I just talked to my realtor today. Heading up north on Monday to close on my property. While were up there were planning on checking out a rental unit (for investment purposes). Other than the obvious reason that its four hours from my house, does anyone have any advice about long distance rentals?
The reason i’m even considering this is that around here (detroit) from what i’ve been told rentals are sitting empty around here. This one up north is a triplex thats 2/3’s full.
The other reason i’m considering this is that with prices up there i’d have alot of equity immediately and a very small carry cost in case the rentals went south.
Maybe i’m hitting midlife crisis. I have an insatiable urge to gain assets and make more money, so i’m checking out alot of different options.
Replies
The only drawback to long distance rentals is who manages the property. When we had a rental, I did all the work and maintenance and dear wife did all the paperwork. We considered buying some more and employing a property management company. We did not.
Around here property managers charge 7-10% of monthly rent to manage and 1/3 of the first months rent for each new lease they bring in. For us that took away any profit potential for the properties we looked at.
Friends with managers are constantly griping about the decisions they make on repairs, i.e. purchase a new toilet instead of fixing flapper valve, etc.
If you can find a good manager and still cash flow a property, I think it is worth pursuing, but that can be challenging depending on how much you can put down on the property.
Bruce
Yeah the thought of having a management co can be scary. I dont think i'd want to go that way.
My rentals feed me.... might not be what you are looking at yet (them feeding you) but...
I'm not comfortable with any property i can't see everyday... I'm talk'n property that is on my normal path of travel...
I have a couple shopping centers that are outside this path but still within an hours drive and I have tenants that call and report other tenants actions... BUT these are not marginal properties I have major tenants (subways dominos ect...) that are long term and cover my nut... the others can come & go & not kill me.... plus it's commerical... I don't fix anything but roofs & parking lots...
I have purchased property that was unprofitable because there was a management company involved... just from my observation any management co that has it's own maint guy... beware.... there is no reason for them to actually fix anything long term and to be cost effective.... I assume their stuff gets fixed on your dime...
look at it this way.... you are opening your wallet to them.... i don't do that to my wife... you might as well invest in stocks with a broker and give him 100% control over all trades...
my advice is to look in your own area... an area you know... a market you will come to know.... being a landlord is a people business... I want to know who is in my property i want to see them... you know where your property is, they know where the property is, they know how to find you... you won't always know where your tenant is... and how to find them...
p
Edited 8/12/2006 9:12 pm ET by ponytl
This would be my first rental. I'm not talking about a house in Peru, but it would be about 4 hrs away. I'm just kicking around some ideas. I always hear horror stories about being a landlord, I guess I figure there may be less problems in a small town. I will do some research before doing anything, i'm just trying to find that untouched market and i'm having trouble finding people to bounce ideas off.
We did this for years. You need something closer that you can keep
an eye on. Ask questions anytime!Brooks
Thanks Brooks. Like I said, were going up anyway cause were buying some land on Monday so I do think i'll at least take a look.
dude... never hurts to ask ... If i followed others advice I'm not sure if i'd be better or worse off over all...
4hrs might as well be Peru... i have property thats 90min round trip that i haven't seen in 6 months....
Equity is a nice thing to have... I think I share that weird fear of have'n to eat dogfood when i'm 80... makes me work hard now anyway
good luck... it's always better to have regrets for things you've done than for things you wish you had done...
p
I dont know what it is lately but i've been racking my brain trying to come up with more income. I dont know if its cause I wrecked my back this year or what. I want to keep contracting but I need more, ya know the stuff that works when your not there.
Thanks for the replies.
BTW any short advice about purchasing commericial property? That was my first thought after my last house sold. Anything that brings in a buck.
I've always been scared of commercial. It can go empty fast and stay
empty a long time. I like residential better - people always need
a place to sleep...Brooks
Yeah good call. Theres a city around here called Sterling Heights. For some reason they build strip malls there like mad. Because of this not one of them is full.
If it wasnt risky it wouldnt be fun, right?
You must run on different stuff than I do;
If it was risky it would be fun, right?
