On this episode of the Invest Four More Podcast, I interview myself. I just took a trip to Florida to explore rental property locations and have a nice vacation with my family. I learned a lot about the market, codes, insurance, neighborhoods and towns, while in Florida. I saw quite a few houses, met with multiple agents and I get a really good idea of what it would be like to buy rentals in that area. I think I have decided that the Florida market is much better for rental properties, than the Colorado market and I am going to move forward with my plan to invest in rentals in a new market.
I am giving away a Complete Blueprint Program!
Before I get started on what I cover on this podcast, I wanted to give my readers and listeners a heads up on a couple of items. I mentioned this to my email list already, but I am giving away a Complete Blueprint to Successful Real Estate Investing program. The only thing you have to do to enter the contest is leave a review on one of my eBooks on Amazon and email me to let me know by Monday March 28th. Mark@investfourmore.com. Below is the link to my books on Amazon (all my eBooks are on sale this weekend for $2.99).
Mark Ferguson author page
As a reminder my book Fix and Flip your Way to Financial Freedom is available in Paperback. My new rental property book will be available in the next week or two as well. This book will be about 350 pages long and cover just about everything you need to know about investing in rentals. It will also be available in paperback.
Finally I am having a live webinar on investing in out-of-state rentals next week. I will have time for live questions at the end and you can sign up here. Live Webinar
Why am I thinking of investing in a new market?
I have been over my reasons for investing in a new market on other podcasts and in articles. The main reason I am looking to invest in other markets is our prices are going through the roof in Colorado. I have 15 rentals in Colorado and I love the fact their values have increased, but rents have not increased as much as values have. While I am making more on each property now, than when I bought them, I have a lot of equity in my properties that is not making a very good return. While I am making great returns based on the cash I have invested into my rentals, I am not making that much money based on the equity I have.
The other problem I am running into, is I can not find great cash flowing rentals in my area anymore. Prices have increased from $80,000 to $130,000 to $150,000 to $220,000 for the rentals I am used to buying. Those prices are considering I am getting a good deal and buying below market. Not only are rents not rising as fast as prices are, but it takes much more cash to buy more expensive properties, which reduces my cash on cash returns.
I have still have a goal to purchase 100 rental properties by 2023, so I have to do something different.
What do you have to do to choose a market to invest in?
Picking a new market to invest in is not easy. There are many towns and areas of the country that have decent cash flow and decent prices, but they all different economies. Here are the basic things I looked at to choose a market.
Price point: I want to invest in an area that has decent rental properties for around $100,000. That was my sweet spot in Colorado and worked awesome for me. If you buy more expensive rentals it is tougher to cash flow and takes more money. If you buy cheaper rentals they may have more vacancies, maintenance and can be harder to finance.
Rent to value ratios: It makes no sense to buy rental properties in a new market, if they do not cash flow. I want to make sure the rentals I buy, at least meet the 1 percent rule (buy for $100,000 and rent for $1,000). I would prefer the rents are higher than the 1 percent rule, but that would be my minimum requirement.
Price trends: I would like to buy when the market is down and not at its peak. It is hard to predict what markets will do, but history can tell me if prices were much lower or higher in the past.
Population trends: I want to buy in places with increasing populations, and locations that are not huge so I can figure the market out easier.
Economy: I want to invest in places with a diversified economy that are not dependent on one or two industries.
Fun place to go: The more I want to go to a place, the more likely it is I will go there. I think you have to visit places you want to invest in, if you want to get the best returns.
Who do I know? I think it is wise to start looking at locations where you know people. They can give you insight into markets and neighborhoods.
After looking at all of factors, I decided Florida was a good place to explore.
What did I learn while exploring rentals in Florida?
I learned a lot about the market in Florida. I took my time choosing a location to explore, finding areas that had good prices, as well as price to rent ratios. There were many things I learned about the market in Florida.
Utilities: Hooking up to water is much cheaper in Florida than Colorado.
Construction: CBS homes are preferred over wood frame homes.
Market: The market is definitely improving in Florida. There is not much inventory, not many homes for rent and prices are increasing in the areas I looked at, but prices are still very low.
Agents: I met a few great agents in the area and some lenders as well.
