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Greg

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Reply with quote  #1 
Interesting piece from Bloomberg:

Single-Family Landlords Are Sinking Cash Into Rust Belt Rentals

Anyone here considering risky but maybe high cash flow rust-belt?

rickencin

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Reply with quote  #2 
From the article:

"In most places, however, rents don’t track with appreciation; you can rent a $50,000 home for $850 a month, but you can’t rent a $500,000 home for $8,500. 
As a result single-family landlords won’t buy homes for more than $200,000 in most markets"

Don't worry.  Detroit is trying to rein in investors. 

The $50,000 house mentioned above could have a 12.5% CAP and 25% ROI.  If I was 20 years younger and wanted to grow my portfolio, those kind of returns would be very tempting.  Of course, I would move there.  The Great Lakes have a different sort of charm.  But, for now, I will sit here and pay the sunshine tax. Man, it's nice living next to an ocean known as the "Pacific". 

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Rick
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Reply with quote  #3 

Doing ROI on out of state rentals is very misleading unless you want to move there and manage it yourself---and who really wants to move to Detroit?  The low inventory means that homeowners must compete for what they can afford and where they can live.  And one of those quoted had done 1000 flips, so they had volume working for them.

Think about the experience of Greg Norris who had something to do with managing the rentals in Texas (not sure if they hired management companies as well) and then also built homes in Florida.


I think his interview was extremely interesting.  Remember when Bruce went on bus tours of Texas way back when?  Well, this interview is the closest that I've  heard that it was a mistake.  Keep in mind that at the time Bruce bought appreciation was unheard of in Texas and when Bruce sold they had significant appreciation.  So, you are talking about the best of both worlds, really.   And Greg was exceptionally well qualified, a homebuilder / electrician who had previously managed rehabs in California.  Notwithstanding all of these facts, Greg said it was a mistake---they wish that they hadn't done it, it was a real pain. 

And, for me that ought to give one pause before investing out of state.

Going out of state is usually the first mistake every novice investor makes.

javipa

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Reply with quote  #4 
Investing locally in single families is already the biggest risk to one's time and money and expectations, much less doing 'that' out of state.

I can't think of a scenario where investing in single family units out of state would be wise.

Single family investing of any type pretty much means 'local investing.'  Otherwise, they become an unprofitable, expensive management headache.  They're already prone to 'that' in the first place, without adding distance to the mix. 

It's the same with anyone who owns a rental that's more than 100 miles away from their house. 

And that's the reason out-of-area landlords are more often motivated to sell, and agree to bargain prices.

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Greg

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Reply with quote  #5 
Thanks for the feedback. 

I grew up in the Detroit suburbs so I pay attention. No immediate plans to move back.
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