Houston Multifamily Investing Woes

20 Replies

90% of Houston Texas multifamily units (inside the loop) have significant deferred maintenance with higher prices. While I can afford the prices, the cost of no cash flow, high property taxes, obvious maintenance and COVID producing a more favorable renter policy vs landlord gives me great pause. However I'm anxious to get my first MF under my belt.

If you’ve invested in similar situations, how did you break through. What was your approach.

If you just listed all the negatives, why are you intent on pushing into that? There's way too much advice pushing multi-family as the best viable opportunity in the investing game for a new investor via a house hack, but because of all of this advice and the house hack fever, all of the markets are saturated with multi buyes pushing prices up over what these are worth and making them, as you said, cash flowless. So why not think about other strategies. Condo flips (quicker, less risk, but less profit) or one-year holds. Small house rentals, 2 bedroom ones. When you see a black hole and you call it a black hole and know you don't want to go into the black hole, why are you still getting your spacesuit on?

@Deo Sanders look for somewhere else with a more favorable condition. Never jump in with the croud, no matter how anxious you are to get you first MF. Heed the warning signs and look for somewhere more appropriate with conditions for better cashflow and higher probability of success. Strategy revaluation might be needed.

I wish you the best in this endeavor.

@Jonathan Greene thank you for sharing. :) I also flip and have STR in other markets but most US analysis point to Houston as a top 5 market and I live here now. So pursuing that option looking for folks who are winning in this space. I also agree and have been looking at other closely related strategies. I appreciate the feedback.

If 90% don't work, focus on the 10% that do.  

I know this sounds glib, but it's true.  In my market, everyone says "too expensive, too bid up, too many buyers" but we have found 3 profitable deals within the last 12 months.  

@Deo Sanders You will need to sift through 60-100 deals before you buy one, especially your first. Its a bit counter intuitive, buts its easier when you buy larger properties. Less competition and more skilled buyers. We are under contract for a 440 unit deal which is our 10th acquisition. 

Originally posted by @Jonathan Greene :

If you just listed all the negatives, why are you intent on pushing into that? There's way too much advice pushing multi-family as the best viable opportunity in the investing game for a new investor via a house hack, but because of all of this advice and the house hack fever, all of the markets are saturated with multi buyes pushing prices up over what these are worth and making them, as you said, cash flowless. So why not think about other strategies. Condo flips (quicker, less risk, but less profit) or one-year holds. Small house rentals, 2 bedroom ones. When you see a black hole and you call it a black hole and know you don't want to go into the black hole, why are you still getting your spacesuit on?

I was in KC this past week and there are thousands upon thousands of little 2 and 1 600 to 800 sq ft single levels.. NOw those are great rentals.. you can hardly hurt them and to do a turn over cost very little.. one bathroom one kitchen.. little square box.

they have zero curb appeal .. but as a pure rental.. when you look at some of the other ones i looked at  bigger houses big sq footages those are going to lose money over time in the rental game.

 

I am kind of a broken but real estate deals get better the longer you hold them. Real estate is painful in how long it takes but the sooner you buy the happier you will generally be in the future. Just be diligent to buy a property you keep through a down turn and don't buy in bad neighborhood. If you do this in a significant way it is hard to see how you don't end up wealthy in the end.

As other's have said, you could look elsewhere - in your case, outside "the loop". Since you live in Houston, you likely know the secondary and tertiary markets in the surrounding areas better than many other investors.  It may be best for you to consider markets up to about an hour outside the downtown Houston area, and focus on off-market properties that will have less competition, especially for your first MF deal. Good luck!

Look, every newbie is going to make mistakes. If you want a MF, then get a MF. Check it off, learn from it, and decide if you want another one or not. It might be the best deal you ever make! It might be the worst deal you ever made :( But, just be sure you thoroughly analyze the deal, vet it with your private money lender and other experienced investors, and close the deal. If you need some help, hit me up!! I'm from Houston!

@Deo Sanders

I haven't found a multifamily deal I like inside or outside the loop currently for the same issues you mention in your post due to high sale price, too many deferred maintenance, lower rental rate, etc... Houston is a bust to me for multifamily, I dont know how other people are buying multifamily but if you're looking at the MLS for multifamily it's overpriced IMO.

If you want to stay in Houston, maybe take a different investment approach or start doing your ad campaigns to find deals.

Originally posted by @Deo Sanders :

@Joe S. I’m a very sophisticated investor joe. Just new to Houston. I have 20 units. LOL

 I understand you’re a very sophisticated investor. :-) I guess I missed the part where you specified what size complex you was looking for. Did you say or did I simply overlook it?