Termites: There are many things to watch out for in Florida that I don’t worry about in Colorado. Termites are very rare in Colorado, but are often found in Florida. Hurricanes can cause damage and higher insurance, which we tend not to have in Colorado, but they don’t have damaging hail as much as Colorado.
For more detail on all of this, make sure you listen to the podcast.
What is my real estate investing plan moving forward?
After visiting Florida, seeing the market and having a nice vacation with my family, I have decided it is a good market to invest in. I have two properties in Colorado, that are vacant or will be vacant soon that I plan to sell and use a 1031 exchange to buy multiple rentals in Florida. I am also moving forward with refinancing 7 of my rentals with a national lender to 30 year fixed rate mortgages, which will give me about $250,000 cash out. I can use that money to buy more rentals in Florida. If you want to get more information on 30 year fixed rate mortgages from national lenders, check out the article below.
How to finance more than ten properties.
If you liked this episode, be sure to leave us a review!
The podcast is really starting to take off! Thank you all who listen and reach out to me. If you know of anyone who might be an interesting guest send me an email:Mark@investfourmore.com. If you enjoy the show, be sure to leave a review on iTunes!
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Don’t forget to get entered into the contest for a Blueprint by leaving a review! Mark Ferguson author page
Transcript
[INTRODUCTION]
[0:00:58] MF: Hey everyone, Mark Ferguson for Invest Four More and welcome to another episode the Invest Four More Real Estate Podcast. Just gonna be me today. I have a lot of really exciting things to talk about. I am sitting in my office right now staring out at a blizzard outside in Colorado. Just got back from Florida last night, so perfect timing. But I really wanna talk about Florida, what I found down there, why I went down there, and some other things that are going on in my investing world right now. Lots of information on rental properties, picking a market.
But before we get into that, I have a couple of other really exciting things going on. As many of you know, I have a few books that I’ve written and self-published, and one of those is Fix and Flip Your Way to Financial Freedom. That book I was able to publish in paperback earlier this year, which was pretty exciting. Not an easy thing to do, but I got through it. And I’m running a contest right now, for anybody who buys the book, leaves me a review on Amazon, you’ll be entered into a contest to win a Complete Blueprint for Successful Real Estate Investing.
So that Blueprint program, face value is $997, we do two coaching calls a month, email coaching with me, there’s audio CD’s, mp3’s, over 300 pages of information, a ton of stuff comes with that program. So if you’re interested in that, if you’ve been interested in that program, all you have to do is a leave a review on Amazon for that book, or any of my other books as well. You will get entered once for each review you leave and then send me an email letting me know you left that review just so I make sure I see it: mark@investfourmore.com.
That’ll get you entered. I was going to end the contest March 25th, but the weather and my trip kind of slowed down the recording of this podcast, so I’m probably gonna extend it at least till the end of this weekend. So that would be March 28th I think I’ll pick a winner. So please, love to have review, love to see how people feel about my books. It takes a lot of work to get a book written, that’s for sure.
All right, moving on to Florida, why I went, what’s going on with my rental properties. As many of you know, if you’ve listened to my podcast, read some of my articles, prices in Colorado are going crazy. I know I sound like a recording when I say that because I keep saying it over and over again. But they just keep going up. They have not really slowed down much at all, and because of that I’ve seen great appreciation in my 15 rentals here, and it’s just been awesome.
Rents have gone up as well, but rents have not gone up as much as the prices have, relatively speaking. So when I evaluated my properties, how much equities I had in the rents, I have a ton of equity in those properties that is not making that great of a return. So I was thinking, you know, I could refinance some properties or I could sell some properties, take that equity out, reinvest it. So right now, my current plan is to refinance some of my properties and sell at least a couple of them and buy in new markets across the country.
So on the refinance side, I’ve talked to a number of the large hedge fund type lenders across the country, there’s B2R, Jordan Capital, Lima, Colony. There’s a lot of companies out there that have financing for rental property owners, and they specialize in people who have a lot of properties who have difficulty getting conventional financing or even local bank financing because they have a large portfolio of properties, and most banks do not want to give you a lot of loans.
Once you hit 10 mortgages it becomes very difficult to get more loans. So I’ve been talking with those companies, I’ve got something pretty much finalized with Jordan Capital. I just have to decide what properties I wanna refinance, and then I may try to resign some leases, raise rents a little bit, just so I can increase the amount of cash I can bring out of those properties.