I dont work hard on a lot of things but risk is something I try to keep to a minimal.
People starting out usually start with residential. It could be a basement apartment under you or an apartment over a shop , to houses and duplexes. Once they gain knowledge there of real estate and are successful some move on to commercial. Commercial has to have a business plan for success. You have to be able to see changes coming and be smart enough to react or you could end up with empty property. When you do end up empty you have to go out and sell your self the empty seat. The whole business reminds me of Monopoly. The starter properties will pay the rent but the last ones win the game most every time . So the quest of acquiring the winning properties is what the game is really about.
Having a rental property that is 4 hours away from you would be like washing your feet with socks on since you would be starting out learning the business . There is much to learn being a landlord plus the knowledge of what type of rental you need to be successful. There are deals that make sense where you live normally.
On the other hand if you wanted to flip houses four hours away , its very doable with a place to stay such as a camper trailer . DW and I were just talking about that very thing Friday night . Bentonville , Ar is the fastest growing town in the state and surrounding areas. Thats 1 1/2 hours from the house. Too far for a few rentals . But an effective striking distance for flips .
Tim
not sure exactly where you are... but I'm in the market for a house on lake hamilton... not a 1.2mil deal... i want older on the water with a dock... if you hear of anything... that area seems to be booming, I would have liked to seen it 40-50yrs ago when my grandad use to hold court in the Hot Springs bath houses.... pretty country that area...
p
Lake Hamilton is high priced stuff if you are talking water front.
Its about 60 miles South of me . Our Daughter was there for a couple of years and we looked quite a bit at real estate.
NW Arkansas is a much better investment. Hot Springs still lacks the luster its always needed. Too many people that live there dont like it . She moved to NWA. She loves it and so do most people .
Tim
Hot Springs real estate listings in the newspaper: go to http://www.arkansasonline.com/Class/
and click on "Real Estate" then scroll down to "Garland County" or "Resort/Waterfront property". Each day's listings go live at noon.
many thanks....
due to low rainfall use of my current lakehouse has been limited (7ft normally of water under my boathouse has been at 2ft all summer) so for 2hr longer drive i thinking of lake hamilton... just seems to be alot to do in the area and stable water levels...
I'm 6-9mo away from doing anything unless a deal jumps up & out at me
thanks again... I'll watch it everyday now so at least I'll know that deal when it appears
p
Thanks Mooney, I figured that out myself when I went to look at the property today. Too much stuff to go wrong that far away. I pulled up in the drive-way and the first thing that jumped out on me was a pretty serious lean in one corner. Questionable "extra beams" in the basement, and a few other "repairs" brought me back to having less interest in landlording.
I do have the realtor searching for dumps up there for flipping purposes and I spoke with the Economic Growth Corp today about the towns future, so there may still be another purchase up there but its gonna take some more research.
its gonna take some more research.
Id like to enterject somthing here .
An auctioneer finished my dads estate sale and I shook his hand and told him what a fine job he had done as Im an auctioneer too.
He said Tim , I just took what they let me have today.
That may never mean anything to you or anyone else here for me to print that . It has stood the truth over and over dealing with properties. I cant count the times Ive been on the ride home and thought about his statement.
ON your best day , its the best you can do. From a prayer , God give me the sense to reconize a deal before it passes me by. You cant take anything from anyone one but if they offer it I hope I have the knowledge through research to make the right decision.
I stay here to have a good time like most of the rest , I wont lie. But the knowledge gained has been an edge to many times. With out constant research its a dead horse for the only thing age carries is experience.
Dont ever feel bad about where you are in a book as long as you are reading it .
Tim
Edited 8/15/2006 12:05 am by Mooney
From a prayer , God give me the sense to reconize a deal before it passes me by.
Ahhhhhhhhh, The morning meditation from the Rev Moon. LOL!
I just took what they let me have today.
That may never mean anything to you or anyone else here for me to print that . It has stood the truth over and over dealing with properties. I cant count the times Ive been on the ride home and thought about his statement.
