Is it possible to cash flow strong in Houston?
Rental Property Investor · Washington, DC · Member since 2015 · 88 posts · 45 votes
Is it possible to cash flow strong in Houston?
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Real Estate Broker · Chicago, IL · Member since 2015 · 122 posts · 103 votes
8yGood morning, sir!
When I left Houston a year ago, we were buying roughly 40 homes per month in that market. Many of these SFH properties were buy and hold. I can assure you, there are areas where you can buy low, add value, and rent out close to the 1% rule or higher, AND get a 10% cash on cash return.
Look into areas like Katy, TX. It's a great little suburb just west of Houston. We were buying homes there close to 100k, they needed 20-30k, were worth close to 150k, and rented for 1500 p/month or more all day long. Very desirable area.
Also look into Sugar Land, Missouri City, and even as far down as Pearland, Friendswood, etc.
Hope this helps!
51 Replies
- Texas City, TX · Member since 2014 · 63 posts · 43 votes8y
I live in Pearland and I see a reasonable number of duplexes in my part of town(near 35 and 518.)
Two were actually just built this year, so they must be making someone, somewhere money.
But in the newer parts of Pearland towards 288 I don't think there are hardly any in that area.
- Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
David Nguyen would be a great person to contact in Pearland. He owns at least 50 multi-family properties in Pearland and has been doing it there for almost 20yrs.
Originally posted by @Account Closed:
Originally posted by @Cody L.:
Originally posted by @Vijaianand Thirunageswaram:
Most successful investors build their portfolio buying older properties in better community for good discount price and start adding on top of it. I know there is competition but deals out there. I get good deals every day, just don't have takers/investors who are willing to invest.
No offence but I find that hard to believe. In this market there is all buyers / no (few) deals. 10 years ago it was all deals, no buyers. I can bid on anything I want, any size. I know if I get some $100m deal under contract and don't have the $20m to put down, I can find it. And any number of banks that'll do the $80m
So if you say you have deals, and no takers, then maybe it's not really a deal. If you really do have deals, I'll buy them all.
I find deals everyday; as most experts know, "deal" is relative however. Some "deals" don't have the teeth I need to pull the trigger on so I will pass them on to less active (less needy) investors. They are deals, just not for me.
"If you really do have deals, I'll buy the all." seems like an olive branch used as a whip. You dont' have the capitol or team to handle a deal a day, and you haven't line out any criteria as to what defines a deal.
I'm at 65% of ARV minus repairs. Thats a good deal (I usually take home around 18%) for me, but others (landlords) would likely need less meat on the bone and wholesellers more. (so they can take a bite and pass it along).
Hell, I pass on "deals" that fit my criteria all the time because I don't want to engage in the time managing emotions, or personalities of the seller.
Being blunt with facts doesn't always go over well with people, so I am grateful to have 100% of my deals be referrals or take overs via referral.Wasn't an olive branch or a stick. It was hyperbole. But the point remains. Finding buyers/$ is easy, finding deals is hard. ~6-8 years ago it was totally reversed. I know as 6-8 years ago my phone rang off the hook with brokers saying "I have this deal, want to buy it?". Now my phone rings off the hook "I have this buyer, do you have anything you'd sell?"
Obliviously 'deal' is defined differently, especially if you extend it to someones own property type preference, by everyone -- but the basic idea everyone has is the same. Deals, like pornography, is hard to accurately define but as one SCOTUS said, 'you know it when you see it'
PS, if the 'deals' fit my buying criteria of larger sized multifamily inside the loop (or close by), then yes, I have the capital and team to take down as many as he could send.
- Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Cody L., no offense but nobody has the capital and team to take down a "larger multifamily" inside the loop everyday.
Thats hyperbole too I suppose, it seems like you'd be a difficult one to find deals for when you don't speak factually. Originally posted by @Account Closed:
@Cody L., no offense but nobody has the capital and team to take down a "larger multifamily" inside the loop everyday.