So the current plan, I’d be refinancing seven properties and be taking about $250,000 of cash out of those properties, and then I could take that money, reinvest it into another market as well. That will probably happen in the next, oh month to six weeks I think, it will be finalized. That will also give me some great capital if I need more money for flipping. But for the most part, I wanna take that money, reinvest it into more rental properties.
And one reason I wanna do that, some people think it’s risky to refinance, raise your loan to value ratios, but one of the biggest advantages of buying rental properties is getting them below market value. So when you first buy a rental, if you can buy at 20%-30% below market value, I mean you just started the game off with 20-$30,000, maybe more, in equity in that house as soon as you bought it.
And that’s been one of the really great reasons I’ve been able to expand my net worth, to build quickly, is because I get great deals on properties. Not just buying any property on the MLS, I’m getting great deals building equity very quickly and then of course appreciation helps as well. So that’s my plan for the refinance side, that’s moving along. I’ve gotten kind of preliminary approval, I just have to decide a few details on getting that done.
And then for the selling side, I have identified a few properties that aren’t in the best area for my strategy. Maybe they have a little bit of trouble renting, or just something else is going on with them where if our market does decline, if things change, those properties will probably be the first ones to decline in value. So I’m kind of keeping my core area of really good rentals, and thinking about selling off some of the ones that aren’t so great.
Maybe I was pushing the numbers a little bit, or pushing the areas I invest in just to be able to buy more properties because our market has gotten so crazy. So I have a couple of those properties that will be ready to go soon. One of them is rental property, oh I think it was 13? I’d have to go back and check to see the exact numbers. But it’s an up-down duplex, had it rented for a year and both tenants decided they wanted to move out and the house needed a little bit of work.
So we’ve been working on it getting it fixed up now. We didn’t fix it up when I first bought it because it had tenants when I bought it. So we fixed a few things while the tenants were in there, but we didn’t wanna go through and remodel the house with the tenants still living in there. But now we’re going through, making it nice. And I think that one is more of a college rental, which I’m not a huge fan of.
I think many people can make a ton of money with college rentals, but I don’t like that strategy as much for me. So that’s one reason I’m thinking about selling that one. So I bought that for $120,000 last year, we’ll probably put about $10,000 of work into it, and I’m thinking it’ll probably be worth at least $160, probably more than that, when we sell it. So I’ll have $50,000 or so of equity I can work with in that, maybe a little more.
I can exchange that into one property, maybe two properties in Florida if I find the right financing and not pay any taxes on that profit, which is really nice. So using a 1031 exchange. Another property I am probably gonna sell is rental property number five, and that one’s been rented to the same tenants since I bought it 3 years ago. For one thing, it’s under rented, it was rented for $1,200 month, which it probably could rent fro $1,400- $1,500 a month now.
But we just had troubles with these tenants from the very beginning and part of that was I was managing the properties at that time. I did not do a really great job of screening the tenants and we kind of chose these tenants because they were the only ones that wanted the house at the time. I wasn’t patient, I didn’t wait for the right tenant. And part of the reason we couldn’t get it rented was the home has really no dining area.
There’s no place to put a dining room table and every person we showed it to was like, “Yeah, we love the house, we like everything, except there’s no place for us to eat.” So I didn’t realize that until after I bought it and tried to rent it and I’m like, “Oh yeah, you’re right. There isn’t a place to eat.” So we’re probably gonna sell that one. That one I bought for $88,000 in 2012 I believe. We put about $15,000 into remodelling it as soon as I bought it.
And that one is probably worth $190-$195,000 right now. So I’ll have a huge chunk, probably $110,000 in equity after selling costs that I could exchange into more properties in Florida. So those two properties for sure, I believe I’m gonna sell and try and get a 1031 exchange done. And then I have another one in a small town called [Perzy], which I bought over there because we had a really big oil boom going on for the last few years.
And with oil prices going down, obviously there’s been some layoffs, the oil boom is not booming like it was. So the main reason I bought that house cause it was right in the middle of the oil areas. I thought it’d be an awesome rental for oil workers, just right in the heart of oil country. And it’s funny because ironically, we never did rent it to anybody who worked in the oil industry. It was just to a couple people who lived in the town of [Perzy].
