\n
Ashley :
Happy holidays. This is Real Estate Rookie, episode 246.<\/p>\n
Tony:
In terms of market selection, there\u2019s three big buckets that I look at. I look at permitting, the policies in that market, I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I\u2019m getting in a market versus the average purchase price, what does that ratio look like and am I able to hit my return?<\/p>\n
Ashley :
My name is Ashley Kehr and I\u2019m here with my co-host Tony Robinson.<\/p>\n
Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. And today I want to shout out someone who left us a review on Apple Podcast. This review says I\u2019m a real estate agent in Minnesota looking to invest in real estate, and I think I found the perfect virtual mentor to help me get started. This is the best place to learn if you\u2019re filling overwhelmed. We appreciate that. If you guys are listening, and haven\u2019t yet left us an honest rating review on Apple or Spotify, wherever it is you\u2019re listening, please do. The more reviews, the more folks that we can reach, more folks we can reach, the more folks we can help. Actually, Kehr, this episode comes out a day before Christmas, and I got to say, I think the best Christmas gift I\u2019ve gotten so far is knowing that you have a pretty decent singing voice. That was a nice little intro right there.<\/p>\n
Ashley :
You know what? I\u2019m shocked that you\u2019re saying that because my voice is not nice. So that must be the only two words that I can sing. When I was younger, I always thought that I would have a life with a mic in my hand, but I always thought it was because I was going to be a Spice Girl, not a podcaster.<\/p>\n
Tony:
Not a podcaster.<\/p>\n
Ashley :
So I think that\u2019s definitely way more fitting than me actually singing.<\/p>\n
Tony:
Wait, but our good friend Kara Beckmann, she actually just released a Christmas album. So if you guys can go support Kara Beckmann. I don\u2019t know, producer, if you guys can put a link to Kara\u2019s like Spotify album in the show notes, we\u2019d love to support-<\/p>\n
Ashley :
Yeah, Kara, I think it\u2019s on Apple Music. I don\u2019t know about Spotify yet, but yeah, she\u2019s @beckmannhouse on Instagram and is an amazing designer. She has a short-term rental, she has long-term rentals and she does the most amazing luxury house flips too. So you\u2019ll have to go and check out. This has been a passion project of hers forever. And I think it just shows too, the power of real estate investing is that you get to pursue these passion projects as you\u2019re building up your wealth and your time freedom through real estate is that you can be able to go off and do some of the things that you\u2019re passionate about. So Tony was recently kicked off Instagram, so that must be his passion.<\/p>\n
Tony:
Yeah, I was banned from Instagram for three days, but I\u2019m back now from Instagram jail, so cool. But we got a good show for you guys lined up today. So one of the last show you guys are here before Christmas, we got question on house hacking and how to make your units stand out if you\u2019re trying to rent that extra room. We\u2019ve got questions about zoning and what to do if you\u2019re trying to figure out to what can I do with this property after I purchase it? We talk about a little known phrase called the Chamber of Commissioners, and what exactly does that mean, and how does it play a role as a real estate investor? And then last thing we talk about is litigation and how to deal with attorneys and how to use them as a new investor. And Ashley goes on a world class example of how she worked with her attorneys. And then we actually added a little bonus question that came from my Instagram about choosing your market and how rookies can go about doing that. So lots of good questions that popped up in today\u2019s episode.<\/p>\n
Ashley :
Yeah. And we tailor that last question to short-term rentals or long-term rentals, but it can definitely be tailored to flippers too, as to some of the key points out of that too is to choosing your market and just where to even start when picking a market, especially if you already know you\u2019re going to invest out of state. Okay, you guys, let\u2019s get started with our first rookie reply question. This is a house hacking question from Tony Wong. Should you furnish the house if you\u2019re renting out rooms? So I mean, it depends. You don\u2019t have to, you could. That is really up to you. But I think one of the most common things is that you are furnishing the common areas.
So if you end up furnishing the kitchen, the living room, you can always put that into your listing as to, there\u2019s two couches, there\u2019s a big dining table, room for everybody in the house to eat at. But also if you\u2019re going to furnish the bedrooms, you can increase your rent by providing a bed, a dresser, maybe even a desk in that room, and that can increase your value. That maybe won\u2019t be valuable to everyone. There\u2019s probably people that already have their furniture, so they\u2019re going to want an empty room and not willing to pay that increase. So that is completely up to you, but I think at least it\u2019s very common to furnish the common areas of the unit.<\/p>\n
Tony:
Yeah, that\u2019s a great answer, Ash. I guess just to try and make that determination, take a look at some of your competition. Are there other listings that are being offered for furnished rooms or is everything an empty slate or is it the other way around where it\u2019s like every single room that\u2019s up for rent is also furnished, right? So I think taking a look at what the competition is doing can help guide that decision.
