All Forum Posts by: Andrew Herrig

@Account Closed If by cash flow you mean gross rent minus PITI, yes you can probably get $400 per door. If you mean cash flow net of all expenses, then no.

As an out of state investor, I would be wary of any sub-$100k properties. You will quickly get into war zones at that price point.

Unless you are doing some sort of value add, the best you're probably going to do is 1% rent to price (i.e. $120k house renting for $1200). After property management, capex, vacancy, taxes, insurance, etc. you will about break even. Best way to get cash flow in DFW right now is to look for off-market, value add properties. Or buy a bunch of cheap war zone properties and carry a gun to collect rent.

@Tony Karns Just to clarify, even if this probably wouldn't cash flow as a stand alone rental, I agree with @Bart H. that it would make a great house hack. 

You might not be able to get rents up to $1900, but $1600-1700 is probably doable. The problem with nailing down rents is that most of the duplexes in the area are 2 bedrooms renting at $1200-1300 per month. There are no 4 bedroom rent comps except for much nicer single family houses in adjacent neighborhoods.

But the duplex is in a good elementary school, and with a little cosmetic rehab you can certainly raise the rent substantially to cover most of your mortgage.  

@Tony Karns Yes, depending on level of disability.

@Tony Karns Just make sure you do our due diligence. I'm pretty sure I know what duplex you're talking about - I live a couple miles from there. If you want to get in the $1700-1900 range you're probably going to need to put $15-30k of updates into it.

Also make sure you check if it's in a flood zone - parts of that area are. Not a dealbreaker, but you will need to factor in flood insurance if so.

Other than property taxes, I think your expenses look good. Dallas County has been relentless in raising property taxes the last few years. As soon as it sells, they will raise the tax value to at or near the sales price. Even with the homestead exemption, taxes are going to go from $370 per month to $600 or more.

If you need any other help send me a PM. My wife is a realtor and we live in and know that area very well (again assuming I know which duplex you're talking about).

@Tony Karns I would be very suspicious of a duplex listed on the market at $360k where market rents would be 1% or more. Something doesn't seem right. How confident are you market rents are $1700-1900 per side? Why are they only getting $1142?

Honestly I have not seen a 2-4 unit property listed on the market that would actually cash flow in the past 2-3 years.

@Grant Smith I live and invest in Dallas, so not out of state. But I think you either need to get on a plane and get familiar with the city yourself, or have boots on the ground here that you trust. 

In general, I would be very wary of buying a property with an ARV less than $150k or so as an out of state investor.

Sounds like you are at the very beginning stages of your research. I would find some other out of state investors who have owned property in Dallas for awhile and get their opinions and recommendations. 

@Account Closed I think building your own lists that are a little harder to get is a good idea. But you can't call a mailing campaign a failure after only 1 touch.

Regardless of the list, I would highly recommend committing to 6 mailings (1 per month for 6 months) before I evaluated whether the list is good or bad. I receive a lot of mail from investors wanting to buy my own houses, and probably 75% of them never mail me more than once. I bet if I picked up the phone and called them, 75% of those investor wouldn't even answer.

Yes there is a lot of competition, but most of them are not doing what it takes to succeed. If you mail consistently and answer the phone, you are already doing better than most.

@Steve S. Are your properties single family homes in DFW? If so, at around $250k each, you are probably well above the median rents for the area. If and when a downturn comes, it could hit the higher end properties harder.

All that to say, I wouldn't be looking to leverage your existing properties any further right now. You are getting some good cash flow, and trading up for higher value properties is something I've considered (I've got twice as many properties as you and getting about the same cash flow - more management headaches, but they are bread and butter median income rentals).

A few options I see:

1. Keep buying more rentals that cash flow as deals come up. Use your extra income to pay down one mortgage at a time.

2. Invest more passively in multifamily syndications, notes, or as a hard money lender.

3. (Crazy idea) Liquidate the 401k to pay off your current mortgages (taxes and penalties would probably take a huge chunk, hence why it's a crazy idea). At 4.5% interest, you could add another $3800 to your $3200 cash flow per month, netting $84k per year from your rentals alone.

@Mark Douglas There are deals to be found in every market cycle. Real estate is an illiquid investment. Even in a hot sellers market, it can take 1-3 months to go from deciding to sell a home and getting the closing check. Most of the deals I do are with truly motivated sellers who can't wait that long or for some other reason don't want to sell through the traditional route and are willing to trade equity to avoid it.

That said, be careful in analyzing your deals, and don't get caught up in the hype and pay more than you should because you baked appreciation into the numbers. If you're buying rentals, do a sensitivity analysis and make sure you will cash flow even if vacancy increases or rents drop.

@Jerry Thompson For your situation I would definitely recommend house hacking as a good way to get started. Being single with no kids gives you a lot of flexibility. It's a good chance to dip your toe into real estate investing and see if you like being a landlord. Find a duplex, live in one side and rent out the other. Or even a single family house with roommates. Take advantage of the low down payment and interest rates on an owner occupied mortgage.

As far as the IRAs - they could be rolled over into a self-directed Roth where you have more flexibility to invest in notes or hard money loans.