DFW

[Kamran Ahmed]

Hi guys, I'm just starting out in REI in the DFW area. I can't leverage with interest based loans, because I don't give or take interest as a Muslim. I have 2 questions: 1. How much money do I need to start my first REI project? 2. What is a good first REI project for someone like me who is a full-time medical student (working 12 hours per day currently)? Thanks so much for the help!

[Steven G.]

Kamran, I am in DFW. Since you cannot borrow or loan money, that does complicate some things. But it can be done. I have done a ton of investing successfully, especially early on, without borrowing a dime.  Now I lend a lot more money than I borrow, but of course I do some. You will find buying lower end rental properties can be extremely profitable - they do have a few more headaches than a nicer rental, but you can get a 20% cash on cash return or better fairly easily. I see you're in Southlake, so I would stay close to Fort Worth or the mid-cities with your rental properties. What are some example deals/ideas?

- There are the Boca Raton condos in east Fort Worth, near that old country club over there. You can pick those up for $10k to $18k fairly easily, and rent them out for a good return - as long as you keep them rented (otherwise the HOA dues will kill you). I probably would of bought 1/2 that complex (I'm kidding there) years ago if it was not so far away from where I am, over in Rockwall

- There are lots of cheap rentals in Fort Worth starting with I-35 to the west ... going east ... and as far north as I-30, encompassing everything north of I-20 or west of 820. That whole block of Fort Worth has lots of cheap rentals, starting from the $15k's on up to $100k+; I would stay at $50k or under....preferentially at $40k or under. 

- Wherever you invest, try to keep this formula. **Only buy something that will give you 2-3% back per month in gross rent**. So if you buy a $30k house, make sure it rents for at least $600 a month. Or a $15k condo that rents for $600 a month (subtract HOA dues from that formula, so if the HOA dues are $150 then you'd really be at $450 a month gross before repairs).

- Finding deals? Try getting on some wholesalers email lists, and watch the MLS like a hawk. Free websites like ziprealty.com will email you automatically if you save a search where you to meet certain parameters (e.g. anything in Fort Worth, under $50k)

- Also, make connections so you can find some cheap handymen. Older homes / townhomes / condos make more money, but they require more maintenance than a new house. So having a handyman who will change a toilet for $40 instead of $100, or someone who will replace an outside AC unit for $250 labor vs say $500+ ... is better than paying a retail company that'll kill your bottom line.

Hopefully that helps!