But I bought that house for $99,000, I’ve had it rented for $1,250 the last year and a half, maybe two years. We only put $4,000 of work into it. It was in pretty good shape. That house is probably worth $160,000 minimum right now. So there’s another big chunk, probably $60-$70,000 I can exchange into more properties as well. So if I sell those three properties I will have over $200,000 probably close to $230,000 that I could exchange into new rental properties.
If I’m able to get good financing, put 20% down, 25% down into new properties, that means I could buy six, seven, maybe more rentals with those three sales. So not only am I using that equity much better by buying more rentals, I’ll have more cashflow than I have now, I won’t pay any taxes on the profits. It seems like it makes a lot of sense to me, although it will be a lot of work to get all this done.
All right, so moving on, why did I go to Florida? Why? Well first off, it was a vacation with my family, plus kind of an exploration trip to see what the market’s like down there. If you’ve been following me at all, I really like Florida as far as rental properties, I’ve been thinking about investing there. Before I buy anything, I wanted to go down there, visit the areas I was interested in, see what they are like personally, meet some people, meet some agents, meet some lenders, and then kind of give me and idea if it’s worth pursuing even more, investing 1,500 away/2,000 miles away from me.
So we left on March 12th, got back yesterday, March 22nd. You’ll probably hear this podcast a few days later because it takes a little time to get them edited, but it was a really good trip. We went to the Orlando area, I went to some different markets around Orlando. I know many of you will be asking me what markets I’m gonna buy in, and where I’m buying at, and many of you are not gonna like this. But I am not going to publicly say where I’m buying at, at least for the immediate future.
And the reason is, these are very small markets. They are not big, there’s not a lot of inventory, there’s not a lot of properties for sale there, and if I told everybody where I was investing, I think it would hurt myself greatly in my ability to buy properties there. So what I’ve decide to do, I will — you know I am letting some people know where I’m investing if they’re in my coaching programs. And that’s who I’m limiting it to at this time. But it is, I will tell you, it is in the Orlando area.
And there’s another area in Florida too I think would be a great place to invest in, but I haven’t explored that area yet. So why did I pick Florida? What really stuck out in my head? There’s a lot of things to consider. So when you’re buying out of state, there’s no perfect market. A lot of where you invest is going to be based on some of your personal factors; how close you are, how comfortable you are, how well you know an area.
The first thing I always look for is, do I know people? And luckily with my blog and my website, plus being a real estate agent and REO agent who sells foreclosures, I have a really big network of investors, of real estate agents, of people I know across the country. So that wasn’t a huge difficult part for me, because I know so many people. But for others, I think if you have some connections, know some people in an area, it will make your life so much easier investing there. That’s one of the first things I would look for.
And then one of the other things you really wanna look for is price point. So most people want to invest in new markets because properties are too expensive where they live, or there’s just no cashflow. If you’re in California, if you’re in New York City, if you’re in Seattle, if you’re in Denver right now, prices are so high that it’s just really, really hard to cashflow on rental properties. Normally the higher prices are, rents just do not catch up with the values, relatively speaking.
So many people are looking for other markets to invest in. And plus, when prices are $400-$500,000 for a property, it’s really hard to get the down payments together, it’s really hard to buy multiple properties because it takes so much money to buy a rental when prices are that high. So one of the first things I looked at was where are prices lower? Where are good price points?
Honestly, there are a number of markets across the country that have great price points. Florida, parts of Texas, Wisconsin, Milwaukee, areas of Chicago, Illinois, Ohio, upstate New York, Pittsburg — there’s places all over the country that have great price points for rental properties. So then once you see the price points, I kind of want to take a look at what the rents are. What’s the rent to value ratio for those properties?
So say a property’s selling for $100,000, what would it rent for? Would it rent for $600 a month? Would it rent for $800 a month? $1,000 a month? $1,500 a month? A lot of people think that the price to rent ratios they see in their market is gonna be what they see everywhere. If you can buy $100,000 house and it rents for $800, people feel, “Well that’s probably what it’s gonna be like all over the country,” but that’s not true.
There are huge difference in how much properties rent for compared to what you can buy them for based on a number of factors; the economy, the demographics, taxes, supply, demand, population increases/decreases. There’s a number of factors that affect that. So that’s one thing I really look at. And one site that can help you get an idea of what rents are is Investability.com. I use that site quite a bit.
But what you wanna see is just a general idea of what properties are selling for based on what the rents are gonna be. Now, if you can’t find any awesome deals or homes that are selling for $100,000 but they’re only renting for $900, that doesn’t mean it’s a bad market, because remember, you’re just looking at a few houses for sale at that particular time, whatever website you’re using, and you wanna get really good deals.
So if you’re patient, work with a great team, you’re probably going to be able to buy houses a lot cheaper than what you’re finding online at any given time. So don’t lose hope just because what you see on your first day or your first hour looking online, doesn’t have great numbers. The numbers in Colorado on the surface were not great for me when I was buying three or four years ago. But I was buying really cheap homes that needed work, because I knew how to get great deals, which made the numbers work awesome.
All right, so besides looking at price points, rent to value ratios, there’s a number of other things I’ve looked at. Price trends; so houses are selling, or the median price is $100,000 in a market right now. What was the median price a couple of years ago, or five years ago? Was the median price $50,000? Have prices been shooting up? Was the median value $200,000 a few years ago? Have prices been dropping? Or did they drop really fast, and are they starting to go back up?
I don’t think there’s any trend that’s really bad to invest in, except for maybe areas that are seeing huge increases in values because you have to look at so many other factors to see if the value increase can be supported by local economy, wages, incomes, all of that. But I am not scared to invest in an area that has prices that are decreasing, or prices that have decreased but then have stabilized.
I don’t mind investing in an area that has seen steadily increasing prices. One thing I really like about Florida, is their prices were really high before the housing crisis. Many areas saw median values over $200,000, other areas much higher than that, depending on where you’re looking. And many of those areas saw prices cut in half. I mean they decreased 50%.
And Florida is starting to recover now, but they’re nowhere near where they were before the housing crisis, and there’s a number of factors I think that contribute to why prices are not — had not caught up to where they were before like they have in other parts of the country. And one of those factors is, it takes about 935 days to foreclose on a property in Florida. That’s almost three years to complete a foreclosures.
So there’s still a ton of foreclosures in Florida even though the economy’s doing better, people are moving in, and housing prices are increasing. So there’s still opportunity to get great deals, and there’s still decent inventory in some areas for properties. So that really attracted me to Florida, and then the economy, like I said, the economy’s doing better. Florida became the third or forth largest state in the country passing up New York recently.
So many people are moving into the state. That always pushes prices up. And they didn’t build in Florida for the last seven to eight years because the housing market was so bad, the economy was so bad, there’s no new construction going on. And that’s exactly what I saw in Colorado. There’s no building going on, but our population kept increasing. People were buying up foreclosures, distressed properties.
But when the foreclosure inventory slowed down and stopped, there was no inventory for people to buy because they hadn’t been building. And that forced prices to shoot up, and that’s one reason prices are so high here. Plus the cost to build in Colorado is pretty high, which is something else I would look at in a market. If you’re looking to invest in an area, are they building new construction?
How much does it cost to buy new construction, and what can you buy existing homes for? You can’t get a house much cheaper than a brand new house. That might not be that great of a deal because they can just keep building, keep increasing the production of new construction homes, and you won’t see prices increase that much. But there’s a lot of different things to consider.
All right, something else to look at when you’re investing in a new market are the industries, obviously. We saw Detroit crash and burn a while ago, mostly because they’re dependent on one industry, the auto industry. And when that went down, the whole town went down. Now it’s come back up, not to where it was before, but Detroit is recovering. But that’s something I look at too; am I investing in an area that only has one industry?
Is it only tourism? Is it only the auto industry? Is it only an iron mill? There’s lots of things to consider. If that one thing goes does, will the market crash? And I don’t want that. I want a diversified industry, I want many different economies, lots of different things going on. People look at Northern Colorado and thought that our economy would crash once oil prices dropped so much because a lot of our economy was pushed by the oil drilling, oil wells.
However, we have a lot of other diversification in our area. Lots of agriculture, we have manufacturing, we have many different things going on here. It’s not all oil, and our economy has not collapsed. In fact, our economy is just as strong as it was before. One of the problems before, in Colorado, was you could not find workers if you owned a business because everybody was working in the oil fields because they can make $20 an hour or more standing around doing a job that takes no thinking or driving a truck.
And none of the local businesses could hire people. Now they’re able to hire people again, the local businesses are doing better, gas prices are cheaper, so our economy’s doing just fine. But you do have to look out for areas you invest in, is the industry based on one thing? And that scares me a little bit if it is.
Finally, another thing that affected my decision was, you know, we looked at different places in Florida, do you want to go there? Is it a decent place to visit? I think if you’re going to be investing in rental properties, hands on, trying to get great deals, really taking advantage of buying rentals below market, getting great cashflow, you need to visit the area, you need to be there at least a couple times a year if not more.
So if a place is fun to go, if it’s fun to visit, if you can take vacations there with the family, you’re probably gonna be better off than choosing somewhere that’s miserable, you never wanna go there, there’s nothing to do, and you don’t ever wanna visit to see what your properties are actually doing. So that’s something that I considered was, we’re gonna take a family vacation, we want somewhere warm, we love the beach, so that also helped us a lot investing in Florida.
All right, when I went down there, one of the things I really wanna do was meet some people, start building a team to help me invest. ‘Cause that’s one of the most important things you can do investing out of state. You have to have good agents, or a one good agent — real estate agent. You might need a new lender, property manager, contractors. So, when I looked for agents, I reached out to my network of people, I reached out to agents who had done well in the area, were selling a lot of houses, and that’s kind of how I figured out who I wanted to work with.
I actually met with a few different agents, not just one down there and there’s a huge difference in the quality of agents. And I did meet one who’s awesome, couple of others were okay. So I’m very happy I did that. We can kind of tell how much someone knows about an area, how experienced they are, when you talked to them. One thing that turned me off a little was one agent who was in a town of about 20,000 people had to use his GPS to find every single house he showed me. I’m like, “That seems a little strange to me.”
But agents are very important. One thing I really like to do to start off with is finding foreclosure agents, agents who sell a lot of bank foreclosures, HUD homes. Because one, a lot of times they have really good inventory, they have homes that need work, and they also might work with investors because people looking to buy those homes many times are investors. So I try to talk to them, get with them first. Plus I have a large network of people in that industry as well.
Once you find an agent that’s really good, they can also help you build the rest of your team. So, one problem I’ve talked about is financing more than 10 houses. I’ve got 15 mortgages now, but part of the reason I’ve been able to do that is ’cause I have an awesome local lender in Colorado. But they do not work in Florida. So I can’t just use them in Florida, I have to find a new lender. Some of these national lenders I talked about before, Jordan Capital, some of the other guys, they will lend down there too, but their rates are a little higher. Not sure I wanna use them yet.
But the agents I’ve talked to have given me numerous contacts for local lenders in the area, I’ve talked to a few of them, and I think I’ve found a couple lenders in Florida who are portfolio lenders who will give me very similar rates and terms to what I have in Colorado, which is awesome. So one of the lender in Florida, and we’ll do 30 year amortizations, about 4.5% interest rate on a five year arm. So the interest rate would be fixed for five years, and then could adjust after those five years, but it doesn’t have a balloon payment.
So it’s very similar to the products I have here in Colorado. I’m talking with a number of other lenders as well to see if I can get something, backup plan, different lenders, just to figure out something down there which would be fantastic if I could find a similar lender to what I have here, down there. Property management is huge. You have to have a good property manager if you’re gonna buy out of state properties. There’s no way I’d try to manage them myself from 1,500 miles away.
Again, the agents I’ve talked to down there have given me referrals, I’ve talked to different property management companies, and one of the agents even manages properties himself. So I haven’t completely explored all the property managers yet, that’s on my list of things to do, but definitely have some possibilities there for finding decent property managers. I have a really good article on how to find a property manager that I’ll link to. But yeah, very important when you’re investing.
