Hey Houston, 

I am an out of state investor (but mobile), looking to BRRR invest in Houston ,TX, I am a fan of the micro demographic data and trends. I house hack a duplex in an expensive market but new to investing in a home that is not my primary residence.

My requirements: 

Build a buy and hold rental portfolio properties over the next 7 years, 2-3/properties a year 

Would love to get into duplexes, but understand its not as prominent in Houston

Expected returns, cash flow: 12-15% CoC

Properties that ARV 120-200k, HML Cash Buy

Plan to make myself available locally to manage rehab. 

What I've put in place thus far:

Approved by HML

Secured refi financing 

Found reliable property management 

Missing one key piece, you guessed it, a deal? Leading to my question, to meet my above requirements should I start my focus in the inner loop wards or rather the outskirts such as Baytown,Missouri City, Pasadena, Spring. 

@Steve Alexis You are definitely on the right path and you have got the key things you need.

I'm a Local Investor-Realtor and Buy & Hold Investor myself. 

I have a 10 units currently under rehab and another offer was accepted on a 4-Plex just yesterday. 

Let's connect and make magic happen.

Goodluck.

Hey Steve, 

Your missing piece is the most important. If you want to BRRRR into cash flowing properties you're going to have to look outside the loop as prices inside the loop are just too high and don't support the rents.

Check out the suburbs like Katy, Sugarland, Meyerland, Spring, etc. 

You're still going to have a tough time cash flowing at these high prices, so much sure you're buying at a discount. 

Best of luck!

Thanks Cameron. Thats great advice especially from your perspective as property manager and investor. 

Im sure your sifting through the data daily. 

@Cameron Tope I agree with you, I am currently looking for SF to BRRRR but each deal I am running numbers on they won't work. almost giving up on Houston :(

@Cameron Tope Great point on looking outside the loop. I believe I already discussed this with @Steve Alexis but where is the discount in this highly competitive market?

@Edward Adams That's Funny. You can't give up man. To make your analysis easier, I will suggest you just add $15,000 to the listing price of every property you are analyzing because THEY WILL SELL OVER ASKING PRICE.

The market is insane right now because of the Low Interest Rate as low as 2.5% on a 30-Years Loan.

Goodluck

@Wale Lawal they wont cash flow anyway, TAX, and other expenses are too high vs the rent. always end up with negative cashflow in my analysis. 

@Edward Adams what are the assumptions you are using for taxes and expenses in this market?

@Steve Alexis

There’s a website that provides yearly taxes on properties in TX by punching in the street name or property owner name. That’s what I used to crunch the numbers. Also, download HAR, the property taxes they show are close enough.

Dont forget to check your area if it requires flood insurance, that can greatly affect your numbers.

If you are looking on the MLS the key is speed. If you can't make a decision and have an offer in place same day a deal hits the market you missed your opportunity most times in this market. Another thing you can do is target properties that have been on the market for a longer period of time, these have less competition but that is typically for a reason (overpriced, needs extreme renovations, or both). You never know on properties that have been sitting they may accept a low ball offer!

@Steve Alexis every MLS listing has almost all the information you need to analyze any deal including tax rate, HOA, Flood Zone etc. You can use Rentometer for rent comparable or get it from your Realtor if you are using one.

Goodluck

Originally posted by @Edward Adams :

@Cameron Tope I agree with you, I am currently looking for SF to BRRRR but each deal I am running numbers on they won't work. almost giving up on Houston :(

Trust the process! Cash flowing and BRRRR deals are hard to find but stick to the process. Eventually the tides will change, as they always do, and you'll have more deals than you do money.

@Wale Lawal deals at a discount are there, just not as many as there used to be! 

Originally posted by @Steve Alexis :

@Edward Adams what are the assumptions you are using for taxes and expenses in this market?

TAXs and HOAs are known i do 10% management, 10% maintenance 5% capital expenditure. i only guesstimate insurance. 

Just through some realistic view about the market and numbers from end.

- Yes market is actually SUPER HOT and ON FIRE. I have been trying out offers for many of my investors even with LESS option or NO OPTION period, CASH/HM, we keep losing it because prices are going way too high even for properties needs rehab. It doesn't really make sense if you run the numbers and how these investors are wanting to pay this high price. As we can see, it turning out to be FOMO market and they just need investment property. I don't recommend that strategy for my investors which is losing one.

- OFF Market properties also are going way about asking these days with repairs needed. With Wholesaler relationships sometimes I can make deals happen before it get WILD. These deals might still be think on the cash flow but numbers work.

What I am trying to say, those days are gone where you used to get 10-15% discount on OFF market or MLS turnkey properties accepted for Cash purchase. It's very tough market and you gotta work hard for it.

BTW, calculating CASHFLOW varies by person. Some do after taking Capex and maintenance savings and some before.. Whatever way you do it, make sure you are on the positive side or break even with current mortgage rates.

Hope this helps. 

This has been great advice.

Here are the general themes I am taking away:

-Houston Market is unbelievably HOT, due to various factors, margins and cash flow are being squeezed, and even veteran investors are moving cautiously

- with that said there are deals to be had, requires patience, diligence, but also speed to action

To add to that:

My general observation is that, low rates and hedges against inflation is flooding the market with cash, increasing the cost of assets but the rents have not caught up.

With that I can see why it will be difficult to BRRR, but shouldn't the flipping strategy still be effective in this environment, assuming you can cover your purchase premium paid via your charging a premium at your exit.

Should Investors be looking to Flip and hold cash for when the market allows buy/hold deals to pencil? based on historical data this may be 1-2 years from now.

Curious on the thought from this group here.

Originally posted by @Steve Alexis :
Should Investors be looking to Flip and hold cash for when the market allows buy/hold deals to pencil? based on historical data this may be 1-2 years from now.

Curious on the thought from this group here.

@Steve Alexis As it stands for me, I am on hold, still looking though. I have not come across a deal that has motivated me to buy, however, when the time comes, I'll be ready.

I have always focused on a slow and steady approach to buying RE. I like building a portfolio that can resist a crash, or 50%+ vacancy. (I have been through 50% vacancy)

When you have lived through several economic crises; 1980 recession, 1987 Black Monday, 2001 Dot com crash, and the 2008 recession. You learn to never over leverage and, to position yourself to be ready to buy.

I know my way is not exciting however for me, it works.