%)             $ 40,000
Loan (90% +closing cost)      $370,000
  (seller also paid part of closing cost)
Gross Rental Income(monthly) $12200
PI payment                             $3000 month
Taxes                                      $400 month
Insurance                                $400 month
Property Mgmt fee                 $ 1300 month
   (advertising included-rental apps, etc)
15% reserve fund                  $1800 month
(reserve for repairs)
Water/Gas                             $400 month
15% vacancy fund                 $1800 month
Total Expenses                      $9000 PER MONTH

GMR - NOE =  12200-9000 = $3100 (NOI)

Also keep in mind, I received from the seller $70,000 cashback at close to cover my downpayment and repairs needed to complex.  Property management company stayed on and I was not charged any new fees, we kept existing contract in place. Normal charge from them would have been about $1000 for 1st month plus 5% rental income.
The contract with seller to recieve $70,000 back was a seperate contract with between buyer, seller, realtor and escrow agent to dispurse funds to me after closing. it is not listed on the HUD statements.

Also the avg rents are $350 to $575 per month, with 20units of the 25 on section 8 housing. the other 5 units are regualar tennants and all longterm over 5yrs in apartment. (all rents were raised about $50 per month to market rate when leases expired to increase rental revenue)

So not a bad deal here, and really the cashflow is much higher if i decided to tap into the reserve funds I have set up for repairs and vanacies.  Property mgmt charges 5% per units monthly rent plus extra for landscaping and general maintnace to bring it to 1200 per month fee.  yes they do get some from my reserve ever few months, but it has grown considerable and soon will be used to leverage other deals....

So out of town deals work, if you find them.. How i found this deal was from another investor. He came across it from a local contact but was afraid of an out of state deal. So I talked to seller and his management co taking care of property. All seemed good, he was motivated to sell because he was in his 70's and ill and wanted to leave his family money and not real estate when he passes on...

[propertymanager]

yrush,

Nice deal!  This is the best real world rental deal that I have seen posted with out of state management and maintenance.  I'd like to have one of those myself!!!  Very nice!

Mike  

[yrush2000]

Mike

The problem is many investors, experienced or new are afraid to venture out to certain areas, especially those from large cities.  Some excellent cashflow markets are Pittsburgh (just ask the property mgmt co 1st on locations), small cities in Alamaba, Arkansas, mississippi, Lousianan and plenty midwestern cities.  Remember, small towns offer cheap properties, low taxes and insurance, and people who just stay put. They do not move, they generally a decent working class people I find.  Just stay away from towns that are built around a mill or manufacturing plant unless you know its stable...thats when the market botttoms out in little town..

check with local REIA clubs in smaller cities and try and get leads....remember no one can or wants to close ever deal they come across...

[TMCG]

what is the We BUY GUYS?

[yrush2000]

We buy Guys are the guys with signs all over the street saying WE BUY HOUSES FOR CASH..or advertising they have rentals, etc..All newspapers have a small section listed with these guys who list every week.. check out the guys stating We will help you if your in Bankruptucy or any other ad that seems investor friendly...

[TMCG]

ryanpal -

I'm in Suffolk County.

yrush,

Now I know who you're talking about.  That's what I thought you were referring to, but wasn't sure.

[yrush2000]

Always good to ask when not sure...thats the only way we learn.