Thats hyperbole too I suppose, it seems like you'd be a difficult one to find deals for when you don't speak factually.I've done $36m in deals in the last 12 months as principle. That # wasn't limited by capital, it was limited by # of deals.
I don't mind making that claim as I know the market well enough to know there is more cash (if I needed to raise it), then deals that would come my way.
But I don't have any desire to get into a comment beef so I'll simply wish you the best of luck in your own business and leave it at that.
- Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Cody L. - Sure, if you had deals that were 100% packaged and verified for you, thus requiring absolutely no inspections, number verification, negotiations, or construction cost gathering, you still couldn't do a large apartment inside the loop a day. You couldn't handle the after purchase of structuring management/maintenance/marketing. You would be losing hundreds of thousands, daily and ultimately go bankrupt.
To prove my "theory" is that 6-7 yrs ago you weren't buying a deal a day when your phone was ringing daily or you would own every large apartment in Houston. - Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Cody L. I knew a guy who was doing good back then, but Feb 2014 forfeited his company via not paying his tax debt. Of course he reinstated it the next month, but he won't mention that to people now that he is back to "doing well" again. His focus seems to be on braggadocios claims of ability instead of the details that make a real business. Like not forfeiting his company for not paying his debts to the Government. As a result I won't do business with him, not because he made a mistake but because he won't admit his mistakes and yet loves to point to other peoples. That kind of behavior is gross, and cowardice.
*He also has layers of people between him and potential clients looking to sell to him, as he has patterns of behavior that allow him to feel "big" while remaining small no matter how big his portfolio. Which is why it won't be long until he "forgets" to pay bills and loses everything again. - Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Jason Malabute - Just make sure you do your research. Houston, like a lot of metro area's, is FULL of frauds. The amount of investors who are taken to court by the city/state for being slum lords is HUGE. A lot of these "investors" buy things about to be deemed uninhabitable, make a bunch of promises to the owners/tenants/city to let them take over, then they patch stuff as cheap as possible and start collecting rent. Once in control they don't care about the tenants/owners/city. These are the same ones that will claim "I am saving a building" but really just want the cheapest property they can get because they are cash broke and have no real interest in ever investing in the buildings they acquire.
This matters to you because these are the same frauds who will JUMP at the chance to sell to an out of state investor. One who may not do the due diligence needed and doesn't know the market/reality of the properties condition. (frauds are good liars and will claim they "tried the best they could with what they were working with...i.e. slumlords w/ no intent of providing safe living space for their clients).
As I always say, "Trust but verify". You wouldn't want to wind up listening to someone who types out morality while his tenants go months w/out hot water and with drugs and prostitution being a part of the properties fabric....not without fair warning anyway. Originally posted by @Account Closed:
@Cody L. - Sure, if you had deals that were 100% packaged and verified for you, thus requiring absolutely no inspections, number verification, negotiations, or construction cost gathering, you still couldn't do a large apartment inside the loop a day. You couldn't handle the after purchase of structuring management/maintenance/marketing. You would be losing hundreds of thousands, daily and ultimately go bankrupt.
To prove my "theory" is that 6-7 yrs ago you weren't buying a deal a day when your phone was ringing daily or you would own every large apartment in Houston.Because 6-7 years ago, like I've said multiple times in this thread, the deals where there, the $ was not. Financing simply was hard to get. Now financing is easy, but there are no deals. But there are no deals because there is so much easy/cheap money chasing them. The exact opposite of before. Plenty of deals because no $ available to buy them.
I've bought 2000+ units inside the loop dude. Never lost on one. Almost every one I hold has been refinanced such that my new debt exceeds my original purchase price thus no $ of my own in it any more and still cash flows nicely.
There are not enough to 'buy one a day'. I have mid 8 digit LOIs out there and could close on all if they hit. Getting financing or even capital for down payments is easy.
Originally posted by @Account Closed:
@Cody L. I knew a guy who was doing good back then, but Feb 2014 forfeited his company via not paying his tax debt. Of course he reinstated it the next month, but he won't mention that to people now that he is back to "doing well" again. His focus seems to be on braggadocios claims of ability instead of the details that make a real business. Like not forfeiting his company for not paying his debts to the Government. As a result I won't do business with him, not because he made a mistake but because he won't admit his mistakes and yet loves to point to other peoples. That kind of behavior is gross, and cowardice.
