Sam Sharata asked 8 years ago
Hi David,
Hope all’s well with your latest flip. It has been a few months since we spoke, and my partner and I have been kicking our rehabbing business into gear. We’re just about to wrap up our second rehab, and have another 3 in pipeline. It’s pretty exciting, but we’re tying up HUGE amounts of our own capital into these hungry babies, and it honestly makes me uncomfortable holding too many properties. I just hope we have a seat when the music stops…
I’ve been exploring the prospect of investing in some out of state rentals, and recently signed a LOI with a seller for a portfolio of 10 units in Baltimore city (6 SFHs & 2 Duplexes) that I found on Craigslist. Having owned and managed a couple of negative cash flowing SFH properties in N. Virginia for the past 10+ years, I was frankly amazed by the returns. All 8 buildings cost less than $230K and generate $7K gross income per month, and the rents are below market. Since it is Baltimore, I guess you can call it “hazardous duty pay”, but in all seriousness, I am finding the ROI on these properties too hard to ignore.
Since you presently own a couple of properties in Florida and live in California, I wanted to reach out and ask you about your experience with your out of state rentals before I take the plunge. I’m only 50 miles away from Baltimore, but I may as well be in Timbuktu, because I have no intention of driving out to these properties to unblock toilets, fix leaking faucets, or collect rent!
Since I want to use the income from these properties, I don’t want to fund them with my SD retirement fund, and would also be curious to hear your thoughts on how best to fund these without completely draining what little remains in my bank account.
Looking forward to hearing back from you.
Cheers,
Sam
David Greene Staff answered 8 years ago
Hey Sam,
Great question! The problem seems intense but the solution is actually really simple.
You didn’t mention if you’re using a property manager or not. I would strongly advise you to get one.
Once you do, they are going to be the ones who help you solve these problems from 50 miles away.
Your biggest problem is that the PM (Property Manager) is going to send a plumber to fix those toilets and they aren’t going to help you out much by spending time finding the cheapest, best one. If you want to save yourself some money, YOU are going to need to spend some time on yelp or google looking for a plumber with good reviews who will service that area, then work something out with him for when you need repairs.
Once that happens, provide his info to your PM and that is who they will call when the toilet leaks.
This process should be completed for a guy to fix broken appliances, paint, door locks, electrical stuff, etc.
If you do the work up front when you have the time you’ll be very glad you did when the problem springs up and your busy in the future.
As far as your question about how to fund the property, are you referring to the Baltimore properties or future properties?
Congrats on finding the deal. Very nice.