But ultimately, Tony, I mean there is no right or wrong answer. I think what I would look at to make that determination is what does it cost for me to furnish that room and what additional rents can I get by offering it as a furnished unit? And if the difference is nominal, if people aren\u2019t willing to pay much more for a furnish unit versus a non unfurnished unit, then maybe spending the additional capital to furnish that room might not be worth it. But if the difference between a non furnished unit and a furnish unit is pretty big, then maybe it makes sense for you to go out and spend that extra couple of thousand bucks to furnish that room as well.<\/p>\n
Ashley :
And since this is a holiday episode, it is Christmas Eve when this comes out, I\u2019m literally going to twist every question into some kind of relation to Christmas holiday spirit. And I apologize if you don\u2019t celebrate Christmas, but send me a DM with what your holiday is and if you want me to turn an episode into a holiday theme, I will definitely do it. So please send it to me. So for this one, that may include including a Christmas tree into the common area to make it all nice and warm and cozy, maybe putting Christmas lights in the window. So there\u2019s all different kinds of things you can do. So even in the 40 unit apartment complex I managed, there was some common areas. There was a community room where it had a little kitchenette with a stove and then a large table.
So anyone that rented an apartment there, they could actually rent out for free. They just had to reserve the room and they could have parties in there for baby showers, holidays, whatever in there. So one thing that we did extra was we would put up a fake tree in there every year, and it started out with all of the tenants kind of adding their own little ornaments every year and then the tree would be brought out and everything like that. And it was just this\u2026 Especially when we were leasing in the winter, which in Buffalo, New York, not a lot of people move in the winter because of the snow. So it was nice to always take people into that room and just show them like, oh, this is a community, here\u2019s that.
And so maybe that\u2019s not for everyone. They just want to be kind of left alone and don\u2019t want to talk to anyone or do anything. So thinking about ways that you can make your house hack stand out from other ones, and I think Tony hit it on the nail as to look at your comparables, what are they doing? And maybe what can you do that\u2019s a little above and beyond, and that\u2019s maybe a little extra but barely cost you anything. I mean, Black Friday, you can get what? A fake tree for probably $25, just a small fake tree to put up and couple dollar store decorations.<\/p>\n
Tony:
Yeah, I love the idea of the decorations. We actually do offer, or not offer, but decorate our cabins in Tennessee for the holiday season. So every year right around Thanksgiving we\u2019ll throw up the Christmas decorations and then after first week of January we\u2019ll pull them all down. We don\u2019t do it in Joshua Tree, it\u2019s not as common out there, but in Tennessee a lot of people come out there for the holidays. But something else you said about what are some small things you can do to make the space more competitive, once you said that thoughts were just kind of running through my mind. And it\u2019s like, if I were renting out a room, what are some of the small things I could do?
Getting obviously a smart TV would be a big one. If you could have the smart switches. So if you have an Alexa in there and it\u2019s like, \u201cDim the bedroom lights to 25%\u201d, and it can do that for you. If you get automatic roller shades, if you\u2019re only got one or two windows in a room, it\u2019s not going to be super expensive. But the experience with the person that\u2019s staying there to say, \u201cHey Alexa, let there be light\u201d, and the shades come up, that\u2019s a pretty cool thing to have. Zinus brand mattresses, I love a Zinus brand mattress. So yeah, there\u2019s a lot of little things you can do that don\u2019t have or don\u2019t cost a ton of money but still give you that good return on your investment.<\/p>\n
Ashley :
And you know what? It does kind of tie hand in hand with a short-term rental almost, I guess. There\u2019s some compatibility there as to things you can take from a short-term rental and put into your house hack as things too. So if you are house hacking, you know what will be a\u2026 Do you give out your checklist for supplies to purchase for a short term rental, Tony?<\/p>\n
Tony:
I do. Yeah, if you go to the realestaterobinsons.com\/shoppinglist, it\u2019s got all of our household essentials in there.<\/p>\n
Ashley :
So if you are furnishing the living room and the kitchen, you could go ahead and use Tony\u2019s list and then maybe create your own off of that based on what you actually need for your house. But at least that gives you a starting point is okay, I at least need to get utensils in the kitchen. It may not make sense for you to give everyone their own drawer, their own cabinet and they all have to bring their own silverware, their own spatulas, their own pans and things like that. So I think that\u2019d be a great starting point to anyone who is looking to furnish their home is to go to Tony\u2019s website or there\u2019s a ton of other\u2026 The Maddens, [inaudible 00:10:43] Madden. She gives out her checklist too as to what they do. And I think Rob does too. Robuilt gives out his on robuilt.com.
