I have been doing my research and applying formulas that I’ve learned here to different areas upstate NY looking for possible cash flow properties to purchase…If it’s not one thing it’s another but my question are many so I will get to it…
#1) Even though I have read in books that it’s bad to hire a property manager that owns units in your desired area how do I get around it in todays day and age where everyone owns RE?..Also wouldn’t this person being that they own and manage in the area be the best fit ?..
#2) Vacancy rates…I have been using %15 vacancy,%10 repairs,%10 property manager,taxes,water and sewer and mortgage…I only apply heat if it’s included…Am I missing something?..
Anyone that is active in Upstate NY RE please send this newbie some advice to use…The few property managers I have spoken with are not willing to take on and manage a section 8/DSS portfolio…They expect to only manage an easy to rent location…
#1) Even though I have read in books that it's bad to hire a property manager that owns units in your desired area how do I get around it in todays day and age where everyone owns RE?..Also wouldn't this person being that they own and manage in the area be the best fit ?..
The problem with hiring a property manager that also owns property in the area, is that they will fill their own units first and put the best people in them.
#2) Vacancy rates..I have been using %15 vacancy,%10 repairs,%10 property manager,taxes,water and sewer and mortgage..I only apply heat if it's included..Am I missing something?..
I think you got everything except evictions, legal fees, capital expenses, office expenses, entity maintenance, damage done by tenants, lawsuits, finding tenants (many managers charge extra for this), tax preparation, etc, etc, etc.
Thank you for the reply and I’m curious what state would support all of my deductions plus yours??..I’m looking 3-5 hours out of NYC in nowhereland to find decent profit ratios…It seems every time I make an attempt to justify to myself this may be it I soon realize that even this won’t make money?..
The majority of the United States will support profitable rentals. These areas are flyover country i.e. the red states (which previously included Ohio). It is much easier to make money if you manage and maintain the properties yourself, as you can keep the 10% management fee and 5-10% maintenance fee. You can also do a better job managing the property than a paid 3rd party.
Regardless of the area, you will almost always need to buy the property at a big discount if you are to rent it at a profit. It is impossible in almost every market to buy at retail and rent at a profit.
What is certain is that you must understand the real world expenses if you are to be successful. Lack of cash flow is the number one reason that the majority of new investors fail.
In most cases, this is not true. Rookie landlords make all kind of mistakes that end up killing any chance of making money as some times get themselves into legal hot water. Moreover, if you have a regular job and/or live far away, you are not going to have time to deal with all the tenant hassles and keep things under control.
Most of the time I pay only a percentage of of COLLECTED rents. One prop. mgmt co. I use also get a small placement fee, but its in an isolated area and they are the only real game in town. I would not under any circumstances pay 1 mn rent for placement becuase this will only motivate the prop.mgmt co. to place a crappy tenant in a hurry.
Also, prop. mgmt cos. want to find trouble-free tenants as badly as you do becuase easy tenants means less work for them. If they have to do deal with crappy tenants, they suffer too since bad tenants gobble up all kind of time.
I use a property manager in upstate new york. He is very knowledgable. I made it a point to find some good people. There will always be some sort of problems unforseen with mangement that sometimes comes about for any reason. My manager got overloaded with work and is now only going to keep investors that are advancing their portfolios.
It’s been alot of work…When you are looking in these relatively small upstate NY towns you are limited in many ways…Property managers especially,quality ones that is…One particular property manager seemed uninterested in dealing with me once they found out I wasn’t an out of town buyer…I can only guess it’s easier to put the screws to someone who can’t simply drive up one afternoon and check things out…Another thing was the type of vacancy rates…I was using %15 into my equations but I found out that %20-25 is more suitable…After factoring in that kind of vacancy+%10 property manager,%10 repairs,taxes,water/sewer/insurance,evictions,mortgage etc there is like nothing left…I can see why rehabbing/flipping is so desireable to someone if you can buy on the bid…Making cashflow is much easier to say than do…After chopping apart attractive numbers there isn’t sandwich money left…Even if the property cashflows you have an argument if it’s even worth the hassle,even if you make %15 cash on cash…The money is no longer liquid,the properties are extremely old,the eviction rate can make the +%15 go negative fast…I’m not fearful of investing I just don’t want to buy a headache…I also have a tough justifying why anyone who is making %20+ ROI would want to sell to make a few dollars in capital gains…I know as a businessman I would never sell certain income producing investments I own that yield me those kind of numbers…
Thank you that advice…I have been using everything I read here and it has helped tremendously…I’m not going to let these small obstacles stop me from purhasing…Once I have everything lined up and the numbers have a good shot of working I will move forward…After speaking with some local mortgage brokers ,one in particular even suggested I can get %100 financing and possibly only have to lay out closing costs because of my credit/assets etc (only to make the % better,I have money for downpayments but nothing cashflows if I putdown money)…4 of the properties I ran the numbers for came out +%15-18 using %100 financing and taking out an obscene amount of expenses…I will be driving up soon enough to do an onsite check of these clapboard palaces…My next obstacle will be once I do a more thorough walk thru…Good thing my homeowners ins quotes(yearly) are less than a montly car lease…Surprisingly taxes are high in these areas…There are homes in Queens NY(20 mins from NYC) that cost 850k that have the same taxes as an 85k house upstate…
Please keep the advice coming…I’m also currently working with a friend in the Raleigh NC area to find cashflow properties as well…Need a good property manager there as well…I’ll keep searching…
How are you coming up with those vacnacy rates? Where are you looking (towns) and where are you getting those rates. Where I am investing vacany rate is average 5% but a property I just got done fixing had both units with commitments to rent within 2 weeks after my prop manager marketed.
My vacancy rates come straight from property managers and real estate investors I have spoken with in the area…I firmly believe when you are purchasing a property to take a worst case set of numbers rather than tease myself into believing every deal will cashflow…Fact is upstate NY is a depressed area all together…Have some areas bounced off the floor?,absolutely but all in all manufacturing isn’t supporting upstate anymore…The homes need constant maintaining,the prop taxes are no bargain,the economic climate is basically no where…Is there money to be made, I definitely think so but it’s not easy money…I would just rather prepare myself for realistic scenarios…
I have looked in Rochester,Buffalo and there are definite bargains…I’m trying remain open minded as an investor…
oh ok yes buffalo is the most depressed. Although great money can be made there IF you have a good contact. I have a property in rochestor public asssistance tenant great property manager so far so good.
Another thing I keep in mind is that NY is coming off a record 5 year runup in RE prices…The flip side is that upstate NY RE is still dirt cheap…So even though you are cashflowing the appreciation is zero (well almost) in comparison to anywhere else…I think the rehabbing business is much better than playing landlord upstate that is…You can buy these bombs for 10-15k get out the sawdust,glue,carpet,paint and flip it out to an out of state buyer with a section 8/DSS tenant for $25-35k and to the person who’s buying it ,they are happy to make cashflow…
rehabbing is good but I dont think flipping is as far as my strategy goes. An occasional flip is ok to bring in a lump. Prices are appreciating steadily. I would rather buy low fix refi and rent. That way I keep more money. Why kill the goose that lays the golden egg?
MY AREA IS ALWAYS GETTING SLAMMED BY THE PEOPLE WHO LIVE DOWNSTATE. THEY ARE THE REASON WHY WE HAVE TO HAVE ANNUAL INSPECTIONS ON EVERY UNIT WE OWN AT 20 DOLLARS PER UNIT. BECAUSE THEY BUY HERE AND THEN BECOME ABSENTEE. THE PROPERTIES BECOME SERIOUSLY RUN DOWN, THEY REDUCE THE RENT JUST TO KEEP THEM FILLED AND PEOPLE DON’T COMPLAIN ABOUT CODE ISSUES BECAUSE OF THE PRICE. SO THE INVESTORS THAT MAINTAIN THERE PROPERTIES WELL(SUCH AS MYSELF) GET THE SHORT END OF THE STICK. LOWER RENTS etc. DON’T GET ME WRONG I HAVE NO PROBLEM WITH OUT OF TOWN INVESTORS, JUST MAINTAIN WHAT YOU OWN…
AND THE ECONOMY HERE IS MORE STABLE THAN NYC OR ANY OTHER MAJOR CITY IN THE UNITED STATES
shark I can see you are sentimental about upstate but don’t go overboard…Upstate’s economy couldn’t and never will be able to compete with downstate…Don’t make ridiculous comments…Buffalo is ridden by crime,heavily vacant and burnt out areas that go unpoliced,drug dealers thrive in these environments,cops are too busy writing out cellphone tickets to drivers,property taxes run close to %5 of the property value,for the most part your areas homes are an average of 100+ years old…Out of state buyers have ruined your area by bidding up and buying properties sight unseen,not us downstate people…Is there money to be made there?,ofcourse but don’t compare it to the greatest real city on earth…There is a reason why our real estate values have gone up %100 in the last 4 years,people want to live here…All the while most places upstate continue to see declining population and loss of major employers/corporations…And it’s no secret home prices in Rochestter,Buffalo are the same as they were in the mid 90’s…I can definitely see why people are beating down Buffalo’s door to live there…LOL
Shark you are right its the out of town investors that ruin it for others. They dont know what they are doing and they throw money at the houses because they are low priced and they ususally overpay. The local economy suffered in the late 80s’ early 90’s because of the loss of manufacturing jobs but its starting to come back and is on the rise. This create a great atmosphere for property owners as the local government tries to straighten out their mess. They have great colleges affordable real estate and didnt fly off the hook at an unreasonable pace like many other areas of the country did. What area do you invest in in the city?
Buffalo, NY (14213) Live Weather:36 Degrees Partly Cloudy
ECONOMY Buffalo, 14213 United States
Unemployment Rate 5.60% 5.00%
Recent Job Growth 0.76% 1.30%
Future Job Growth -0.62% 9.06%
Sales Taxes 8.25% 6.00%
Income Taxes 7.13% 5.02%
Household Income $21,673 $44,684
Income per Cap. $12,236 $24,020
Buffalo, NY (14213) Live Weather:36 Degrees Partly Cloudy
HOUSING Buffalo, 14213 United States
Apartment Rent $625 $653
Property Tax Rate $26.47 $0.00
Median Home Age 57.9 27.2
Median Home Cost $61,000 $208,500
Home Appreciation 6.58% 13.62%
Homes Owned 26.33% 64.07%
Homes Rented 52.43% 21.45%
Housing Vacant 21.24% 14.48%
Buffalo, NY (14213) Live Weather:36 Degrees Partly Cloudy
CRIME Buffalo, 14213 United States
Violent Crime 7 3
Property Crime 7 3
The numbers on the left are Buffalo and the right is average of the US…Safe to say shark you are just a slight bit off…Buffalo may be up and coming and I am all for buying at a bottom…But just say that,don’t make up numbers that don’t exist…