On the show today we talk about… Investing from Abroad with Rich Carey!
– Rich’s post on 5 Secrets to Finding the Best Property Manager
– Rich’s post on How Much Money Will I Make From My Rental Property?
– Favorite book – Fooled by Randomness by Nassim Taleb
Show notes for Investing from Abroad with Rich Carey
The Vantastic Life is…
– is in Anchorage Alaska
Rich Carey is in Montgomery Alabama, Julie is in Seattle WA, and Joe is in Anchorage AK.
Rich has figured out how to live the good life!
What makes Rich unique are his philosophies on money and real estate.
From working for the Air Force Rich has acquired 20 rental properties, and has worked to become debt free.
Do you like hearing “thank you for serving”?
Yeah we do. And it depend on where you are if you will hear that. Like in Montgomery Alabama I hear it all the time, but in other places I might never hear it at all.
Can you give us your life story?
Sure, I grew up in California near Disney.
My dad was into real estate and so was my mom. My mom grew up in Wats (or Compton).
So my grandma (my moms mom), someone told her she should buy a 4 plex, live in one and rent the other 3 out. And she ended up doing that, and creating financial independence for herself.
When we bought our first house it was a little nerve wracking. But the first house that we bought shot up over the first year that we owned it.
It was very cool, but actually probably not a very good thing because you think you’re really good at real estate.
I eventually sold that first property after 13 years… but it really only appreciated to the same amount as it did the first year.
Over a long period of time all markets are going to make between 3 and 4 percent over the long run.
I agree. Here in Seattle everyone agrees that the rental properties don’t really pencil.
There are floods of people heading to other markets around the country to get rental cash flow.
Montgomery you can get cash flow, and there are another few markets around here that you can get some appreciation and cash flow.
How has your history changed your perspective on real estate?
There are people that reach out to me who are in the military that want to invest in real estate like me. Maybe they heard me on the BiggerPockets podcast.
I want to invest in real estate from a position of power. I want to pay off all of my high interest loans (other than personal mortgage or low interest student loans). Then I want to have some diversity and savings.
I’ve heard that you need to make sure that your real estate is going to do better than the S&P at 7-8%, which makes a lot of sense. And I haven’t heard a lot of people talking about that.
Do you still live by that today?
Absolute. You could diversify. An excellent way to look at your money… a real estate investment is a lot of work. You have to mess with a lot of different people (contractors, agents, etc.). There are a lot of people that are needing to get paid.
What do you think of syndications? Vetted syndications. Of maybe 8%…
I’ve tried so hard to find something other than the S&P, and other things. My things do around 10 percent.
That 8% isn’t solid enough for me. And the fees are things that I don’t really like.
One thing nobody talks about on rentals is delinquency. Do you feel that 1% and 50% for expenses.
How do you deal with that, or what are your tips?
When I first started in Montgomery I was concerned that those things could bankrupt me or eat into my returns. I’ve had a lot less evictions than I thought I would.
One of those (3) evictions was totally my fault. The Managment company told me that they had a hard luck story, but at the end of the day it’s a business. If you have a criteria, you have to live by that.
We have friends that are investing out of state because everyone should be investing in cash flow.
The neighborhood that you want to live in is different than the neighborhood that works for cash flow.
To achieve these cash flow properties people might have to invest in neighborhoods that are a little rougher.
I think there are varying degrees of this. If you rent one of my properties it’s $950 or $1000, and everything looks really really nice, and that’s how all of the neighborhood looks. The schools are not very good. I would say lower to middle class. It’s a normal neighborhood, and there is some crime. But there are Starbucks and that kind of thing.
Could you reverse engineer that to where you’re looking for school districts that are lower to middle of the road.
There are a lot of people that buy a house to live in (for the military), and then rent it out afterward. But those end up being a bad rental that has a poor ROI.
But if you move into a little worse neighborhoods you can find really good cash flow. But those are like meth labs and people getting shot all the time. You’ll never be able to sell them, and you’ll have a lot of problems with the tenants.
Figuring out the range that you need to buy in is not an easy thing to do.
That’s why I think it’s hard to invest from thousands of miles away from where you’re buying your rental properties.
We have some good people that are helping our local crowds out of state. Do you have rentals out of state?
I’d like to talk about how I used my management company when I was out of the country.
One of the things I was doing while overseas. I was finding them on MLS and other ways. And was making low ball offers. If something got accepted I would have my realtor go take pictures, and then send my property manager in. Sometimes you have the governor mansion on one street and the projects on the next street.
My property manager would go in and tell me that it wasn’t going to work. And I would lose my deposit. But the property manager understands that specifics of what I’m looking for, and where I want to buy.
Do you have any tips for finding good property managers?
Blog post on how to find a good property management company
I always worried that doing evictions was going to be expensive, but it didn’t turn out that way. They are relatively cheap with my property manager.
There was one thing that was the most important to me while I was gone.
I bought 14 properties while I was gone. So, I needed people to supervise rehabs while I was gone, and that ended up being my property management company. I paid cost plus 10% markup, and that worked out.
Was there any incentive for if things went well.
I am a larger customer for them, so they wanted things to go well for me.
When I was here locally they always called me about really small things. I realized that they were looking out for me over really small things. And I realized that I had struck gold with these people even though they charged 10%, which is pretty high.
The neighborhoods that I’m in have pretty high turnover, but they don’t charge for bringing in a new lease or tenant.
That’s a great tip!
You don’t use debt, you prefer to use cash for everything.
It’s not that I prefer to, but it ended up that way. It’s actually hard to get a loan for $25k. I tried, but I couldn’t, so I paid cash.
I’m very fee adverse.
In the future I want to own multi family. I want to learn it, and I’m going to use debt.
There’s an amazing piece of mind to not have debt.
It’s smart to evaluate an investment as a cash deal. Breaking it down like that is very helpful.
The difference between cap rate and ROI?
It’s dangerous to use creative financing to make a deal work, just to make it work.
You should be looking at it from a cash investment to see how it’s going to be.
So you want the cash view point to be the bench mark.
It you use creativity it’s going to cost some kind of expense.
Where are you in your life personally… someone can’t tell you what to do is because they don’t know your own personal situation.
What we didn’t jump into today was how to do the 1% rule and all of that, but you can get it on Rich’s website all spelled out very clearly.
Blog post – How much money will I make from my rental
Are there any blog or podcasts that you listen to?
My favorite book is called Fooled by Randomness by Nasim Talib
* About how randomness is misunderstood in our lives.
What’s the tough part right now?
How much money would I be making it I’d used leverage… Would I have double or more times the cash flow.
That nag is sometimes there.
I agree, and at this stage in my life I’m into trusting my gut and my comfort.
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