Houston investor looking to buy first rental home

30 Replies | Houston, Texas

Hi all!

I'm a Houston local currently renting in the Heights area. I've come to a point where I have a sizable amount of savings and I'd like to get more involved in a more tangible investment (not purely stock market). Real estate is something I've always been excited to try, and now feels like the right time.

I've done a decent amount of reading and learning thus far, and I've settled that I'd like to start off by purchasing a duplex/triplex property that I can live in, and rent out the other units (essentially House Hacking).

If there are any investors, brokers or people involved in REI in the Houston area, I would love to meetup and grab a coffee (I'll buy).

I'm also not afraid to get my hands dirty, and am willing to help out with anything in exchange for knowledge. I can also paint, clean, build or fix pretty much anything cosmetically. Anything that can help me get involved with hands-on experience I'll donate my time.

I can also design and build websites, marketing materials etc (I'm a full-time professional designer and web-developer).

If you are in the Houston area and have an opportunity for me to learn and give you a helping hand, please reach out! I'll only preface that I work a full-time job from Mon - Fri, but I am typically available anytime during weekends, or early morning/later evenings during weekdays.

Looking forward to meeting and learning from you guys here in BiggerPockets community!

-Axel

Get after it sir! I was in your shoes one year ago and finished this year with 3 duplexes under my belt and currently finishing my first single family.  So much fun! Property Taxes seem to kill most potential deals but if you live in them it could be a different story.  There seems to be better deals right now outside the beltway - but that doesn't mean they don't exist!  

@Tony Castronovo @Brian Watts Nice to meet you guys!

Can I ask what method you're finding most of your deals? The MLS doesn't seem to have much. I've talked with a few investors and it seems like the best option is to either get a deal through a wholeseller, or even better trying to generate my own deals directly with sellers.

Have you guys had any success with working directly with pre-forclosure sellers?

Hey @Axel Norvell , I was fortunate enough to find my first 2 on the MLS but they weren't in Houston proper. My current deal is a short sale (also on the MLS). Starting next year I will be taking the wholesale route now that I have established funding with Corridor Funding.  They have good flexibility depending your goals.  Message me and I can send you the contact info.

BW

Finding deals in today's market here in Houston is TOUGH. Most of the stuff I see from even wholesalers don't work from a numbers standpoint - flips are profiting $5-10k and they're pitching rentals at 80-85+% of ARV. You really need to network with the good wholesalers that don't blast out every property they get to an email list. If they can discuss it with you first because they know you actually close, you'll get better deals. I know really experienced flippers here in Houston that are constantly flipping houses that can't find anything where the numbers work - that tells you how things are right now.

You were also correct with what you mentioned - going directly to the seller is your best option. That can be time consuming if you work a 9-5, so stay patient and look for value-add opportunities others missed on the MLS or that rare good deal from a wholesaler. Also, tell all your friends & family you want to invest in real estate and buy a fixer-upper (something they understand) - you never know who will come out and say they have one or know someone that has one. You sometimes find deals in places you aren't looking.

@Axel Norvell Good deal! I like your attitude and way you want to go at it.. 

I see many new investors in BP and other meetings, Real estate investment is attractive investment strategy and not short get rich game. Many wants to get in and quickly make money or make it happen. Actually it takes time.. it takes time to create network, it takes time to find your deals, it takes time to get moving...  Patience is key but keeping your momentum level during this time is more important than that..  Many give up half way or never find the deal they wanted because they stuck with analysis paralysis. You need someone to help you get through the hump. Find experienced investors to push you through with it..  Having coach or mentor who can be an agent or experienced investor is not bad idea. I know they are hard to come by but they are out there.  Sorry I was in preacher mode :-)

As per deals, you have to have your eyes all over not just one place. You also need people to work for you whether it;s realtor or wholesaler..  You can try your own luck by marketing for your deals. I thought about it many times and even have my picket sign which I put in anytime I got around my rentals. But I don't want to spend $10k to send post cards to get 10 leads and 1 may work out and don't have time..  I would rather pay $10k more to wholesaler if he finds good deal for me. I buy all my deals thru wholesaler and pocket listing or direct sellers thru grapevine.

Set your goal, get our funds ready, find your deal and make it happen... JUST DO IT!

@Axel Norvell

You don't have to house hack if for example you find a good deal outside the beltway, and you still want to live in the loop, well you can rent out all the units, and with the profits you can rent a place where you desire.

You can also house hack by renting a bigger place, and airbnb the rest, but that is only if you are comfortable with other people in your house :)

Good luck

I agree with @Brian Alfaro and in fact I would say that some of the deals I get from wholesalers are worse than some of those I find on the MLS.

Here is the thing with the MLS that newer buyers tend to forget -- the realtor isn't stupid, and they know there are a gazillion investors crawling around everywhere, many of whom are willing to overpay. And even in a normal market, they will add on what, 8-10% to the sales price just to leave room for negotiation.

