[Calc Review] - Arlington TX - Help me analyze this deal

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*This link comes directly from our calculators, based on information input by the member who posted.


Hello BP,


My husband and I own a plumbing company in San Diego, CA, and are working on becoming real life real estate investors as well as business owners. Our area is a tough market, so we've been looking in other states, and Texas came up as potentially a good market. I've got a real estate agent sending us small multifamily listings as they come up, as we are looking for at least a duplex for our first investment. I've run a lot of these listings through the calculator, using information from local insurance people, property management people, the Tarrant County property tax estimator, and rentometer, and I must be doing something wrong. Even with prices that to my California eye seem really good, cash flow is barely adequate and often in the negative, mostly due to the property tax (I think.) Can you veterans see anything else I am doing wrong here?? 


Thank you in advance - Jessica 

Your doing everything right but the deal sucks . Maybe Find something outside your area .if your paying property managers and ridiculous taxes your never going to cash flow . Why can’t anybody manage a property themselves these days . Your giving all your money away 

@Dennis M. Thanks for your response. We live in CA which is why we would need property management for this deal in TX. The prices seem so great compared to the market in CA, but the cash flow isn't working out with my estimates for taxes, expenses, and rents. Rents aren't that low, so that makes me think I am overestimating something on the expense side and was wondering if anyone with more experience in Arlington would be able to see something I don't. Of course, the deals may just not be that great! 

Thanks!

Jessica

Can you give ONE example?   You don't need a complex calculator.  If you're paying over 100x rent, it won't cash flow.

Example:  If you have 4 units, each renting for $800, that's $3,200 in rent roll.  You need to pay under $320k.  I use that 100x rule as a way to analyze a property super fast.   

If a property is new or in a great area I might bend my rule and go up.  If it's a C property in a C area I wouldn't even pay 100x rent.   So it's a guide.   

I just paid $2.8m for a property that brings in $23k/month.   So under my rule.  But it's a nice new'ish 4 story building in a hot area of town.   Then in a bad area of town I paid $6m for $120k/month of rent.  So much better than that rule.

Originally posted by @Dennis M. :

Your doing everything right but the deal sucks . Maybe Find something outside your area .if your paying property managers and ridiculous taxes your never going to cash flow . Why can’t anybody manage a property themselves these days . Your giving all your money away 

 Bro, that's terrible advice.  You think someone from Cali is going to manage a random 4 plex in no-where Texas?   Or do you think someone with a full time job is going to manage 100's of units?

I stopped doing the management myself once I hit about 100 units.  I realized I was no longer an "investor", but rather a full time property manager.  F that noise.  I'd rather pay someone to manage, so I can focus on buying more.  

Telling someone they shouldn't pay someone else to manage is like telling them they shouldn't 'waste' money on paying someone to do electrical, plumbing, or flooring work. 

Originally posted by @Cody L. :
Originally posted by @Dennis M.:

Your doing everything right but the deal sucks . Maybe Find something outside your area .if your paying property managers and ridiculous taxes your never going to cash flow . Why can’t anybody manage a property themselves these days . Your giving all your money away 

 Bro, that's terrible advice.  You think someone from Cali is going to manage a random 4 plex in no-where Texas?   Or do you think someone with a full time job is going to manage 100's of units?

I stopped doing the management myself once I hit about 100 units.  I realized I was no longer an "investor", but rather a full time property manager.  F that noise.  I'd rather pay someone to manage, so I can focus on buying more.  

Telling someone they shouldn't pay someone else to manage is like telling them they shouldn't 'waste' money on paying someone to do electrical, plumbing, or flooring work. 

It’s not terrible advise if you read into what I meant .Im just telling the fella where the money is all going .hard to save for that next investment when your giving your profit out to everybody and their brother  wouldn’t you agree .I understand your point ,there’s a scale to the management but if you are just getting into RE sometimes self management helps you bring in more cash flow therefore allowing you to add to your portfolio . 

Originally posted by @Dennis M. :
Originally posted by @Cody L.:
Originally posted by @Dennis M.:

Your doing everything right but the deal sucks . Maybe Find something outside your area .if your paying property managers and ridiculous taxes your never going to cash flow . Why can’t anybody manage a property themselves these days . Your giving all your money away 

 Bro, that's terrible advice.  You think someone from Cali is going to manage a random 4 plex in no-where Texas?   Or do you think someone with a full time job is going to manage 100's of units?