So okay, let\u2019s move on to our next question. This question is from Robin in Prentiss. The first question is, how do you find out the zoning on a property? Is this what you need to know if you want to build more houses on it?<\/p>\n
Tony:
So I actually just had this experience, we were looking at some land and it was landed a great location that we\u2019ve been kind of eyeing for a while and a lot of times when it\u2019s listed they\u2019ll put the zoning in the listing description, but the zoning itself, if it\u2019s RL3, what the heck does that even mean? So typically what you have to do is you have to go to the city of the county\u2019s website, they\u2019ll have a link to their ordinances and inside of those ordinances it tells you the allowable use for each zoning like zoning description. So like, hey, this is only for rule, you can only build this there or this is zone commercial, you can do this or this is for mixed use or this is high density, this is low density.
So typically for me what I\u2019ve seen is just going onto that city or county website is a great way to figure that out. And then the best way is just like if you can just go to the city or the county and ask them like, Hey, I\u2019m looking at this parcel of land, can you tell me what it\u2019s zoned for? We\u2019ve called the county in different cities multiple times to ask those questions as well.<\/p>\n
Ashley :
Yeah, if you go onto the GIS mapping for the county, you\u2019ll be able to see, but I would always take Tony\u2019s recommendation and actually call to verify, especially if that zoning is really going to rely on what your project is going to be. You can always go to the planning board and you can request to have the zoning changed, but that is something that you don\u2019t want to commit to a project not knowing if that is going to be approved or not. So talking to the local code enforcement officer and even maybe a member on the planning board if that is something that you want to do, is to change the zoning of that property. And also finding out, because it does vary from state to state, or county to county, maybe even town to town as to what can actually be done on how a property is zoned.
So if it\u2019s commercially zoned, are there limitations as to what kind of commercial properties can actually be put onto that property? So I think looking further and make sure exactly what those things are. And a lot of times you go to the town or the village websites, you can just pull that up and kind of read it. Very, very boring reading, but it\u2019s in there. And so a lot of the towns that I invest in, there\u2019s a code enforcement officer and it\u2019s a very small town, so it\u2019s not like they\u2019re overloaded with stuff or you\u2019re waiting years for permits. So I usually just send an email and ask my question and then get a response that way. I found that the easiest.<\/p>\n
Tony:
And Robin, one thing you can do if you\u2019re looking at a property, you\u2019re looking at land or whatever it is, you can put as a contingency in your offer to say, contingent upon zoning allowing for X and like, hey, we\u2019re not going to close on this land unless we can make sure that we can do what we want to do with it, we\u2019re not going to close on this property unless the zoning supports whatever our end goal is for that property. So you can definitely write that into your contract as well. And your EMD doesn\u2019t go hard until you\u2019ve been able to validate that.<\/p>\n
Ashley :
Okay. The second question is not sure how to word this next question, where can I find out information about a town and its future plans? A town was halfway burnt down and I would like to see if there has been any talk meetings about rebuilding. Would buying a property on that town be a good investment? Wow, first of all, that\u2019s awful, the half burnt town.<\/p>\n
Tony:
Half is burnt, yeah.<\/p>\n
Ashley :
Yeah. I think the best place to start is the planning board because they\u2019re going to approve any kind of development that goes into that area. So they would be the ones where people would bring their proposals as to what they want to redevelop there in that area and then they would approve it and they would kind of go through the process.
So going to that town\u2019s webpage and looking when the planning board meetings are. Usually they are once a month, at least where I\u2019m from. I don\u2019t know, maybe if that\u2019s the same everywhere. But you can also read the minutes online so they\u2019ll have somebody take the meeting minutes that kind of goes over everything that happened during the meeting and you\u2019re able to read those after they had the meeting too, so you could go back and look at meetings you\u2019ve missed and see what they have, or even if you can\u2019t attend, you can go ahead and read those meeting minutes, but the planning board would be the place to start.
