Somewhat new here - from Houston Texas

7 Replies

Hello everyone!

I am new here and not really new here at the same time. This is my first (or maybe second or third) post after signing up on BP! I signed up a few years back, lurked here for a bit, never really posted. Today is the day I am aiming to change.

A bit of background: I am currently 20 years old and own outright 2 properties. One is simply raw land in Colorado that is off-the-grid, the other is a single-family residence in Wichita Falls, Texas. I am from the Houston, Texas area and haven't really traveled much, besides the places I now own. Real estate has piqued my interest and love learning more about it. The event that really got me serious about real estate was a natural disaster (literally). I and my family went through Hurricane Harvey in 2017 which brought this city down to its knees. Rain was dumped upon us on a scale that I or the city had never seen before since recorded history. I and my father had just come from our RV trip from Colorado on my land, and lived quite frugally there for 2 weeks (off-the-grid, ahem) and very much enjoyed the scenery. We came back 1 week before the hurricane struck. 1 week. Needless to say, we are still recovering from that. From one bad thing comes a good thing I guess. It definitely inspired me and my father to do something vastly different to better from that low point.

Some other miscellaneous stuff: I am very technologically inclined. My phone number is listed as "Tech Support" to many in my family and friends. I am also not new to online forums either. I used to moderate a forum [] which helps out other people on their issues on the Linux operating system [Ubuntu, Linux Mint, Red Hat, Fedora, OpenSUSE, Manjaro, etc.] and also to help users switch from Mac or Windows should they choose to do so. Still love Linux to this day.

Now to the present: I bought the house in Wichita Falls very recently [Feb 2019] and am working to improve upon it. It is in fixer-upper status right now, but it is in livable shape as it sits right now (maybe only just, depending upon an individual's standards of living). My primary reason for having this single family residence is for renting. The home was built in 1930/1931 according to the county and is a short drive away from Midwestern State University and downtown Wichita Falls, almost in between those places.

The question is this:

1. Should I rent it out as is and rehab the house at a later date?

2. Should I postpone renting for now and rehab whenever I can afford to do so? (I'd rather stay away from loans and debt if at all possible)

3. Should I just leave it as is as a rental and never rehab?

I am also contemplating selling the Colorado land. I don't think I will be able to do much with it as it sits at this point in time. Just a future possibility.

I am looking forward to connecting with you all!


@Theodore Thorpe increase your knowledge about leverage and real estate investment debt. It is one of only....scratch is the only debt you should have and it is very powerful once you understand it and can control it.

If it were me...I would mortgage the Wichita Falls property, finish the “rental grade” repairs and I stress rental grade and rent it out. If you have money left over buy another rental.


I agree with @Adam Mitchell . Debt/leverage is a very powerful tool if you use it right, but if you don’t we all know the negative impact it could have. 

If you take out a HELOC on your paid off home you could use it as needed for repairs and/or as a down payment for another home. Once you have a tenant in place their rent payment should cover your debt service monthly payment AND produce some positive cash flow. Yes, there is debt, but you aren't paying it off. Your tenant is. If you only use what you need you'll be fine. Don't over-rehab the house.

Hi Theodore,

Let me take a slightly different point of view than most folks. As someone who has 4 SFHs (not a lot, I know) in Wichita Falls and has learned a lot over the past 3 years about that market, I'm going to recommend that you consider selling the Colorado land and use the proceeds for the rehab, and here's why.

First, I know the area you're talking about and, quite honestly, I would not borrow money on homes in that area. I'm hoping you are very successful with your property, but homes in that area have a lot of "churn" with investors coming and going, mostly going because those aren't fun properties in many cases. Again, you may do better than others, but that area of WF can be challenging, and it will be easier to exit without a mortgage than with one should you chose to do so.

Second, tenants in that area can be less predictable in terms of payment and turn over, so not having a mortgage can give you greater flexibility and security if a tenant skips out or is chronically late. 

