All Forum Posts by: Andrew Herrig

@Rung T. Yes, property taxes in Texas are high, and at least in Dallas County, they are on a mission to jack the tax appraised value up to market value. One of my rentals has increased in tax value almost $100k in 2 years. That is an additional $200 per month just going to taxes. My rent increases are barely keeping up.

When you are doing your due diligence on turnkey properties, do not use their numbers for the property taxes. You need to assume the year after you buy it, the tax value is going to be raised to very near the sale price. Rule of thumb, taxes will be around 2.7% of tax appraised value.

@Steven Hamilton II @Ann Bellamy Thanks for the reply. Sounds like I am over-complicating things and should stick with cash :)

@Jonathan Wolter @Ann Bellamy @Steven Hamilton II @Davey Wilde

Reviving an old thread here, but had a question on cash vs accrual accounting for rental properties.

I am setting up my rentals (currently 9 properties) in QuickBooks and struggling with whether to use the cash or accrual method. I have been trying to do it "right" and use accrual, but thinking I may be making things harder than they need to be.

Even with just a handful of properties, things are quickly spinning out of control with journal entries for accruing property taxes monthly (paid at the end of the year) and insurance (usually pre-paid and then expensed out monthly, but each property seems to be a little bit different). Also setting up a monthly bill to separate out each mortgage payment into principal, interest, and escrow.

Am I making my life too complicated, or is this the right way to go about it?

@Leo Lanza My best response rate on direct mail in DFW is about 0.25% (2.5 calls per 1000 letters). It's a numbers game. You need to spend a lot of money to find deals right now.

If you want to find deals and you don't have money, do what other people aren't willing to do: door knocking, cold calling, networking, etc.

@Vincent Chen There has been a ton of appreciation in the last 3-4 years. I think it will be difficult to find properties that cash flow (or even break even) AND have a good chance for appreciation. If you are looking for appreciation, I would be scouting out the northern suburbs, but you're not going to find cash flow there. If you are looking for cash flow, some of the southern Dallas suburbs still provide reasonable numbers, but not much chance of appreciation in my opinion.

I invest in Dallas because I live here. But if I were out of state, I would be looking for another market that is not quite so hot.

@Rung T. is correct that everything in Dallas either has foundation problems or will have foundation problems. For the most part, it is not a big deal as it is pretty much expected here. I usually budget $5k for foundation work on almost every house I buy.

@Scott Thompson I would not want to deal with the tenants and deferred maintenance in that class of condo ($50-75k).  In my opinion you are better off going to some of the inner-ring suburbs where you can get to the 1% rule on $100-150k houses.

Unless you want to do what @Philip Postel mentioned and buy up the majority of the complex. That is a very interesting idea.

@Dallas Bass What town is this in? I see you are in the DFW area. I'm assuming it's not Dallas as those rents would either be very low or else it's in a war zone. I would think a little outside the metroplex you should be able to do better than the 1% rule.

@Blake C. As others have stated, it really depends on your goals. You won't make a high percentage return (making some broad assumptions, around a 4% return on equity), but if you don't have anything better to do with that money maybe that's a good return for now.

There are a ton of options to increase your return by selling and reinvesting the proceeds, all with varying levels of knowledge/risk required. Some ideas: buy a portfolio of lower cost rental homes in DFW, buy a portfolio of turn key rentals in another market, become a private lender, invest in commercial/multifamily syndications, etc.

Back on market! Buyer fell through.

Also posted a couple walkthrough videos.

Interior Video:

Exterior Video: