Out-of-state REI
I currently reside in So CA. I'm considering purchasing one or two multi-unit residences in up-state NY. Here in So Cal, a 2-unit will cost me at minimum $300k-$400k. A 3 to 4-unit will surpass the $500k mark easily. In up-state NY, near Cooperstown, multi-unit residences start as low as $100k and barely surpass the $200k mark. My brother lives in up-state NY and I'm currently discussing the possibility of making him a property manager. Though, I know he's got a full-time job, so it's up to him whether to take up the responsibility or not. According to my sister-in-law, rental market in their area is hot! Especially since it's near a University. Many tenants are students. I know renting to university students has it's pros and cons.
Anyone investing out-of-state? Is it a good idea? It's seems to me it can be much more profitable than purchasing a half-million dollar multi-unit here in CA.
I have a friend who now lives here in AL but used to live about 45 miles from Cooperstown. The thing that sticks out in my mind are the property taxes. Out the roof so to speak. Don't know how they compare with CA, just be sure to check it out.
I agree College town rentals can be profitable. I'm close to Auburn and as the school has grown, so has the real estate market to an extremely hot area. I think renting to students just has its own set of guidelines on what to expect.
Seems like if you have a property manager you can trust and who is capable of doing what you expect of him for the job, and your numbers work for your chosen property, it will probably work for you.
Good luck,
Terry
Thanks for your input Terry. Property taxes are indeed high in upstate NY for the price, but I'm still ahead when comparing home prices and property taxes in Southern CA... Property taxes for a $120k home in NY may run approx. $2200/yr. In CA, I would have to spend $400k++ and pay approx. 1% of that in property taxes. Purchasing outside of CA still seems more profitable.
Quote:
On 2004-09-11 21:28, concrete wrote:
I have a friend who now lives here in AL but used to live about 45 miles from Cooperstown. The thing that sticks out in my mind are the property taxes. Out the roof so to speak. Don't know how they compare with CA, just be sure to check it out.
I agree College town rentals can be profitable. I'm close to Auburn and as the school has grown, so has the real estate market to an extremely hot area. I think renting to students just has its own set of guidelines on what to expect.
Seems like if you have a property manager you can trust and who is capable of doing what you expect of him for the job, and your numbers work for your chosen property, it will probably work for you.
Good luck,
Terry
Just to share some tips on renting to students, it is better to rent to junior/senior, or graduate students. Freshmen tend to do wild things that can damage your property.
I also live in CA and start looking into AZ, TX areas.
For out-of-state if you have dependable PM then it is worth looking into.
What kind of CAP rate is out there, how much rent?
[ Edited by jamesCA on Date 09/12/2004 ]
According to my calculations...It's averaging 5-7%...some slightly higher.
Quote:
On 2004-09-12 01:59, jamesCA wrote:
Just to share some tips on renting to students, it is better to rent to junior/senior, or graduate students. Freshmen tend to do wild things that can damage your property.
I also live in CA and start looking into AZ, TX areas.
For out-of-state if you have dependable PM then it is worth looking into.
What kind of CAP rate is out there, how much rent?
<font size=-1>[ Edited by jamesCA on Date 09/12/2004 ]</font>
There seems to be three main threads in the discussion.
1. Property taxes - they are high in upstate NY. Just looking at another deal and the taxes kill the cash flow unless I get a bigger discount on the price. As the discount is likely, I will still go forward. Definitely much higher then I am used to in other areas though.
Otherwise the cash flow is pretty good for the property price.
2. Remote investing and management. There are lots of issues here. One thing is to stick to an area for a while so you developer an understanding of the prices and who the good suppliers are. This way you start to understand when you have a problem vs. a good deal. That said it is hard to really know the market compared to something local.
The flip side is some markets such as parts of CA just make no sense for rentals. The amount of capital you need to tie up just to make a deal cash flow is painful. If the appreciation happens then you could do OK in the long run. That is a bet on more insane price rises.
When prices are really low (upstate NY) you might not see much appreciation if any for a while to come. It has to do with the economy in the area.
3. Property management. Nothing really special about this one. If you do not do it yourself you have to depend on someone else. I have had a rental that was over 6,000 miles away. When the property manager says it needs a repair you can not just pop over to verify if they are right. Even if the property was local, using a property managers is a great time saver but is more costly then doing it yourself. I prefer property managers over direct responsibility. I have managed up to 7 rentals at one time and know a bit about the process.
An alternative is to consider joint ventures with a local investor. There are other risks when you go this route. Hence you have to decide which way you want to go and then manage the risks.
John
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An alternative view that sometimes works for me.
If you are looking at a good cash flow area you are many times looking at an area that has poor appreciation. If we rule out war zones then we are normally talking about areas that have seem major dislocation in the local employment.
Upstate NY, eastern Ohio and other such areas are examples where the prices are really low, the job market is OK but not robust so the house prices are likely to stay low. Heck, given the low interest rates of the last few years any area that is still way below the national average is not likely to move upward much when rates drift up.
So, being the lender can be a good alternative. You lose out on the possible upside of appreciation but you gain on the costs and management issues. If you earn between 8%-10% in interest then the lack of appreciation is likely to be completely offset. Having no management issues and no expenses (such as property taxes) adds up to a sometimes superior return compared to being the owner.
John
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