Hello fellow Houston newbies and semi-newbies!!!
I found BP less than a year ago and it has been an absolute godsend and has served as my motivation to jump into real estate investing after being interested for quite some time. So far I haave purchased a 3 bed 2 bath home on the MLS for $98,500 (June 2014) , spent $5,000 getting it rent ready :-| and rent it out for $1200/month. The house was vacant for 2 months while we made all the small repairs since we did them ourselves on the weekends (bad idea). We've had tenants since November since the sellers rented it back for 1.5 months and so far they've paid on time and there have been no issues. It is self-managed and there have been $260 worth of repairs. I feel okay about things so far but I'm waiting to see how a full year worth of owning this property pans out.
I am waiting to close on my 2nd property with a projected close date of April 10. This home is a 3 bed, 2 bath SFR in the same neighborhood but the foundation has been repaired, the roof is 1 year old and the HVAC unit was replaced 2 years ago. We are under contract for $100,000 with a $2,000 credit at the table for some minor repairs including termite treatment :-| We plan on spending an additional $1,000 on landscaping and a few other items. This home is smaller so we hope to get $1150/month. WELL, I entered my info into the BP rental properties calculator and...it says I will have negative cash flow. That sucks.
So, I shared all this to ask......
How on earth is is possible to have decent cash flow in the Houston area by buying homes off the MLS? I work pretty hard trying to find homes on the MLS that are decently priced and do not require a crazy amount of work. I really have no interest in buy, fix and rent. I'm willing to do repairs obviously but I find it extremely difficult to find properties that can cash flow and satisfy even the 1.3% rule. I plan on using my LOC associated with my investments to make cash purchases in the future from wholesalers, step outside my comfort zone and do more repairs, then refinance. That's the only feasible way I see myself being able to have decent cash flow.
How have you all coped with the Houston area with multiple bids on homes, high property taxes and high insurance rates??? Because at this rate, I will need a whole lot of properties to reach my goals.
Its hard! Ive given up on the MLS! We bought our first SFR in December for $108,000. Currently rented for $1100 until May then I am going to raise the rent to market rate of $1300. We found the house by mailing out about 300 letters. We are currently pursuing the county foreclosures and ready to buy with LOC.....but we are patiently waiting for the right property and I am ok with some rehab.
Its hard for me to find wholesaler properties in my area (montgomery county). A few close wholesale properties that I have ran across turned out to be really horrible, insulting to my intelligence deals, so use caution with them. Can I name names here?? I'm not saying they are all bad.
I've been following the Houston market for a while now. I agree that MLS is probably not the best place to find good deals. Cash flow is just not that great. You can still get positive cash flow by it's so low that it's probably not worthwhile. Most properties still meet the 1% rule, but taxes and insurance eat a big chunk of your cash flow. Even for all cash purchase you may get at best 5% return.
I agree with the comments above.
I'm in Houston and spend quite a bit of time looking on the MLS. Deals on the MLS are far and few between. You're going to be searching for a long while before finding something that barely cash flows. Additionally, most sellers now are asking way too much.
Additionally, of the many wholesale deals that are floating around, many have thin margins too. You'll get a better deal with them over the ones from the MLS but you should exercise caution as well.
Your best bet is to do your own marketing to find deals. We're doing direct-mail marketing to find our deals. We do quite a bit of marketing and find at least a deal or two per week that we are able to get under contract.
As of right now, we're wholesaling and rehabbing. Please send me your property criteria and I'll keep you in mind for any deals we get locked up.
Good luck on finding more deals!
You will make very poor returns and near zero cash flow paying near retail. You can't be afraid of rehab. MLS deals are few and far between and highly competitive when they do show up. I got started in late 2013 and have bought 7 SFR since then. Only 3 were on MLS at all, and one of those I got through a wholesaler who locked it up well below the asking price. The other 4 were all off-MLS wholesale deals. My first MLS purchase was in decent shape and I bought with conventional financing and put about 6k into it. All but one of the other purchases required 20-35k in rehab. I used hard or private money for those purchases and then refinanced into conventional after rehab.
Learning how and what to buy so that you get decent cash flow is critical.
As you have seen it is getting harder to find good properties to purchase on the MLS but it can be done, it just takes work and SPEED and it helps to know a few listing agents!
I would recommend you attending several of the local real estate investor groups here locally to meet some of the wholesalers in the market place so that you have access to non MLS properties. There is a very robust non MLS market in Houston and I can assure you based on the (2) properties you have purchased there are many deals to be had that offer better returns that 1.3%!
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I'm a new investor in Houston and I've had a hard time finding anything on MLS that I'm comfortable with. I feel your pain.
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I believe you will have greater success with picking up deals through wholesalers. I just picked up a 3 property package deal for $138,500. 2 half duplexes and 1 single family home. Combined rental income on these properties is currently at $2,450 and will go to $2,550 later this year. Two of the units were currently leased at time of purchase and I will be leasing out the last unit the first of the month. I put in 2k in the vacant unit to get it rent ready. The deals are out there but you need to be looking. Get on the wholesaler mailing list to receive periodic emails on a daily basis and keep your eyes open for deals that meet your criteria.
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