Third, I'm guessing the home is in the $60-$80K range, which means in WF we're talking $650-$900 rents.  Once you add the expense of a mortgage on top of the burden of taxes, insurance, management fees, and inevitable repairs, you're not cash flowing enough to build capital for your next purchase.

Others have (and will) espouse the virtues of leverage, and overall the general advice to use debt wisely in real estate investing is correct. But in this particular circumstance, if you have the ability to add the rehab dollars into the property from the sale of the land, I believe that will help you do what you want to do without the risk and with stronger cash flow, and that cash flow is what will help you acquire your second property.  

The first two properties I bought were with cash.  I could have borrowed, but no mortgage meant I had GREAT cash flow which I used to fuel my next two purchases which were financed.  I did things almost as quickly as with 100% leverage, but it was much safer since 50% of my properties are now owned outright.  I don't intend ever to drop below a 67% equity position in my portfolio overall.  That's just me. Doing so provides a margin of safety that I'm comfortable with, and in the next nasty recession, I'll be able to lower rent and survive while the guy down the block who's mortgaged up cannot.  To me, that's worth something.

Just my 3 cents for what it's worth!

Thank you everyone for all your suggestions @Robert S. @Brian Alfaro @Adam Mitchell . The house was actually purchased for $14K @Alfred Litton . Since I have been to Wichita Falls a few times by now, I noticed early on that many houses around the city, especially in older areas (like mine), there are many vacant houses that are boarded up or overgrown, which kind of worries me a little of the overall status of the market, but yet I see new HOAs popping up as well. My house was lived in up until the 2 weeks before I purchased it, so it never really was vacant for any substantial length of time. I am probably being a bit optimistic but I think I could be able to rent it for $250-300/month (maybe even $320-350 on a good day). Maybe the biggest worry at that point would be the possibility of low quality people that I would have to screen through.


@Theodore Thorpe  
I also have a lot of experience in the WF market. I would say you have received a lot of good advice in this post, and I would like to anecdotally echo @Alfred Litton . Had I a mentor of his wisdom when I was starting, I would not have been forced to sell my 17 unit rental portfolio in 2011. I was over leveraged going into 2008/2009 and I was not able to lower rents to be competitive. I was forced to exit at much lower price than I wanted, but I netted cash at sale. However, it really hurt watching my net worth plummet. I certainly paid for that education. Today, my RE portfolio is 42% leveraged. For me that is a very comfortable number, if a little low. I will be increasing it with some projects coming this winter, but for now it sits there. 

I say all of that to convey to you a sense of my knowledge of this market. I have lived here for two decades, and invested here for most of that time. So, on to my advice for your situation. 

Considering you live South of Houston, WF may be a long trip for you to rent this property, to work on it, to show it, etc. Older homes require more work. Unless you get a handy tenant and trade rent for work, you will need to have things fixed often. Contractors are expensive, and paying them will wreck your profit quickly. Remote landlording old properties is a tough job, and I wouldn't wish it on anyone. 

Have you considered offering it for sale by owner finance? I think that strategy benefits out-of-town owners/investors better than renting, especially with older houses. The WF market is very flat, meaning prices here do not swing with the broader market. You will not see much appreciation here like you might in other markets. Where your property is located will certainly not see any appreciation. Owner-financing may be a buyers best option for a property like this one. You might get a qualified borrower who will want to care for the property. For example, you might offer it for sale for $25,000, 10% down, 10% interest for 10 years. Taxes and insurance will be escrowed monthly for a total payment of ~$400 per month. After paying taxes and insurance you net close to $37k in 10 years, or 26% per year. Of course there are risks to this, like all investments, but I just wanted to give you the idea.

I wish you the best and hope you make a great return on this investment. 

Given what you've told us now about your purchase price and the condition, I'd have to do a 180 on my earlier advice. I would do exactly as @Josh James is recommending.  Rent-to-own is the route to go, hopefully finding someone who is handy and wants to do the improvements on it.  With a purchase price of $14K, and knowing where your location is, personally, I would not risk more capital from any source of my own.  I don't mean to sound negative, but honestly, I would look for a way to profitably extricate myself from that property. Josh's advice is the soundest.

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