I stopped doing the management myself once I hit about 100 units.  I realized I was no longer an "investor", but rather a full time property manager.  F that noise.  I'd rather pay someone to manage, so I can focus on buying more.  

Telling someone they shouldn't pay someone else to manage is like telling them they shouldn't 'waste' money on paying someone to do electrical, plumbing, or flooring work. 

It’s not terrible advise if you read into what I meant .Im just telling the fella where the money is all going .hard to save for that next investment when your giving your profit out to everybody and their brother  wouldn’t you agree .I understand your point ,there’s a scale to the management but if you are just getting into RE sometimes self management helps you bring in more cash flow therefore allowing you to add to your portfolio . 

I hear ya.  And I self managed because I wanted to know every damn thing I could about it.  That's why I also did all the home depot runs, worked with the contractors, installed the floors, etc.   But if you are investing OOS to chase yields, that's not an option (even when you're starting out).    Everyone is getting a piece of the rent pie when you buy a place.  The state, utility companies, contractors, etc.  Most people who are just starting and investing away from home will make MORE money with a competent management company than w/o 

Originally posted by @Cody L. :
Originally posted by @Dennis M.:
Originally posted by @Cody L.:
Originally posted by @Dennis M.:

Your doing everything right but the deal sucks . Maybe Find something outside your area .if your paying property managers and ridiculous taxes your never going to cash flow . Why can’t anybody manage a property themselves these days . Your giving all your money away 

 Bro, that's terrible advice.  You think someone from Cali is going to manage a random 4 plex in no-where Texas?   Or do you think someone with a full time job is going to manage 100's of units?

I stopped doing the management myself once I hit about 100 units.  I realized I was no longer an "investor", but rather a full time property manager.  F that noise.  I'd rather pay someone to manage, so I can focus on buying more.  

Telling someone they shouldn't pay someone else to manage is like telling them they shouldn't 'waste' money on paying someone to do electrical, plumbing, or flooring work. 

It’s not terrible advise if you read into what I meant .Im just telling the fella where the money is all going .hard to save for that next investment when your giving your profit out to everybody and their brother  wouldn’t you agree .I understand your point ,there’s a scale to the management but if you are just getting into RE sometimes self management helps you bring in more cash flow therefore allowing you to add to your portfolio . 

I hear ya.  And I self managed because I wanted to know every damn thing I could about it.  That's why I also did all the home depot runs, worked with the contractors, installed the floors, etc.   But if you are investing OOS to chase yields, that's not an option (even when you're starting out).    Everyone is getting a piece of the rent pie when you buy a place.  The state, utility companies, contractors, etc.  Most people who are just starting and investing away from home will make MORE money with a competent management company than w/o 

Yeah I could totally see that . There seems to be a great deal of timidity with the mindset of new landlords and ideally a property manager does things without emotion and by the book

In Texas your search needs to be tailored some geographically by:

1. tax rate

2. muds/puds

3. lease rates

4. # beds/baths

5. school districts

6. historical neighborhood turnover ratios

+ more

The increase your monthly rents by decreasing your deposit, charging pet rent, tenant pays first $x of repairs + more....

In today's market you cannot think like a 1980's property owner.... Use the prefab calculators only as a gut check. Analyze the data thoroughly and get really familiar with a few markets and agents. So much more to say...

After looking, do you pay P&I and another $150 on insurance?  Also, I believe $900 is a “safe” rental price for the area D/FW unless in a bad neighborhood, a good area could command $100+ more each door.  Those two may make your numbers look more appealing.

Thank you so much @Cody L. , @Danny Webber , and @Karl Farmer ! It looks like I need to make some more calls to find out how much expenses in the area are. Really helpful tips. We are trying to learn as much as we can as quickly as we can to becoming experts in the markets  we find interesting. Hence all my newbie questions! @Danny Webber This might be a couple of dumb questions, but what is muds/puds and how do you find out lease rates and historical neighborhood turnover ratios and data like that? Bug some property managers or real estate agents?

As the owner of a plumbing company, I definitely understand the need to answer questions for free in hopes of getting work from some of the potential customers, but I also hate bugging people when I know I might not ever hire them. So I have been trying to find a lot of information online myself but am finding it slow going. What's the etiquette about that? 

Thanks again! I really appreciate the time.