Build a Rental Property Empire
"Build a Rental Property Empire"
by Mark Ferguson
Tags: Become a Real Estate Agent, house hacking, REO investing
One of the first things that stands out in "Build a Rental Property Empire" is the formulas for vacancy and maintenance calculations. Mile Ferguson has it down to a science with vacancy rates of 5% for SFR and 10% for Multifamily. On maintenance he suggests using 5% for newer properties up to 30% for old properties (50+ years old) in bad condition. There is an investment calculator on his blog InvestFourMore.com which looks at these and other factors.
Mark also compares low prices rentals to moderate priced rentals. He explains why the great ratios with cheap properties may not pay off. You must also consider higher turnover, more maintenance, less appreciations, less equity capture, and the difficulty of getting a loan. Although many homes are available in the Midwest for less than $50,000 that rent for $600+ per month, these factors make the investment soundness questionable on these properties.
Some good deals on rentals can be found through REOs. When buying REO properties you must go through an REO Listing Agent. Freddie Mac, Fannie Mae, and Wells Fargo will only sell to owner occupants (at first) from their REO inventory. Your agent will know the rules.
HUD homes can be purchased online at HUDHomeStore.com through an auction. All bids must be submitted by a licensed/registered agent. For the first 5-15 days, only owner-occupants can bid. If an investor gets an accepted HUD contract and later cancels, they will lose their earnest money. This isn't the case for owner-occupants.
Other auction sites include: HUBZU, HomeSearch.com, Auction.com, WilliamsandWIlliams.com, HudsonandMarshall.com, and XOME.com
Mark also uses direct mail campaigns to find properties. He buys lists from ListSource.com. He then sends them letters or postcards. He has a company that does this all for him (including taking calls) which he will only tell you about if you email him (Mark@InvestFourMore.com).
Once he rents out a property he always uses a property manager and makes more money because of it. Typical fees are 8-12%
For determining rental rates he uses RentRange.com which he believes to be more accurate than Zillow. I just checked Zillow on my single family rental in Tampa and it is showing $195k value and $1400 month in rent. I will have to compare this to Rent Range.
For screening tenants he uses COZI or TurboTenant.com. He charges the applicants $50 to make sure they are serious.
His book was interesting since it takes his story and shows the numbers. He includes most of the details others leave out when telling their own stories. This makes it a good read filled with information.
One last note: He acknowledged Josh Elledge of Upend PR with helping him get coverage in the Washington Post, Zillow, and Forbes. Might be worth looking into.
Biggest takeaway: House Hacking allows you to use owner-occupied loans to buy a 2-4 unit property. In rural communities this could mean zero down! With FHA it could mean a 3.5% down payment. You can then live in one of the units for a year and then do it all over again! Pay Zero Down and Earn Cash Flow! Not a bad idea.
Casey Richards (www.MinimumWageMillionaires.com)
April 11th, 2018