And finally, contractors. Again, contractors will be a very big piece of the puzzle ’cause I wanna buy properties that are great deals, many of them might need work, and I’ll need a contractor to help fix them up. Another reason why it’s nice to work with an REO agent, foreclosure real estate agent, is because many times they have to fix up properties for the banks. And they will already have contractors they work with, people they can connect you to, help you start that search for good contractors.
So definitely a lot of work going on when you’re trying to invest in a new market. It’s not something you can just figure out in a couple days. Contractors, lenders, agents, visiting the place, picking a market, it’s a lot of work. It takes a lot of time, but if you want to make a lot of money with rental properties, if you want great cashflow, if you want to find a place that will make you money every month, plus has great upside for possible appreciation, it won’t be easy. Everybody would be out there doing it if it were easy.
All right, so a few more things to watch out for, some things I learned out in Florida. Different markets have different things going on with their housing. Colorado’s completely different than Florida, obviously. I mean most houses in Colorado have basements. You can’t have a basement in Florida unless you want it to be under water all the time. So many of the pipes are in slabs, hot water heaters, laundry rooms are in the garage, you can’t have that in Colorado or everything would freeze.
So many different things. Many of the places I saw were still on sewer and septic that were in towns, and you just don’t see that much in Colorado either. But one thing I discovered was, in some of the towns I was looking at, it may be $1,500 to hook up to the city or county water where in Colorado, in my area, it’s $15,000 or $20,000 to hook up. So huge differences in costs down there for different things. Utilities can be more expensive for electric, for gas, for water.
Insurance is something to look at because you’re in Florida, you might be in flood zones. Have to have higher insurance because of hurricanes. Many different things going on. HOA’s can be different, local codes. Every code is different in most counties. Different states have different codes. Those are things you need to pay attention to. You need to know how strictly the codes are enforced, what you can and can’t do. If you’re selling a house you have to have things updates.
Another thing that we very rarely, if ever, have in Colorado are termites. You know, you just don’t worry about that here. But it’s a huge deal in Florida and something you really have to look out for. So in Florida they have CBS homes, which are concrete block systems. At first when I first saw CBS I had no idea what it meant. I’m like, “Is that some kind of manufactured home? Is that a mobile home?” But no, it’s actually a good thing.
Basically you build the home out of cinder blocks so it’s stronger, the insurance is cheaper because there’s less chance of being damaged in a hurricane, and then there’s less chances of getting termite damage because it’s concrete block, there’s not as much wood. So I learned so many different things. Something else that I looked out for that I tried to learn while I was there is not just the towns to invest in, but neighborhoods.
There’s a big difference in neighborhoods in different towns. If you go to some of the big cities like Orlando or Jacksonville, neighborhoods change from street to street, sometimes even house to house. It’s really tough to figure out those areas, and that’s one reason why I chose some smaller towns to look at because it’s easier for me to figure out the neighborhoods, the local economy, and the local housing market.
For me to explore all of Jacksonville will take months, and I still probably wouldn’t know the local nuances of neighborhoods and different things going on. So by looking at the smaller towns it makes it much easier for me to learn faster and it felt less overwhelming to explore. But there’s still different neighborhoods in those smaller towns too. You know, some neighborhoods, super nice, well maintained. Other ones, not so much.
And the prices vary greatly from neighborhoods. The rents vary greatly in different neighborhoods. And that’s something it helps to have local knowledge as well, it’s kind of like, “Well why are rents higher over here versus over there, but the prices aren’t that different?” You know I would see that in my area a lot here in Colorado. Or some neighborhoods would have similar rents for properties, but the prices might be higher, 20% higher in one neighborhood than another neighborhood.
There’s not that big of difference in the quality of renters, but the houses might be a little older. Or it’s just not in — it’s a worse location. Who knows what it is? But sometimes there’s opportunity to make more money with rental when you can find similar rents, but lower priced homes. That’s something to watch out for. But one thing I do try to avoid is investing in the bottom, very cheapest, lowest price point of areas.
Just for me, because I tend to see, you know, those areas tend to drop in price the fastest if things go bad. If prices start going up they tend to be the slowest to recover. And the cheaper the rent, usually the more maintenance you’ll have, the more vacancies you’ll have, the more headaches you’ll have managing and taking care of properties as well.
