All Forum Posts by: Brian Alfaro

Great advice, @Sarah M.!

I agree with Sarah. Treat yourself as a tenant in your calculations. 

What’s really important is not what your mortgage is necessarily but what the market rental rate for the home is. If your mortgage is $1,500 but rental rates in the area are $1,300, it won’t make a good rental unless you’re only looking for appreciation and not cash flow. What’s going to impact whether it has positive cash flow or not is how big of a down payment you put down if you’re going conventional to get your monthly payment as low as possible to make it cash flow once it’s a rental. If you’re putting less than 20% down chances are it won’t cash flow after you rent it out unless it’s a property in a zip code with high rents compared to lower values. The neighborhoods you mentioned aren’t known for having low values (cheap houses) and high rents. They’ll likely be at 1% or less of your property value in those areas - i.e if the house is worth $250k you likely aren’t going to be able to get $2,500 per month for it.

Be sure you talk to a realtor before you make any decisions to get rental rates on a particular property for sale you want to buy and rent out down the road. Obviously the market can change drastically in two years, but it’s still valuable info. 

I agree with @Adam Mitchell . Debt/leverage is a very powerful tool if you use it right, but if you don’t we all know the negative impact it could have. 

If you take out a HELOC on your paid off home you could use it as needed for repairs and/or as a down payment for another home. Once you have a tenant in place their rent payment should cover your debt service monthly payment AND produce some positive cash flow. Yes, there is debt, but you aren't paying it off. Your tenant is. If you only use what you need you'll be fine. Don't over-rehab the house.

Patten Law Firm or American Title are two popular ones. Both investor friendly and both know how to handle the type of closings you mentioned. 

Welcome @Seun Saka!

Glad to hear you are ready to take action! Good luck on your search for your first rental in Toledo. If you are also looking for properties in Houston, I would highly encourage you to network, network, network! Meet as many people out there as you can taking action so they motivate you to do the same, and so you build mutually beneficial relationships. You never know where the next deal might come from. 

Feel free to reach out and connect if you are in need of a Realtor or have any questions. I'm a Buy & Hold investor currently working on my first rehab, so we're in the same boat. Hope to see you at a local networking event. 

I think it really depends on what you’re looking at, as Cody mentioned. 

If the property is turn-key (rent ready) and doesn’t need any major work, going the conventional route may be your best bet IF you have the 20% to put down. Nothing wrong with taking this route depending on your goals. Realize that if you go conventional, unless you have a lot of cash, you are going to be buying slower if you have to put down $20-40k per door as a down payment not including closing costs. Some people are fine with this. Good news here is you have equity from the beginning and likely need very minimal repairs  

If you want less cash out of your pocket or are trying to buy properties that need to be rehabbed, consider finding private money or using hard money. Yes, the fees and interest rates are high, but ideally you're in and out of that loan in less than 3 months, so the interest rate isn't a deal breaker. You refinance out of the hard money and into a conventional 30 year mortgage at whatever interest rate the market is at based on your credit. With this type of loan, they'll loan 70-75% of your after repair value (ARV) which includes your rehab funds. If you can buy right, it is possible to bring very little money to the table. Way less than you would on a conventional loan. I just picked up a property as a rental that needs $40k in renovations, but I only brought $9,800 to the closing table because I got it at a good price.

Long story short, don't only focus on the interest rate. There are other variables to consider including your goals (how many you want or need to own to be financially free and how fast do you want to get there). Make sure you focus on learning to run your numbers for cash flow. A lot of great potential rentals in Houston can get killed by property taxes, HOA fees, etc. If you buy a home that's too expensive as a rental it won't cash flow because you won't be able to pull in enough rent to cover PITI, CapEx, OpEx, Property Manager, etc.. Make sure you speak to a licensed realtor or broker to get a market analysis. Reach out if you need some help - I am a realtor.

@Ben M. Good call, Ben! I use ListSource often to find potential leads. 

Finding the leads is easy. Convincing them to sell to you is another. Houston is a saturated market when it comes to investors and wholesalers. You might reach out and find you’re the third, fourth or fifth person to contact them. Especially if they’re “motivated” by the way of tax liens, pre-foreclosures, etc....

Just make sure you have a plan of attack to close! 

I'll keep my reply simple - no! That's why I stopped skimming the MLS daily. I'd rather spend that same time finding other leads

Looking forward to seeing what others say.

Jeyo!

Thanks for connecting. I'll share my opinion based on what you've shared. I looked up the property on HAR and pulled HCAD on it. 

The appraisal values on HCAD are $95k consistently from 2015-2018. 2019 is pending. Where did you pull these numbers from?

It is NOT uncommon for a listing agent to own a property - especially investment properties. I see it all the time when I research properties on the MLS. Also, it's not uncommon for an agent to not want to show a property with tenants until it is under contract so their time isn't wasted and to avoid people coming out wasting their time only to submit lowball offers. They don't want to spend an hour of their day and coordinating with tenants showing you a property that you won't close on. They'll want proof of funds (POF) and a contract in place with a short option period.

Brandon is talking about COC - Cash on Cash Return. Looks like it's around 12% on this deal if your numbers are correct.

Your numbers look questionable to me. Your ARV is the list price. That's not likely accurate - you need to reach out to a an agent/realtor to get an accurate CMA on the property. If the property is appraising for $95k a $299k ARV is not likely, but I am not sure.

Finally, this is a DUPLEX. For $299k, or even $280k, you're paying between $140k-$150k a door. Yikes. This is not a "deal" - you're only cash flowing $97 on the property using your assumed $1,300 per month per side rent. Again, you should reach out to an agent/realtor to ensure your rental rate is accurate. Since this has been sitting on the market for 137 days, it's obvious this property is fairly overpriced. Otherwise, an experienced investor would have snatched it up quickly. 

Agreed, @Mark Sewell  if you find cheap land in the suburbs 30-45 min away from downtown you can buy a lot and build for $75-80 per square ft from what I’ve heard as well. MUCH cheaper than paying what people are asking. 

@Marvin Montanes Not really. Austin and Dallas are just as bad as Houston for finding cash flowing SFH or 2-4 unit MF because of property taxes. You REALLY need to do your due diligence before investing or you'll end up cash flow negative or barely breaking even. I suggest reaching out to an experienced realtor who can maybe help you locate these properties and run rental comps. You need to know your criteria though - you can't just say "I want a duplex triplex or quad in a decent neighborhood that'll cash flow." You need to be specific such as "I am looking for a tri plex under $250k (or whatever your budget is) in a rental neighborhood where rental rates are _________ and that's not in a war zone." If you show you're ready to buy with proof of funds or pre-approval from a lender the agent/realtor is more likely to be of assistance.

Only tip I have to your question directly is small MF units that are affordable and at or under market value are hard to find. Very hard. Most MF stuff here listed is over priced, but it doesn’t mean you can’t still make offers. 

Also, MF is hard to find because there aren’t a ton here and the investors like to fight over them if they’re even remotely affordable and listed. Best bet is to try to find an off market deal but reaching out to current MF owners who might want to sell. Unless you’re okay paying full price. 

Finally, the neighborhoods might be a bit rough on a lot of the potential properties. There are beautiful new small MF in some areas here, but you’re paying retail new construction prices. The older stuff that needs work will likely be in areas that aren’t as desirable. Make sure you’re ready to live there (and so is your wife) if you’re planning on house hacking.