*He also has layers of people between him and potential clients looking to sell to him, as he has patterns of behavior that allow him to feel "big" while remaining small no matter how big his portfolio. Which is why it won't be long until he "forgets" to pay bills and loses everything again.You're going to know a LOT more people like that. There are a lot of people paying WAY too much for properties.
14 months ago I bought a 170 unit for $38k/door. I've done little to it other than some stabilization. I've had offers to buy it in the mid to high $50k/door range. Those people won't make money. At least they won't after their floating rates go up or property tax catches up. They'll be dead.
Soon we'll revert back to lots of deals, and hard to finance. If you buy smart with that in mind, you'll be fine. But I have a feeling LOTS of new guys are going to get smacked. Hard.
Originally posted by @Account Closed:
I'm at 65% of ARV minus repairs. Thats a good deal (I usually take home around 18%) for me, but others (landlords) would likely need less meat on the bone and wholesellers more. (so they can take a bite and pass it along).
Hell, I pass on "deals" that fit my criteria all the time because I don't want to engage in the time managing emotions, or personalities of the seller.
Being blunt with facts doesn't always go over well with people, so I am grateful to have 100% of my deals be referrals or take overs via referral.I'm curious to know where you're finding these properties at 65% ARV minus repairs in this market. Finding deals like that these days would be like spotting a bigfoot riding a unicorn. Even a good 75% property is tough to find.
Originally posted by @Cody L.:
Soon we'll revert back to lots of deals, and hard to finance. If you buy smart with that in mind, you'll be fine. But I have a feeling LOTS of new guys are going to get smacked. Hard.
I totally agree.. And I think it'll happen more sooner than later.
- Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Cody L. - I am going to guess you do D or lower properties? You aren't buying discounted properties in rent ready shape w/ no money down I am guessing; which means you aren't fixing them or bandaiding them in order to rent them?
@Mark V. I just bought one in Alvin a couple of months ago.
75k purchase 25k (actual 35k) repairs with an ARV of 200k - Bank Verified.(Dual income)
I am currently working a deal that is 3.5m purchase 200k makeup/jewelry with 2 independent appraisals for 4.9 and 5m. - Bank Verified.(SFH)
I don't work quantity, I work quality. - Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
@Mark V. - The "myth" is that you can ever buy anything consistently and easy. I resolved to only do deals of a certain caliber and didn't settle for less. It was hard as hell the first time, but I have never regretted it.
If I can't buy a property and make it something I am proud of then I don't want to buy it. Doing so would be out of greed, not a wise or moral investment. - Real Estate Broker · Chicago, IL · Member since 2015 · 122 posts · 103 votes8y
Sorry, sir. I'm a little disconnected with that market at the moment.
I've been buying in Chicago for the last year!
PM me if you're interested and I can redirect you to someone local who can help you in HOU.
Thank you sir!
Best,
Van
- Investor · Beaumont, TX · Member since 2016 · 171 posts · 277 votes8y
Very possible. But you need to be looking off market, not on the MLS. I picked up a house in Third Ward for $17,500 with inherited tenants that didn't want to leave and have been collecting $750 a month rent for the past 3 years and I haven't spent a dime on repairs as they said the tenant is a handyman and had been doing his own repairs, and when I go sell I can probably sell for $85k "as is" due to land value.
Have a condo Spring i will probably sell in a few months. Picked it up for $30k, spent $3k for new paint and carpet and a new stove and Rents for $900, HOA is $130, and i can throw it on the MLS for $67k and it'll be pending in a week.
Originally posted by @Account Closed:
@Cody L. - I am going to guess you do D or lower properties? You aren't buying discounted properties in rent ready shape w/ no money down I am guessing; which means you aren't fixing them or bandaiding them in order to rent them?