Also, even just going down and talking to the town clerk, I guess it depends on how large your city is, but when you\u2019re investing in small towns, and I\u2019m assuming this may be a small town since half of it burnt and going and talking to the town clerk. Where my kids go to school, they actually send out a newsletter. The town there, it\u2019s a village and the village sends out a newsletter every quarter with the water bills. And so it will go through like, oh we are in talks with so-and-so about bringing in this franchise or whatever to come in here and they update you on the new development or things that are happening.
There was recently patio homes that were being built and they\u2019re not being paid by the builder or anything like that. They\u2019re just trying to promote things within the community as to this development that is happening. Another place that I find out what\u2019s going on more in the city of Buffalo is I\u2019m subscribed to Business First. It\u2019s a newspaper, I get it mailed to my house and I go through it where they go through real estate happenings, business happenings. So I find out some information there too as to what\u2019s going on.<\/p>\n
Tony:
That\u2019s a great answer, Ash. I literally have nothing of value to add on top of that.<\/p>\n
Ashley :
The other thing I would say is join Facebook groups. My mom is part of one that\u2019s like Be Neighborly Springfield and so she\u2019ll know things that are happening before I do one of the towns that I invest in because she belongs to the Facebook group because it\u2019s everybody in there telling what they know or what\u2019s happening or there\u2019s a police car parked outside somewhere and everybody\u2019s going on in these groups. So that\u2019s really also a great way to gather information. I will say it, use it as a starting point makes you verify that information. When I was doing this new development for an investor, we were building a 40,000 square foot auto dealership and we had to have an environmental study, but we also had to have an archeologist study done because they had built a highway extension behind this property several years prior and they had found artifacts there.
So they required us to pay for an archeologist to come out from one of the city colleges and do an archeologist dig and ended up going to a phase two thing, cost us $15,000. But they went out and they marked all these red flags, went viral across the town\u2019s Facebook, they found a dinosaur there, an Applebee\u2019s is being built there. All these different rumors just going around and it was so funny, and all it was, there was a farmhouse that had been there, it was one of the first houses in the town from the 1700s. And when they had done that highway extension, they had started all this research on that person because they had found the barn. But now on our property they had found the house and there was the actual stone foundation still there, but it was like crazy. They knew how many cows he had, how much milk his pigs produced. It was wild. I would\u2019ve been fascinated by it if I was not part of the team-<\/p>\n
Tony:
The person trying to make it happen.<\/p>\n
Ashley :
\u2026 that was paying $15,000 to try\u2026 And my project stalled to try to get this thing going. But yeah, it was just\u2026 So, make sure the Facebook thing, at least everybody knew there was something going on there, so you could see something\u2019s being built there. But there\u2019s other ways. If anybody would\u2019ve went to the planning board minutes, they would\u2019ve seen that we had approached and it was for a new dealership that was going to be built there. So that\u2019s a funny story for you guys.<\/p>\n
Tony:
Interesting. So no dinosaurs?<\/p>\n
Ashley :
No dinosaur bunk because I would\u2019ve shipped those right out to AJ Osborne.<\/p>\n
Tony:
All right, so you ready for our next question? This one comes from Doug Smith and Doug says, what does it mean when a house is owned by the Chamber of Commissioners? So I\u2019ve actually never heard of the phrase Chamber of Commissioners. I\u2019ve heard of Chamber of Commerce, I\u2019ve heard of commissioners in a county kind of level, but I\u2019ve never heard of Chamber of Commissioners. So Doug, I can\u2019t say with exact certainty what a Chamber of Commissioners is, but without too much context, what it sounds like is that this property is owned by some kind of public like agency. It could be someone associated with the city or the county.
And that could happen for a multitude of reasons why land or a house is owned by the local city. It could be that it was just left empty for so long and no one claimed it. Maybe there were liens or some other reason. There\u2019s a lot of different reasons how cities and local governments end up as owners of properties. What I have found though is that typically they\u2019re not eager owners of those properties and typically there\u2019s some kind of auction that\u2019ll happen to get rid of those properties that are owned by that local government. So that\u2019s my take Ash. I don\u2019t know if maybe you have more familiarity with Chamber of Commissioners.<\/p>\n
Ashley :
Yeah, I\u2019ve never heard it. I\u2019ve heard of the Chamber of Commerce, but I\u2019m assuming this is more of a board of commissioners maybe, but the town commissioner who maybe the property has been vacant, and the town has taken over the property. Maybe an abandoned title has been filed or something like that. And so most of the time when the town takes over a property, they are obligated to put that property up for auction. They can\u2019t just go and sell it.