That statement needs repeating.
Bowz
I pulled up in the drive-way and the first thing that jumped out on me was a pretty serious lean in one corner. Questionable "extra beams" in the basement, and a few other "repairs" brought me back to having less interest in landlording.
I do have the realtor searching for dumps up there for flipping purposes and I spoke with the Economic Growth Corp today about the towns future, so there may still be another purchase up there but its gonna take some more research.
To me in my own way of describing it every trade has its "air of things".
Getting on a framing job at daylight ; The dew on every thing and the smell the water creates on every thing it touches . The raw odor of pine .
Putting in a footer to foundation; The smell of dirt and the machine . The smell of concrete . The close up sound of the machine running . The often welcomed breeze but too often the unwelcomed mud.
I often think about Top Gun when they are walking out to the jets at daylight and everyone has a job to do and then its over .
Baiting a trout line and watching the sunset when all but the birds are announcing the end of the day in quietness. An ocasional fish jumping for a final top-water meal. The smell of the oil in the gas when its time to head for home with just enough light to see the dock.
A drywall job ; the distninct smell of drywall and DW mud and the humitity the mud produces magnifies the smells.
Arriving at a repo; the grown up yards and trash ornating the walk around the house . The foul odors that catch you by surprize as you pass by them. Through all that the building is telling a story of whats happened to it through the years. You have to be listening although you wonder if you should even be there for all kinds of negative reasons . Will there be a dead body inside would have to be the #1 negative thought . You keep telling your self to relax and keep listening to what the house is telling you and you wonder about the unknowns since the power is off as well as the gas and water lines. Will they restart again with out incidence ? You look for sign like an indian of previous evidence of problems. There is so much to do in short period of time before you have to move on to another one . During which time you are trying to find a diamond in the rough. All the while it seems its a strange place to be trying to do that and most of the public would question your mind in doing so. Sometimes you question it your self. So from the time you got there till the time you left its all about questions between you and a building and its so quiet .
Thats where the prayer comes from, lol.
Tim
>>>Arriving at a repo; the grown up yards and trash ornating the walk around the house ...... Sometimes you question it your self. So from the time you got there till the time you left its all about questions between you and a building and its so quiet .
Thanks Tim, I know what you're saying.
well said.... "the harder i work the luckier i become" kinda deal.... if you aren't in the game really no way to win...
p
Man thats deep. Good advice. Sometimes all ya got is that prayer (just steer me in the right direction).
Ya know what, (for me anyway) that prayer usually works.
I do have the realtor searching for dumps up there for flipping purposes...
So you're thinking of flipping from a distance? Probaly not a good idea for most of the same reasons rentals aren't good from a distance.
My biggest problem would be setting up / interviewing new subs. I could conceivably spend a few days up there if need be. I'm just not sure theres enough market right now up there.
What town were you looking in Mark?
blue
Rogers city. Its dead up there right now and i'm not too sure about future growth. I did speak with the EDC and they are talking about limited new jobs within the next 5 years utilizing some agriculture type businesses.
To be honest it would seem like a fools buy right now, but eventually everything comes around and it ultimately comes down to gut feelings and speculation.
Just looking now, but I have this crazy itch to get something more than my contracting going and its driving my nuts.
I'd be leery about Rogers City if they don't have any future job growth planned. There are a lot of auto workers who are trying to dump their second homes. I don't see any need for rentals up north because there's always so many cheap places to live. At least thats true on the east coast.
I believe there is some opportunity in the AuSable Oscoda area but it doesn't involve "normal" rentals. I'm in the middle of some decent sized proposals there and will be looking for money soon if my market survey works out. I've been concentrating my search for apts that I can convert to condos but I've run into some other interesting ideas.
blue
I've been concentrating my search for apts that I can convert to condos but I've run into some other interesting ideas.
What?
Tim
Too complicated to explain at this time. I don't have enough details. It involves some seriously underused but valuable resort properties near the resort property that I own. I've been doing some serious market studies and am in the process of building some relatioinships before I start tossing around offers.
blue
I wouldnt mind discussing your other interesting ideas. What'cha thinkin about up there, time shares, vacation homes?
