I live in Brooklyn NY all of the properties are very expensive, I found a few distress property from HUD about 100 miles aways from my home, is that a wise idea to invest so far from home or should I stay close from home
Far away- If you can find the right area GO FOR IT!!! I bought 2 condos in Gulf Shores Alabama 5 years ago for 68k each they are now worth 550k and 570k
I also bought in Las Vegas and Phoenix made great money there (nothing like Alabama)
Close to Home- I have done a ton of deals close to home and have made great money there as well.
So I guess to answer your question I sould have to say YES I would buy either far away or close to home!!LOL
There are things to look at if you are the type to have the need to be involved and be your own Manager look close and/or plan on traveling!
If you are more like me and say DO WHAT YOU DO BEST AND OUTSOURCE THE REST… It really does not matter!!
Sorry about the non direct answer but I hope it helps!
Robb
Hey Rob Thanks for the advice, I’m a consultant and my contract with my job can be terminated at any time without notice do you think I should still get a mortgage? I’m afraid if I lost my job I will freak and loose my mind any advice.
what are you going to do with them?? rent? rehab? How well do you know the market in the area where you might invest. What looks like a great deal in Location A, may be a terrible deal in the next town over.
I’ve done both close to home as well on the East Coast (I’m in Calif). It takes a lot of effort and time to build up a team in a new area, but with that said, don’t do a deal just becuase its close to home/convenient.
At the end of the day, regardless of the location, the finanical numbers have to work!
i bought 6 homes 750 miles from home,
3 about 1100 miles away and 2 homes 2100 miles away.
i’ve also owned homes within a 200 mile radius.
what can i say, GO LONG!
You always here buy in you area.Im having the same trouble,wondering what to do.A place i want is 3 hours away.Check the numbers!If they work go for it.Im going too.Thanks,Michele
If you’re talking about buying rentals, I’d say buy close to home. Hiring a manager eats up a hugh part of your profit and often the manager doesn’t do a good job. There have been a ton of newbie Calilfornia Investors here in Ohio that have lost their property.
It is hard enough to make it in this business even if you do a lot of the work and manage the properties yourself. I have yet to find anyone who can give or post the ACTUAL numbers on properties that will cash flow long distance (without a lot of money down). Many people with a handful of properties are deluding themselves into thinking that they are making a profit by ommitting many of their real costs and paying the difference out of pocket.
Can anyone post real numbers on a long-distance rental that is showing a strong positive cash flow? I’d love to see them!!!
Mike
What I wanted to do with the property is to buy and rent those property for profits. How do I go about find out if the property worth buying?
mcdady73, to determine if a property is worth buying to hold, you do a cashflow analysis. determine the market rent of the property i.e. 800 per month. besides knowing the potential income, you need to know what the holding costs will be(monthly debt payment, insurance, taxes, maintanance, vacancy, utilities, etc.) If the monthly income is greater than the monthly expenses, its a good deal. even “breaking even” is good, as long as the mortgage is being paid down. i personally like to make as high of a positive cash flow as possible, to pay the property off quickly.
i agree its difficult to cashflow in any place that has half-way decent appreciation.
i’ve bought a few houses in SLC.
purchase price $215k
monthly payments around 1250-1400
rents are 1250-1500 so i’m basically break-even.
but they’ve gone up 20-60k in the 6-18months i’ve had them!
i’m lease-optioning them so i get $2-3k upfront, they are responsible for all utilites/hoa and maintenance. and if they dont pay i pay my attorney $500 to evict[although most have been nice and just move out quietly].
niravmd,
Thanks for posting some numbers for us to look at. This is exactly the type of deal that I’m talking about. When all the expenses are included, this is not even close to break even. I’m not sure what you mean by “monthly expenses”, but by my calculation a 30 year mortgage on $215K at 7% gives a monthly payment of $1,430 (P & I). So, here is my guestimate of the numbers:
Gross Rents: $1,250 - $1,500
P & I: $1,430
Insurance: $100
Taxes: $250
Management: $150
Maintenance: $100
Vacancy: $75
Legal: $50
Total Expenses: $2,155
Therefore, your monthly LOSS is between $655 and $905. This does not include any money for damage caused by the tenants; capital improvements; exterminations; defending lawsuits; entity maintenance; tax preparation; etc.
Moreover, your entire strategy seems to be based on appreciation. Historically, after a real estate boom, prices drop (in inflation adjusted dollars) by 20% and don’t recover for about 10 years. By doing a lease-option, you have tied up your property for the term of the lease. Tenants rarely actually buy the property. Therefore, in the event of a 20% price drop, you’ll have at best a $5,000 profit or at worst a $27,000 Loss. In addition, you’re losing between $7,800 to $10,800 per year in negative cash flow. In reality, you ARE losing even more on the additional expenses listed above (damage caused by the tenants; capital improvements; exterminations; defending lawsuits; entity maintenance; tax preparation; etc). Of course, some of this loss is offset by the tax depreciation, tax deductions, etc.
However, this was an excellent example of why it is difficult to make money with long distance rentals. In fact, it is difficult to make money with any rentals unless you start with excellent positive cash flow.
Mike
niravmd,
that’s great…that’s the way to invest. In CA, u cant make $ with rental unless it’s paid off or has a huge downpayment.