- The two of them, real estate investors Sharon Tsing and Sean Peng, own 21 rental apartments.
- In an interview with Insider, they shared the key metrics they use to decide which areas to make good investments in.
- The couple are looking for areas with growing population and employment, as well as high value homes. They also use conventional mortgage and commercial loans to finance their property.
Sharon Tsing and Sean Peng were interested in real estate investments even before they met. Zeung bought her first property in 2013 in the San Francisco Bay Area, splitting the down payment with her brother and then buying it out.
Pan also bought his first home in the Bay Area, as well as six out-of-state rentals in Jacksonville, Florida. The ability to purchase property in more accessible areas has always been an attractive bargain for Pan.
“As you can imagine, in the Bay Area, you buy a property for about $ 1 million and it rents out for about $ 3,000 a month,” Ban said. “So it doesn’t even cover your mortgage, let alone your expenses like insurance, payments, taxes and operating expenses. Whereas in Florida you can buy real estate for, say, $ 100,000 and rent it out for $ 1,000. ”
Zeung continued to take an interest in real estate after purchasing her first property, but abstained from it for several years. One of the barriers to entry was the high cost of real estate in her area. Cheaper alternatives in other cities meant many unknown factors to her.
After Tyung got to know Pan, they began to explore various states and cities that would allow them to maximize their investment in areas that have great appreciation potential. Zeung was open to the idea of investing remotely.
They now own 21 properties nationwide, 22 of which are in escrow, according to property records reviewed by Insider. Tsyng has 11 rental units under his own name, Pan has six, and together they jointly own four more.
“It was such an advantage when you were paid in the Bay Area, but you could invest in more accessible markets,” Tsyng said.
They shared with Insider the key steps to help them choose the right property.
They use data to narrow down which region is best.
The first step is to narrow the market down to the areas that have the most rental value. They use a website called City-Dataallowing them to view key metrics such as population growth, income growth, rising house prices and declining crime rates. For job growth data, they use a website called Department of numbers…
They maintain a spreadsheet that tracks key data points until they can narrow down areas that rank well across all categories.
“Ultimately, I would say that job growth and population growth are probably your main drivers,” Ban said. “Secondary factors are of course still important, like what is the market price?”
He continued: “If you have two cities with the same job growth and population growth, but one costs about $ 500,000 for real estate and the other costs $ 100,000 for property, we think we can get higher returns with one 000 dollars “.
Finally, Pan adds that leaning towards areas that are more familiar to you is a good idea. For example, if you live in a hot state, buying property where it snows may not be a good idea.
Local team building
Your team is not a group of people that you will be hiring directly. In simple terms, it includes a real estate agent, a property manager, a mortgage lender, and possibly a contractor.
The couple noted that finding good contacts on the ground is key because it will all be done remotely. This process will require research. Zeung usually starts with a simple Google search for an agent and then uses referrals, online reviews, and ratings to validate them.
Real estate agents are usually their first point of contact as they communicate with a large number of people in the industry. Historically, Cyung said they were able to get great referrals for other contacts through an agent.
“I also just call each of them to ask them a bunch of different questions. I have a kind of script of questions that I have collected, ”said Tsyng.
An important part of this process is finding a good property management company. The questions Zeung asks in this piece include how they screen tenants, what their checkout process looks like, how many units they currently manage, and what their fees are. A good property manager will also be well versed in local rental rates and contractor prices for necessary repairs.
They usually aim to spend about $ 150,000 or less per unit. This allows them to set aside about $ 30,000 with a down payment of 20% to 25%.
They told Insider that they reserve regular loans – these are regular low-interest, 30-year mortgages – for more expensive real estate because there is a limit on how much you can qualify for.
For cheaper real estate or real estate worth about $ 100,000 or less, they either pay everything in cash or turn to commercial loans from small local banks. These loans require a smaller down payment of 15%. However, their interest rates are slightly higher and their loan term is shorter – 20 years.