So go spend a weekend making offers.  I am mean, seriously, go hard, make like 50-100 of them.  Not saying spam them or use some arbitrary formula (though I know a local guru that teaches exactly this) but just see if you can get a few of them to counter.   

If you aren't embarrassed about the offer you are submitting, then you are offering to pay too much.

If it doesn't work, then you have just put your name out to 50-100 local realtors that list the kind of properties you are looking for.  And this brings me to the excellent point that Vijai just made above -- probably the only cost effective way to get deal right now, in this market, is networking.  Do it here on B.P, go to meetups, talk to realtors, be relentless.  Somebody will get one, eventually, where the numbers are good but the timing is wrong for them, and they will want to hand it off to somebody that they like.  Be that person. 

Amen to @Mark Sewell . I truly agree about sending offer to MLS properties if you it is the house you want to own it for rental or flip. Last year March, there was property listed for sale in Missouri city for $110k and I saw the house and like the potential if I get it for $90k. I just shoot up the offer the same day, cash offer. You know what they accepted it. Reason, the property is owned by sisters, got it from their died mom. They just want to get out quick and don't care about high price. Cash deal attracted them and closed in 2 weeks. So you will never know the seller situation until you try and make an offer... You might be surprised with the outcome.. Just thought I throw it out there.

This is great advice guys, thank you!

@Vijaianand Thirunageswaram Thanks for your motivation :) Being consistent in searching for a deal is definitely key. It's just a numbers game, and the more deals I come across and put offers where I feel comfortable with, the higher the chances I land one.

I think right now I feel some hesitancy because the market is super hot right now, and I don't want to be in a situation where I've tied up most of my money into a deal, and the market declines.

I've talked with a couple multi-millionaire investors who suggested waiting for the next market correction to begin acquiring properties because I'd be able to find them at a better deal. I know these people experienced 2008 and were unprepared, but are now reading signs that it's time to get liquid to capitalize on the next downturn (which could be 2-3 years).

I'd be interested to hear what you guys think on this. How do you guys minimize your downside and make sure that you're prepared for a market correction? 

Hello @Axel Norvell ,

I work for a local investment real estate company here in Houston, and we purchase 25-30 properties a month. After we close on them, we resell most of them to Local Real Estate Investors. We do not list our properties. We sell them to clients we have met and worked with in the past. If you are interested in learning more about what we do, I'd love to schedule an appointment. Feel free to PM me.  

Mike Morgan

@Axel Norvell   Any luck so far?  I see you originally posted a few months back.. market is still pretty active But typically we can find Some better deals around the end of the year. House Hacking is a great idea! But Heights is such a costly area.. Are you wanting to stay in the Heights or any interest in the burbs?  Happy to connect if you'd like to chat more.

@Axel Norvell I'm a Houston native and just started investing in real estate within the last 3 months. In that time I closed on 3 properties, 2 of which are in 5th Ward. 1 is a SFH off the MLS using conventional financing leaving me with a mortgage less than most new vehicles for a house that will rent $1200/month. The second is a duplex through an investor I met here on BP off a listing in the marketplace and did seller financing.

I mention 5th Ward because it is essentially where The Heights was about 25 years ago, and you know first hand where it is today. There are a lot of value add properties in the area that also have a strong chance of appreciating as the gentrification picks up even more and developers snatch up the remaining vacant lots.

Originally posted by @Vijaianand Thirunageswaram :

Amen to @Mark Sewell . I truly agree about sending offer to MLS properties if you it is the house you want to own it for rental or flip. Last year March, there was property listed for sale in Missouri city for $110k and I saw the house and like the potential if I get it for $90k. I just shoot up the offer the same day, cash offer. You know what they accepted it. Reason, the property is owned by sisters, got it from their died mom. They just want to get out quick and don't care about high price. Cash deal attracted them and closed in 2 weeks. So you will never know the seller situation until you try and make an offer... You might be surprised with the outcome.. Just thought I throw it out there.

Very well said @Vijaianand Thirunageswaram but not everyone have the cash to make cash offer. 
Cash is king I agree, do you think the seller would still have accepted your $90k offer if it was not a cash purchase?

Thank you for your consistent thoughtful contributions to BP.

Originally posted by @Mike Morgan :

Hello @Axel Norvell ,

I work for a local investment real estate company here in Houston, and we purchase 25-30 properties a month. After we close on them, we resell most of them to Local Real Estate Investors. We do not list our properties. We sell them to clients we have met and worked with in the past. If you are interested in learning more about what we do, I'd love to schedule an appointment. Feel free to PM me.  

Mike Morgan 


Hi @Mike Morgan I will like to learn more about your this. Kindly send me a PM

Thank you