Houston, TX- 5 Properties- Kevin Wood

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Houston, TX- 5 Properties- Kevin Wood

Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes

Followed the heading posting above. My 2nd post on this particular is not to ask for advice on a condo, but to share the first 5 properties my business partner and I purchased. All are located in Houston, TX. All are currently rented with the exception of one property where sale is conditional on new carpet, new paint, and rented. Not included here are holding costs at 8%. Insurance amounts are high. All costs are yearly. Here is a rundown of the properties operational costs. We have vacancy estimated at 8% and closing costs etc. :

#1 3 Bedroom 2 Bath

Purchase Price- $88,473

Rent Per Year- 12,806

Mortgage- 4287

Insurance- 500

Taxes- 1,914

Maintenance- 957

Management- 1,025

Miscellaneous- 1,000

#2 3 Bedroom 2 Bath

Purchase Price- $73,727

Rent Per Year- 10,113

Mortgage- 3,572

Insurance- 500

Taxes- 1,541

Maintenance- 770

Management- 809

Miscellaneous- 1,000

#3 3 Bedroom 2 Bath

Purchase Price- $93,388

Rent Per Year- 12,696

Mortgage- 4,525

Insurance- 500

Taxes- 2,056

Maintenance- 770

Management- 809

Miscellaneous- 1,000

#4 3 Bedroom 2 Bath

Purchase Price- $69,795

Rent Per Year- 6,996

Mortgage- 3,382

Insurance- 500

Taxes- 1,500

Maintenance- 729

Management- 795

Miscellaneous- 1,000

#5 2 Bedroom 1 Bath

Purchase Price- $58,982

Rent Per Year- 8,777

Mortgage- 2,925

Insurance- 500

Taxes- 1,287

Maintenance- 643

Management- 702

Miscellaneous- 1,000

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Steve RozenbergPro Member
Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
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I would be careful with condo's. Every time I have owned one and managed one we have had a few issues that we can not get around.

First, the HOA unless you can own the whole structure you can not control the HOA costs and they can go up anytime. I had 5 units I owned one time in Humble. When I bought them the HOA fees were $127 per month. After 3 years the HOA rose to 295 per month per unit. While this did not make it negative cashflow, it came very close. I was not able to raise the rent accordingly so my business model took the hit. When I investigated why they went up since there was no natural disaster and the place looked exactly the same as when I bought it they told me that since other people were not paying they had to raise the dues on the people that were. And basically since I was an investor in their eyes I had all the money and was S.O.L...

The other issue we have with condo units is they do not always allow you to advertise the property with signs, which makes local traffic basically nil to none. The access issue with  getting into those units is always tough for prospective tenants to view the place, as well as agents sometimes get denied access as well.

Lastly some complexes only allow a certain amount on non-owner occupied rentals so if you are coming in above that number they do not allow you to use it as a rental.

Again this is just my personal experience owning these types in the past as well as managing them. When people as our opinion of buying a condo I try to explain that they need to be ready for these types of issues and know what you are buying and the business model around that type of product.

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  • Adam Chudy
    Houston, TX · Member since 2015 · 36 posts · 34 votes
    11y

    What part of town are they located in?

    0Reply
  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    11y

    I would be careful with condo's. Every time I have owned one and managed one we have had a few issues that we can not get around.

    First, the HOA unless you can own the whole structure you can not control the HOA costs and they can go up anytime. I had 5 units I owned one time in Humble. When I bought them the HOA fees were $127 per month. After 3 years the HOA rose to 295 per month per unit. While this did not make it negative cashflow, it came very close. I was not able to raise the rent accordingly so my business model took the hit. When I investigated why they went up since there was no natural disaster and the place looked exactly the same as when I bought it they told me that since other people were not paying they had to raise the dues on the people that were. And basically since I was an investor in their eyes I had all the money and was S.O.L...

    The other issue we have with condo units is they do not always allow you to advertise the property with signs, which makes local traffic basically nil to none. The access issue with  getting into those units is always tough for prospective tenants to view the place, as well as agents sometimes get denied access as well.

    Lastly some complexes only allow a certain amount on non-owner occupied rentals so if you are coming in above that number they do not allow you to use it as a rental.

    Again this is just my personal experience owning these types in the past as well as managing them. When people as our opinion of buying a condo I try to explain that they need to be ready for these types of issues and know what you are buying and the business model around that type of product.

    4Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Hey Steve,

    Thanks for the reply. None of these properties were condos. I asked about purchasing a condo in my 1st post in this forum. These are all single family homes.

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @Adam Chudy:

    What part of town are they located in?

     These are all located in Channelview area.

    0Reply
  • Adrian Chu
    Real Estate Broker · Seattle, WA · Member since 2014 · 1k+ posts · 427 votes
    11y

    Looks like great turn-key rentals. How's appreciation in Houston, TX?

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @Adrian Chu:

    Looks like great turn-key rentals. How's appreciation in Houston, TX?

     Hearing that 6k people are moving in the city a month from my realtor friend (didn't work together on this deal) and that prices will go up. Didn't dig too much into it because we are making a cash play here.

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update:

    Contract was signed on Tuesday. We are in our 10 day review period. We are inspecting the properties over the next few days. Will update if anything major happens.