So if you did see a property that\u2019s owned by a town, the first place you could go to is talking to the town clerk, is go right there and ask, I\u2019ve seen this property here. But also if you look on the GIS mapping system for that county that property is in and pull up that property, you should get a mailing address too for the Chamber of Commissioners. And you can send a letter to that mailing address too and just say that you are interested in buying this property. And worst case scenario is that they send you the information of when the auction is or how they plan to sell the property.<\/p>\n
Tony:
All right. Our last question for today comes from Alan Thomas Taylor. Alan\u2019s question is, at what point in the process, if at all, get a buyer\u2019s attorney when going to purchase property? Before you even make your offer? Never? This will be my first investment property. So I don\u2019t currently have any legal paperwork drawn up, but want to make an offer on a three units property. So Ashley, New York is the state of litigation. So I\u2019ll let you take the first answer here.<\/p>\n
Ashley :
So if you are doing an off market property where you\u2019re not using a real estate agent, I would definitely start with an attorney and just talk to them and at least hire an attorney so that when you are ready to do your deal, you have an attorney ready to go. And you don\u2019t have to put a retainer down with an attorney, you just setting a meeting or calling an attorney and just saying, this is what I\u2019m trying to do, is this something you specialize in? Have you done this for other investors? Things like that. So it says that this is your first investment property, you don\u2019t have any legal paperwork drawn up, but you\u2019d like to make an offer on a three unit. So you\u2019re basically going to tell the attorney that and ask them what is the process that you would help me with when walking through this purchase and getting the contract drawn up.
So they may send you to one of their paralegals, which is perfectly capable of doing that, and it will be a lot cheaper too, because you\u2019re paying a paralegal rate than an attorney rate. So find your attorney first and get lined up before you make the offer. And then what I usually do for off market offers is I do a letter of intent. So you can Google this and you can use a sample format online where basically it\u2019s just saying that you intend to buy this property at this address from this person for this amount. And it\u2019s going to state in there that this offer is contingent on attorney approval. So make sure it does say that in there. And then you\u2019re going to have the seller sign, you\u2019re going to sign it, and then they give it to their attorney and you\u2019re going to give it to your attorney and they\u2019re going to use that to drop your contract.
So if there\u2019s any kind of contingencies, like an inspection, you\u2019re going to want to have that in the letter of intent too. But it\u2019s not going to be your real estate contract that you\u2019re drawing up to purchase this property. This is just to get that offer in agreement and something to give to your attorney to actually drop the contract. A seller could change their mind. So the sooner an attorney can get that contract turned around and you get under contract, the better. So that\u2019s why it\u2019s important to talk to an attorney first, have them lined up so that when your offer is accepted, you can go ahead and have them go ahead and put that contract together. They\u2019re probably going to need some information from you about the property to actually get it started. I know that my attorney always includes the SBL number for the property, which is kind of like the property tax ID number, the Parcel ID number.
They include exactly how many acres, they include, everything that\u2019s included. So appliances, are you purchasing the appliances with this three unit, things like that. So make sure that when you talk to the attorney and when they send you the contract you\u2019re going through and making sure that it specifies everything that you want as part of the deal and everything that you are offering as part of the deal too. And I think talk to them too about structuring the contract, maybe if you\u2019re doing seller financing, things like that and figuring out can they help you actually set up seller financing too, where they\u2019re putting a mortgage on the property for the seller, things like that.<\/p>\n
Tony:
Actually, that was a masterclass and I can tell you\u2019ve done this a couple times.<\/p>\n
Ashley :
Yeah Quite a few.<\/p>\n
Tony:
So Alan, we don\u2019t know what state you\u2019re in and every state\u2019s going to be a little bit different. So that\u2019s the process Ashley has to go through in New York. For me in California, whether it\u2019s in\u2026 And I\u2019m assuming you\u2019re going off market here. For me in California, when I go off market, we usually just go through our escrow and title companies here. So when I have a new off-market deal, I send it to my escrow officer and then between escrow and title they drop the contract, they send it out to the seller or the buyer or whoever the other party is, and they manage pretty much everything for me. They do ask me just a few details about the transaction, but outside of that I don\u2019t have to get too involved. So I think depending on where you\u2019re at, whether or not you even need an attorney is probably the first question. In California, we don\u2019t, other states you do.<\/p>\n
Ashley :
And when you get that contract too, if it is a commercial property and it\u2019s not just a residential contract to purchase property, if it is a commercial one, I recommend getting a new contract every time because the commercial properties can vary so much. But if your attorney sends you a residential contract, and they send you almost like a Word Doc of it where you can go and change things in, what I recommend too is that you go in and you put in the information and then send it to your attorney to review and say, does this look correct? Here\u2019s the letter of intent, did I put everything in okay? And that saves you in attorney fees by doing it yourself, inputting the information.