So I’ve always found my sweet spot kind of not the very cheapest properties, but not expensive properties either. Kind of, you know, below the median value, but maybe a step up or a couple of steps up from the very cheapest areas. So I did find a lot of interesting neighborhoods that I’d definitely be comfortable investing in. I saw some other neighborhoods where I’m like, “Ah, I’d probably wanna stay away from these for my personal investing.”
And yeah, I’ve got some great, great insights and I think some opportunities down there once I get things lined up. And I would say too, I hear a lot of people say, “Well I don’t want to buy a rental where I wouldn’t wanna personally live.” I hear that a lot from people, and I think that’s a really silly thing to limit yourself to because we’re all different. Every one of us, we’re all in a different situation.
Some people like living in neighborhoods where other people don’t like to live in. Some people like renting in those neighborhoods, other people don’t. So I won’t limit where you buy to where you would personally live, I would look at the other factors. You know, look at the cashflow, look at the maintenance, look at the vacancies, look at how much management it would take.
Don’t look at what you personally feel, look at the other factors; the economy, the condition of homes, that type of things. ‘Cause some people wanna live in the cheapest neighborhoods. Maybe they have family there, maybe they’re saving money for something else, you never know? It doesn’t mean they’re bad people or it’s not gonna be a good investment.
All right. So, my future plans right now, like I said, I’m getting some of my current rental fixed up. I think I’m gonna put them on the market, work towards doing a 1031 exchange. We’ll need to finalize some information with lenders down there, make sure I’m approved, pre-qualified. Need to talk to more property managers, I wanna interview a couple more property managers, talk to them. And then talk to some contractors as well.
So I definitely have my work cut out for me. It’s not a simple thing, it’s not just going down there, making an offer on a property, and then starting to buy rentals. With the 1031 exchange, how it works is I’d sell the property here, once I sell it have 45 days to identify a new property or multiple new properties to invest in. The new property or properties would have to be purchased for at least as much as I sell the house for in Colorado.
So if I sell a house in Colorado for $200,000, I have to buy at least $200,000 worth of properties in that same deal with the exchange. Any properties I buy have to be bought in the same name, the same LLC as I sold here. Any cash I get out of the sale from the property here would have to be reinvested into the new properties as well. Or I could pay taxes. Once I’ve identified my properties I have 180 days to actually close, but they have to be identified in 45 days.
So that’s the plan for now, refinance properties, sell a few, exchange them into new properties, and then I’m 90% sure I’m gonna start buying a few rentals down in Florida. See how it goes. The price points I’m looking at down there are from $80,000 to $120,000 and those properties are renting from $1,100 to $1,500. Really similar to the numbers I was getting in Colorado a few years ago.
The market down there is really similar. Prices have been going up, but they have not gotten close to where they were before the crash. So a pretty exciting time. We’ll see how it goes. I had an awesome time on the beach as well, so it wasn’t all business. And yeah, coming up, like I said before, please check out Fix and Flip Your Way to Financial Freedom. Leave me a review to get entered in the contest to win a Complete Blueprint.
Again my email’s mark@investfourmore.com. I’ll have a link to those books on the article that describes this podcast. But you can go to Amazon and search for Fix and Flip Your Way to Financial Freedom, or you could search for “Mark Ferguson books”, all my other books will popup. And then I’m also planning to do a webinar here on investing in out of state properties in the next two weeks.
I don’t have a date finalized yet, but keep a look out for that. I will get that scheduled soon. In fact, by the time this podcast airs I think I will have a date set, so you’ll be able to sign up for that. And one last thing, if investing out of state just sounds like too much work, like you don’t have the time, it’s too much hassle, there’s always the option of buying turnkey rentals as well.
I have one turnkey rental in Cleveland, it’s been doing great. I’ve never been to Cleveland, I’ve never seen the property, I trusted a turnkey company to buy it, manage it. So that’s an option. I bought that house for $45,000, it’s rented for $800 a month now. If you want to investigate turnkey properties, let me know. I can connect you with the company who helps me. I also know of a couple other companies that deal in different parts of the country.
I know I’ve referred people to them before, they’ve done a good job for them. They’re reputable companies. So please let me know. Again, mark@investfourmore.com. Thanks for listening, and yeah hopefully in the next few months here I’ll have some exciting news about properties I’m buying in another state. Thanks a lot guys.
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