Nope. Normally C properties we take to B near the city core of Houston. So C properties in B areas are 90% of our portfolio. They receive a ton of capital improvements.
Our latest buy was one downtown by Toyota Center. Gutted and remolded all the units to A level IMO, removed window units and replaced with ductless mini splits, etc. Bought it 3 months ago, our refi will finish next week. Proceeds will be pretty close to our purchase price + improvements. Thus almost $0 in and a nice cash flowing property.
- 8yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
Originally posted by @Account Closed:
@Jason Malabute there is VERY LITTLE in Friendswood that is Multifamily.
Thank you. That is what I thought. So if you are only interested in multifamily properties should I put all of my focus in Pearland (and disregard Friendswood) ?
Malabute & Company CPAs527 Reviews - 8yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
Originally posted by @Account Closed:
David Nguyen would be a great person to contact in Pearland. He owns at least 50 multi-family properties in Pearland and has been doing it there for almost 20yrs.
is he on BP?
Malabute & Company CPAs527 Reviews - 8yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
Originally posted by @Thomas Shaw:
I live in Pearland and I see a reasonable number of duplexes in my part of town(near 35 and 518.)
Two were actually just built this year, so they must be making someone, somewhere money.
But in the newer parts of Pearland towards 288 I don't think there are hardly any in that area.
Thank you. Where can I Learn more about this? Which part of Pearland is near the 35 and 518 (what is it called?)
Malabute & Company CPAs527 Reviews - Flipper · Friendswood, TX · Member since 2017 · 401 posts · 368 votes8y
I feel there are better area's than Friendswood or Pearland. They are great areas, but you will pay a premium.
- Texas City, TX · Member since 2014 · 63 posts · 43 votes8y
I'm honestly not sure where you might be able to learn more. I just happen to live in the area.
The part near SH-35 and FM-518 is usually called Old Pearland. Not that it is especially old(there are some pretty new subdivisions and nice homes in the area, but it definitely has some older homes too), but it is sort of the area where Pearland kinda started. It was a pretty small, undeveloped suburb that wasn't given much thought, but in the last decade or so, it has really blown up.
Once you go up FM-518 towards SH-288 you start getting into the new area. Lots of new construction. Homes as well as lots of commercial stuff. A large "city center" type of area with restaurants and shopping and such. Much more expensive area.
While I don't invest in the area, because as Jeph said, it's not super cheap to get into, and Pearland is considered a "nice" area, so properties are usually on the decent side. And from my experience, nice areas to live in don't seem to have the numbers for cash flow very often.With that being said, I know there was a good bit of flooding done in the older parts during Harvey. So you might be able to find some properties at a discount that you could make work.
I'm fairly new myself, so I'm pretty limited in my knowledge on how to do deep analysis of cities and that you might be looking for.
- 8yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
Originally posted by @Thomas Shaw:
I'm honestly not sure where you might be able to learn more. I just happen to live in the area.
The part near SH-35 and FM-518 is usually called Old Pearland. Not that it is especially old(there are some pretty new subdivisions and nice homes in the area, but it definitely has some older homes too), but it is sort of the area where Pearland kinda started. It was a pretty small, undeveloped suburb that wasn't given much thought, but in the last decade or so, it has really blown up.
Once you go up FM-518 towards SH-288 you start getting into the new area. Lots of new construction. Homes as well as lots of commercial stuff. A large "city center" type of area with restaurants and shopping and such. Much more expensive area.
While I don't invest in the area, because as Jeph said, it's not super cheap to get into, and Pearland is considered a "nice" area, so properties are usually on the decent side. And from my experience, nice areas to live in don't seem to have the numbers for cash flow very often.With that being said, I know there was a good bit of flooding done in the older parts during Harvey. So you might be able to find some properties at a discount that you could make work.
I'm fairly new myself, so I'm pretty limited in my knowledge on how to do deep analysis of cities and that you might be looking for.
Thank you. I'm trying to determine if I should disregard Friendswood and focus on Pearland since I am only interested in 1-4 unit properties.
Malabute & Company CPAs527 Reviews
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