For my operating agreement, for a loan agreement, things like that, I have just sample contracts where it\u2019s highlighted in yellow, the things that get changed every single time. Then I just go through and fill them in. And then if there\u2019s anything extra that\u2019s different from the norm, then I go and find out what spot should that be put in, or I ask my attorney and then I get that final attorney just glance over, send back, good to go. And then I take it to the seller to sign.<\/p>\n
Tony:
We do the same exact thing, Ashley, for our JV agreements. So we sit down with our attorney usually once or twice a year to make updates to the actual agreements. But when it\u2019s done, same exact, and there\u2019s just yellow boxes that we have that we need to go in and fill out every time we have a new partnership. And that\u2019s so much more cost effective than having your attorney do that legwork every single time you submit an offer or have a new partnership or whatever it is. So when you reach out to your attorney specifically ask them like, Hey, when we\u2019re done, can you give me a template that I can use for future transactions? That way they can show you where you need to fill in that information. I think we got time for maybe one more question.<\/p>\n
Ashley :
Yeah.<\/p>\n
Tony:
I have one that popped up in my Instagram DMs. So let me take this. This one comes from Nathan LaPortes and Nathan says, Hey Tony, Nathan here. I\u2019m a first time potential buyer for a rental property. I\u2019ve been listening to your podcast, I\u2019m watching your YouTube piano for a little bit. And I\u2019m really interested in buying myself a duplex in hopes of listening one side as a short-term rental and the other side as a medium term. The question is, what is the best way to search out and make sure that I\u2019m buying in the best area with the best chances of returns? What resources do we have, or how do we go about choosing the areas to give us the best results and run our numbers the right way?
So Nathan, there\u2019s a lot that goes into analyzing. Well, you\u2019re not even asking about analyzing here. First you\u2019re asking about market selection, and then within market selection, once you found a market, you have to analyze the deal. In terms of market selection there\u2019s three big buckets that I look at. I look at permitting, the policies in that market. I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I\u2019m getting in a market versus the average purchase price, what does that ratio look like, and am I able to hit my return? And then within a specific property, there\u2019s really three things that I\u2019m looking at. It\u2019s location within that market because some parts of a city are probably better than other parts of a city.
If you\u2019re in a lake town, being lakefront is probably better than being two miles away from the lake. If you are in an urban setting, being maybe in the heart of downtown is better than being on the outskirts. If you\u2019re on the beach, beachfront is better than two blocks back from the beach. So every market probably has its location that makes more sense than somewhere else. So location is a big one. Next is the amenities and the design standpoint. So if you\u2019ve got a property that really creates an amazing experience for your guest, even if you don\u2019t have the best location, maybe you can make up for by making the property super amazing. So location, then amenities and last will be value. So how good of an experience can you give your guests in comparison to the price they paid for that property? So it\u2019s more of a framework for you, Nathan, to look at. So in terms of choosing the market policies, popularity and profits, and then looking at the actual property, I\u2019m evaluating location, amenities, and value. Anything to add to that?<\/p>\n
Ashley :
Well, not to really the short term rental side, but I pulled up an article that I\u2019d seen from Bigger Pockets for more of the long-term rental side. So the Bigger Pockets published this article, and it\u2019s The Top 10 Real Estate Markets for Cash Flow in 2022 by Dave Meyer. So I think a great way to start out identifying a market is looking where the research tells you to go and also where other people are investing. So even before that, you need to identify what your goal is for real estate investing. Is it cash flow? Is it appreciation? Okay, so if it\u2019s cash flow, then you\u2019re going to look at this article, 10 Real Estate Markets for Cash Flow in 2022. If then you\u2019re going to go, if it\u2019s appreciation you want, it\u2019s the long-term play you just want to cash out in 20 years after you\u2019ve built up all this equity in these properties, then you\u2019re going to look for the Top 10 Real Estate Markets for Appreciation.