I am leery about Rogers city, just window shopping right now. My agent up north suggested they could use some senior apts up there.
Whats you opinion of a lodge type thing up there? Maybe run an ad and rent out a cabin on a week to week basis. As it turns out I have a friend that lives about three miles from a piece of land i'm looking at up there. May be a good caretaker situation.
Give me a call or e-mail me.
Edited 8/15/2006 11:01 pm ET by MSA1
Mark, I will give you a shout soon. I'm going to be out walking the beat up in Oscoda and Au Sable where I own a resort property.
The lodge type thing is being done all over northern MI. I would check in the localities of where you are looking and do a market study. Most of the things I look at wouldn't cash flow.
blue
Look forward to hearing from you Jim. How well does your resort property do? What occupancy rates do you think I could expect (or use for compiling my data)? A couple of people have suggested 1/3 of the year would be a good benchmark to start.
The resort property has been bad, if you only look at it from the cashflow point of view. There are several reasons for that, most of which can be attributed to us. We haven't tried to maximize it's use because we decided to sell it, not rent it and we were gearing our sales effort toward emptry nester, snowbirds. Our realtor told us that he was very close to selling it last year and we would have made out nicely but alas, that did not happen. We compromised our cashflow by not trying to attract bookings because we didn't want to have to negotiate and buy out a lot of existing bookings. This middle of the road approach is kinda like shooting yourself in the foot.
This season, I've looked at things a bit differently and decided that since it's not selling, I should make an effort to promote it and cashflow it. That opened my eyes to some significant opportunities that I hadn't considered. I was chasing things all over the continent and I already owned something that was a gem in the rough! At this point, I'm thankful that it didn't sell and I have a lot of work to do to get it ready for next season.
To answer your question about occupancy rates: each area has their own specific rates. The west side of the state can book summer and winter because they have ski slopes. My side doesn't have that. I think 1/3 occupancy rate is extremely aggressive and if I came close to that, I'd be very pleased. Where I'm at, 12 weeks would be great. The tourist industry drops off quickly in the middle of August. I think that much of it can be attributed to fall sports starting in the high schools on August 11.
blue
Blue, funny you should respond today. I'm up north right now, we just looked at the cabin yesterday. The cabins great, I could have it ready for renters in about a week.
My concern is the river. Right now its pretty "reedy", the realtor says its because of a dry summer, today I plan to see what he neighbors say.
My intention is the proper exploitation of the local amenities. Theres a golf course w/in 5 miles, snowmobile trails, hunting (state land), and the river for canoeing and fishing. The place also has a rather large garage (hello mini-storage) that I would advertise locally for car or boat storage.
Today I plan to do a little running around and find out a little more about current rentals around here.
For what there asking for this property if I could rent it 12 times a year, i'd own it for nothing. I guess the question is, is that enough for a first unit?
Who is going to rent it and who is going to maintain it ?
Tim
What do you mean by who will rent it? Clients or who will turn over keys? As far as maintenance and caretaking goes....i'm working on it. I have a relative that lives near the cabin who may be interested and if not I may hire someone, not sure yet. I know I need to know this and I will figure it out.
If you mean who will stay at the cabin, I would shoot for outdoor types as there are alot of outdoor activities around here. Theres state land (hunting) its on a river thats within 1/2 mile of a good fishing lake, trails for snowmobiles, and hiking, a golf course, and nature attractions in general.
Believe me I have no visions of grandiuer, (i'm not even sure how to spell it) I fully expect no renters till spring leaving me with 6 mos of payments on my own, but if I advertise properly I think/hope/plan to start getting renters by spring.
I already figgured you would be the one working on it .
Most of the cabins here are changeing linens , towls and such . They come stocked except for food. Firewood is replenished and things like that similar to a motel. Stays are 2 nights to a week normally.
