Starting out, $75k in cash, what would you do?

Question

Trying to assess my options to enter the Houston market as an investor. Currently own my home in The Woodlands free and clear. The market in this area (and likely most of Houston) seems extremely hot with most houses renting out for only ~0.6% of their value. Any other options/parts of town/ideas?

Starting out I'm just looking at buying, minor rehab and then leasing out. Eventually I'd like to get towards a BRRR but am not interested at all in Airbnb or flipping.

Karl McGarvey · Answer

@Dillon Hudson welcome to the new era of investing where the 2% rule is gone. David Greene even said in one of the recent podcasts the days of their advice of “lowball offer on 10 properties and hope one hits” is over and he is recommending people bid aggressively to get into properties before they get even more expensive.

Houston is no different and people are doing just what he said. I think something to think about it the fact that rents are increasing so .6% now may be 2% in a few years. Over time the investments will make money, its just going to take a little more time than it used to.

There are also areas like Galveston with value add options that could bring big returns in the next 5-10 years as the cruise industry continues to love the port and expand (over 100 million dollars being invested in our port).

Feel free to shoot me a message anytime and we can talk about the Galveston market!

Jaron Walling · Answer

@Dillon Hudson Sounds like you're in a great position and obviously know how to handle your money. Congrats on getting your house paid off. You should leverage it in combination with that $75k cash. Dave Ramsey fans and Bigger Pockets forums are not a good mix.

You're going to have risk on any deal. Investing = risk. You could pull a HELOC and leverage it with your cash to rehab a property. You have money, you need to find a DEAL, like most us in these forums. If the property doesn't have upside or different exits why buy it? A lot of investors are flipping right now because properties don't cash-flow at these prices. Run the numbers and develop a plan before you make any offers. If you want a rental property look where rental properties are located. A class neighborhoods are probably not it. Look in cheaper C/B class neighborhoods and buy/find/create a deal. That's all you can do in this market. Best of luck.

Dillon Hudson · Answer

Thanks everyone. I plan to be at the next meetup on Dec 16th in Conroe

Jeff Wallace · Answer

@Dillon Hudson - It sounds like you are planning to start slowly - The best play is to buy something close so you can self manage - I would buy a house in the woodlands - opportunities pop up every day - get something small in Grogan's Mill, Panther Creek, or Cochran's Crossing - with interest rates where they are (for now) you can find decent cash flow with 20% down.  With some smart upgrades, you can push the rent numbers beyond the current comps.  Good clean or updated rental properties are in high demand in The Woodlands... you will do well.

Matthew Rolf · Answer

@Dillon Hudson I'd maybe start by looking at properties in Conroe, Tomball, Jersey Village, Humble, Porter, New Caney, Kingwood.  I think flooding, taxes, and schools are all things to be aware of.

Ryan Thomson · Answer

@Dillon Hudson I would recommend taking some equity out of your home. It's just sitting there not doing much. :)

Erick E Pleitez · Answer

Investing in some rental properties is a good way to go. You can get good deals on tenant ready and sometimes better deals on properties that need a little extra TLC. Message me, I’d love to connect with everyone and talk about possibilities.

Grey Stone · Answer

I would buy a slightly larger home and turn your current home into a rental. I have really liked this strategy, as owner occupied loans get the best terms and can get a nicer portfolio with less cash down and lower interest rates.

Lauren Cutchen · Answer

@Dillon Hudson

Depending on your budget, I've seen houses in The Woodlands that could use some minor rehab and you could get it rented out. Going through analysis recently, you can expect around $1.25/sq ft rental in The Woodlands. A little less in Conroe.

I work Montgomery County, so let me know if I can assist you in any way. I understand the concern with flooding, and even taxes. I help investors here all the time.

You should join us at the next BP meetup in December. Great way to network and bounce ideas off each other.

Bud Gaffney · Answer

@Dillon Hudson I would house hack. Buy a multi family and if you have leftover money buy another. The more units the better.

Starting out, $75k in cash, what would you do?

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