So in this article, it goes through the top 10. And so the number one is actually Detroit with the median sale price at 63,000, the median rent 1400. And so the rent to price ratio is 2.2%. Okay, that information right there, that does not mean run to Detroit and buy property. This is a starting point. This is where you can kind of analyze that data. You have to go and verify. Just because it has that cash flow target doesn\u2019t mean it\u2019s going to not bring headaches, it\u2019s not going to\u2026 These aren\u2019t going to be properties that constantly need repairs. Are they going to be in bad areas, maybe where you have to deal with a lot of conflict, things like that. So you\u2019re always going to want to look at other things too. Are they in good school districts, things like that. What class of tenant are you going to be getting into the property?
So maybe you want to be really passive, so maybe you want higher end properties where they\u2019re more turnkey, they\u2019re brand new. You don\u2019t want to have to constantly send people to do repairs even though you\u2019re getting a larger amount of cash flow. So think about all of these variables and what\u2019s important to you, and then kind of work backwards from that. But you can start with where other people are investing and then kind of analyze those cities and those markets to see if they fit what you want to do, actually.<\/p>\n
Tony:
I love that advice, Ashley. And I think a lot of times, especially new investors, they just want that magic bullet that says, pick this city, right? But there\u2019s so many factors that go into choosing the right market for you because what\u2019s important to Tony might not be as important to Ashley, and what\u2019s important to Ashley might not be important to Tony. So there\u2019s this balancing of priorities and goals and objectives that each market kind of caters towards. So I think the point of thinking about what\u2019s important to you first is super, super critical. So Nathan, hopefully that little framework helps you make the right decision for yourself moving forward.<\/p>\n
Ashley :
Yeah. And Tony, I have one more thing to add because I was kind of just eyeballing the cities and states, and right after I stopped talking, I saw number two, and I don\u2019t know why not\u2026 You would\u2019ve been talking when I looked at this whole thing, I didn\u2019t see this before, but number two is Shreveport, Louisiana-<\/p>\n
Tony:
No way.<\/p>\n
Ashley :
\u2026 for cash flow. It is-<\/p>\n
Tony:
Is it really?<\/p>\n
Ashley :
\u2026 median sale price, 93,000, median rent 950 with rent a price ratio of 1.02%. So if-<\/p>\n
Tony:
I knew it, I was good.<\/p>\n
Ashley :
\u2026 you guys have been a long time listener about Shreveport, Freeport, whatever I thought it was called for two years that Tony had to invest in property. So I think right there is an example of just because that\u2019s the best cash flow you can get, does not mean that is the optimal market to invest them.<\/p>\n
Tony:
Yeah. Yeah. So for those of you that don\u2019t know, I lost $30,000 on a property in Shreveport, Louisiana. It was profitable as a rental unit. We had it rented out for about a year and we were making a couple hundred bucks on it every month. Got some great financing to kind of take that deal down. But when we went to sell it, that\u2019s when all the problems started popping up. So anyway, it was one of these rookie reply episodes, you can go back and find it, but we lost 30,000 bucks on a house in Shreveport.<\/p>\n
Ashley :
And that also gives another example is that, yeah, you were getting the nice cash flow, but also there was lots of repairs and even if you wanted to put the house up for sale, eventually these repairs would start [inaudible 00:36:33]-<\/p>\n
Tony:
All those things would\u2019ve came.<\/p>\n
Ashley :
Yeah.<\/p>\n
Tony:
Totally, totally.<\/p>\n
Ashley :
Well, thank you guys so much for listening to this week\u2019s rookie reply. And I hope you guys all have a wonderful holiday season. And I completely forgot after question one that I was turning every question into a holiday theme. But I wish everyone Merry Christmas and a happy New Year, even though we\u2019ll have an episode next week and I\u2019ll wish you a happy new year again before that. But thank you guys so much for joining us. And I just want to say you guys are amazing and you guys had an awesome year as rookie investors and some of you have just taken off and we love hearing your guys\u2019 story. So keep sharing them with us at the Real Estate Rookie Facebook group and we\u2019ll see you guys on Wednesday for a show with a guest.<\/p>\n
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