Tim
The cabin I stayed in up here provided firewood and bedsheets (sheets once) and that was it. Had to beg for a mouse trap. Realtor thinks i'd be fine not to offer any sheets, my worst problems gonna be finding someone to scrub toilets between visits (oh that and booking the place).
If you mean who will stay at the cabin, I would shoot for outdoor types as there are alot of outdoor activities around here. Theres state land (hunting) its on a river thats within 1/2 mile of a good fishing lake, trails for snowmobiles, and hiking, a golf course, and nature attractions in general.
You pretty much described every cabin in Northern Michigan.
I'd be very concerned about that weed lake.
blue
"You pretty much described every cabin in Northern Michigan."
Does this mean I finally hit on a winning formula?:>)
I am concerned about the river. The general consenous is that its reedy because there hasnt been much rain at all up here this year. I'm figuring to low ball an offer, if they accept it i'll have it inspected and bring my cousin up to see it.
This will give me an out if I want, and a little time to chase renters, kinda test the market.
The place is not without its problems (someone tried to wire it with extension cords and romex hung everywhere), and i'm not liking the flashing on the newer roof either.
Edited 8/24/2006 8:45 pm ET by MSA1
Edited 8/25/2006 8:34 pm ET by MSA1
tim,do you ever get up around rogers-bentonville?we have a cabin over on beaver. i have never seen commercial building going on like that.i looked at a acre + this weekend for 125k.current use is a car lot,that would pay the bills till someone needs it...... it's on highway 62 next to dollar general,mcdonalds,sonic,new bank, boat dealers across street,if you get up that way let me know and i'll give you directions.i'm just tapped out and don't want to borrow with things as shakey as they are here in ks. by the way if you look for a place to stay look out around garfield lake area,sept-june you can rent pretty cheap. larryhand me the chainsaw, i need to trim the casing just a hair.
Ive got a daughter that lives up there and her husband is a controller over three different hotel properties. He sits me up pretty good when I go up there. But IM going to write that down.
Where is Garfeild lake > Garfeild Ar?
Tim
There is always balance
residental vs commercial
residental.... around here takes all but an act of god to get em out... little recourse... plus there is someone wear'n out your property 24-7 and they want you maintain it... leases are short term
Commercial... they don't pay i have a leasehold on whatever is there i can lock them out if the rent is 1 day past due... courts aren't very kind to businesses that don't pay their bills because you aren't putting kids out on the street, i can rent a bare shell they finish out on their dime & they maintain it... leases can run 10-20years, I keep the roof & parking lot maintained... and i even charge back for that (CAM fees) I'm not as sold on Office Buildings as i am on shopping centers... offices require a higher level of service from me...
risk... reward....time invested, it's all a balancing act... I have one duplex left and I'll have 20 apts in my loft project... that i can turn condo at anytime... at this point in my life I just don't see me have'n a desire to unstop toilets that aren't in the house i live in
p
it's always better to have regrets for things you've done than for things you wish you had done...
I'm stealing that for a tag line..........
u can't steal something that was gifted to you....
peace
p
Several of my rentals are over 500 miles from where I live.
Use common sense, good judgement and run the numbers closely. Try to get something that is not going to need too much upkeep and in a good area. You may want to pass on some tenants in favor of those who seem like long term prospects.
On my distance places I try to keep the rent a little below market and try for long term tenants. I don't use a property manager so I save that expense and the long termers make up for it, then some.
Less turn over = more $$.
When I saw this one common sense took over. Theres no way i'd be four hours from this house if I owned it. If it were newer and had the tenant base that this one had, then maybe.
You got to keep using that common sense.
Actually my longest distance rental is a vacant lot in the 'downtown' area of very small west Texas town which I bought real cheap. I have it leased back to the prior owner for storing oil field pipe. The taxes are low, there is no upkeep or expenses and I actually get by out that way a few times a year and look at it.
"It's always better to have regrets for thinks you've done than for things you wish you had done..........."ponytl
Thanks Intrepid, i'm trying to use my brain on this. I have limited investment capital so any move I make must be well thought out. I imagine i've got alot of research ahead of me.