    0Reply
  • Isstad Rashadeem
    Rental Property Investor · Spring, TX · Member since 2015 · 38 posts · 10 votes
    11y

    Looks like a nice deal @Kevin Wood

    1Reply
  • Tyron McDaniel
    Flipper/Rehabber · Sugar Land, TX · Member since 2015 · 142 posts · 64 votes
    11y

    I can't tell from your numbers how much equity capture (if any) you are getting based on purchase prices but the cash flow looks STRONG! 

    Channelview is a good working class area that is heavily supported by all the refineries and industrial businesses in the area! Congrats

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @Tyron McDaniel:

    I can't tell from your numbers how much equity capture (if any) you are getting based on purchase prices but the cash flow looks STRONG! 

    Channelview is a good working class area that is heavily supported by all the refineries and industrial businesses in the area! Congrats

     We weren't counting it but based on numbers should be quite a bit. By our estimates around 50k.

    0Reply
  • Jimmy H.
    Investor · Houston, TX · Member since 2015 · 51 posts · 11 votes
    11y

    @Kevin Wood Are these purchased through a wholesaler? Would you consider $300K properties that can rent for $2,500 in a top notch school district and relatively new communities in Fort Bend county?  Just trying to find what your criteria might be.

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  • David Hood
    Houston, TX · Member since 2014 · 29 posts · 7 votes
    11y

    Channelview is a good cash flow rental area. I have had units there for many years. I grew up there 50 years ago.

    However, there are some pockets that are not very desirable.

    Also, don't expect much (if any) appreciation. Homes are still selling 10%(+) below their 2008 peak. Falling oil prices will not help the situation.

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @Jimmy H.:

    @Kevin Wood Are these purchased through a wholesaler? Would you consider $300K properties that can rent for $2,500 in a top notch school district and relatively new communities in Fort Bend county?  Just trying to find what your criteria might be.

    No these are not purchased through a wholesaler. It was an investor who was getting out of SFR into multis. He wanted to cash freed up for a new purchase. Our criteria is cash flowing properties in the Houston area. We typically prefer 3-2 properties in B-C neighborhoods requiring less than 20k work. Though we may purchase a multi family with our remaining funds.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @David Hood:

    Channelview is a good cash flow rental area. I have had units there for many years. I grew up there 50 years ago.

    However, there are some pockets that are not very desirable.

    Also, don't expect much (if any) appreciation. Homes are still selling 10%(+) below their 2008 peak. Falling oil prices will not help the situation.

     I agree with you we don't buy for appreciation. Never have, never will. Too hard to gauge that market. I tend to side with a few of the BP folks who believe falling oil prices will actually help the rental market and make buys easier. We'll see what happens.

    0Reply
  • David Hood
    Houston, TX · Member since 2014 · 29 posts · 7 votes
    11y

    FWIW, some of the rents on these properties seems low. I'm suspect that they may be rough shape or bad areas. Two bedroom apartments and condos in the area go for $725+. Usually houses go for $900+.

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @David Hood:

    FWIW, some of the rents on these properties seems low. I'm suspect that they may be rough shape or bad areas. Two bedroom apartments and condos in the area go for $725+. Usually houses go for $900+.

     We agree David. These properties were purchased in 1998 and the owner seemed to not keep up with market rents. We've found that to be the case with properties that are held by investor for 10+ years.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 2

    Since David asked. We inspected the properties. There was approximately 5k in fixes for the 5 combined. The main issue was an a/c that needed to be fixed that would cost approximately $2200. The owner is taking care of that and we are taking care of the other fixes. All of them were cosmetic with the most expensive after the a/c unit being replacing siding on the unrented property. On the plus side this property should rent for over 1100.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 3:

    Got our loan disclosures from the lender. Seemed a bit high, but in reviewing with our mentors/advisors we realized that this included a lot of fees we either didn't pay or would actually be lower at the end of the day. I still think we may have undershot our closing costs of about 2700 per property. Still have plenty of cash flow, but definitely eating into our 1,000 misc that we allocated for each property.

    0Reply
  • Account Closed
    Investor · Houston, TX · Member since 2014 · 35 posts · 13 votes
    11y

    Who's doing your property management?

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y
    Originally posted by @Account Closed:

    Who's doing your property management?

     Starting out we are going to self manage and may engage with a property manager if it becomes too much to manage. Based on all the podcasts 5 houses should not be a huge problem.

    0Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 4:

    Closed on all 5 properties on Friday. The unleased property is going up on the market hopefully by Tuesday for rent. The new paint and new carpet is done. One of the other properties has an expired lease. We plan on raising that rent to market when we rent out the current unleased property.

    1Reply
  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 5:

    We are leasing property 4 above. Pictures of the property are included here.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 6:

    We had an open house this weekend. We were told by about 5 potential tenants they planned on coming and no one showed up. Back to the drawing board. We have re-posted to Craigslist and the other sites.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 7:

    We still have not leased property 4 heretoafter referred to as Sheffield. Currently doing a background check with Resident Research on a potential candidate. Just a tip, but we have found success requiring prospects to fill out a Google form. We would get a lot of spam requests for showings and having the potential tenant fill out a form seems to remove about 25-50% depending on the medium. Lots of other small lessons learned along the way and hope our other properties don't have the same issues when leasing.

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  • Kevin Wood
    OP
    Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
    11y

    Update 8:

    We just rented Sheffield for 1099 a month. Happy to be through my first rental process. My business partner handled it and learned a few things along the way so hopefully we get a renter in faster next time.

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