All Forum Posts by: David Ashby

I agree with Jon, Texas is no longer the "Dallas" movie series of the 70's and 80's state dependent Oil and Gas. I lived in Houston for 6 years after living in Austin for 10 and am now back in Austin.

Austin is a technology hub, not just for semiconductor manufacturing but for actual technology start ups like Solar Winds and Dell and many others and stalwarts like Cisco, IBM, who both have a strong presence here and Google and Apple who are in the process of building campuses here along with GE and Visa.

The lack of state tax, low cost of living and abundance of land makes Texas a great prospect for major corporations to set up shop (Samsung continues to expand their chip manufacturing plant as we speak) Even in smaller towns like Waco, you see job growth and new companies coming (mostly manufacturing) simply because the cost of doing business is so much cheaper.

Texas will be fine provided we don't do something like implement a state tax....Having said that, Real Estate cycles and national economic conditions do affect Texas, just not as bad. In 2008-20010, flipping wasn't hot (but wasn't impossible) because of the credit crisis but there were a lot of buy and hold deals. Now flipping is hot again, at least in Austin and Houston, and buy and hold deals are a little more scarce due to the REO inventory thinning out and overall climate for investing.

In my opinion its not a matter of how sustainable Texas economic growth is (it will slow down at some point), its more of a question of how insulated is the state's economy from national and global market conditions and for Texas, the answer is very insulated relative to other places in the US. My recent observations regarding Texas economics are that Texas markets usually lag behind the steep declines and lead the recovery when things pick up hence making it a competitive market to invest in but safer more stable environment when things get messy.

Thanks Bill. I appreciate it. That makes things easier to understand.

2 questions regarding hard money for experienced BP members. I am getting different answers from lenders regarding selling and holding after a flip.

1. Are there seasoning rules that force a property to be owned for 4 months before it can be sold out of a hard money loan? Meaning if I have the property ready in two months and a closing within 90 days to sell, will the seller be able to buy the property (get financing) at the appraised ARV?

2. Refinancing out of a hard money loan- are there really 12 months seasoning requirements before I could re-finance out of a hard money loan if I want to hold the property? This would force me to stay in a hard money loan for 12 months which would kill me.

Any advice would be greatly appreciated.

Thanks

Mike

I have not flipped a house but I did sit in on a presentation from a wholesale group called Networth Realty. They essentially find deals, present them to you and then if needed, connect you with a hard money lender.
The hard money is super expensive and from the presentation I was given, it cut the profit in half (versus paying all cash). So a 190K ARV property purchased at 126K with 20K in repairs left a 45K spread (gross). After closing from both buy and sell side (purchase and then resell)that takes it down to around 30K potential profit and then insert private money. 4% origination fee, other fees (inspection, survey, etc from hard money lender) that totaled about 10K ,along with the 12-14% interest payment each month (approximately 1200 per month for 3 months) and you are left with about 14K profit pre-tax. That is if you get the project completed and resold in 3 months, if not then add additional interest payments to eat at your profit.
So in short hard money is expensive but adds risk to your projected profit and sustainability in the form of extended holding cost. Having said that, for someone getting into their first deal with not a lot of money, it may be worth it. Keep in mind that this deal required a cash outlay of 25K on my part to get the deal. They do want skin in the game (in my case 13K) and a lot of their fees are due at closing and are not wrapped up into the loan (11K).
There have to be different examples of using hard money, this is based on what I was presented for a flip opportunity but I thought it might give you a rough idea of the hard money aspect, especially for newbies (my rate was higher because it was my first deal with them but they said it would drop after two deals 14% to 10%).
Hope this helps and I'm sure others have better examples. As stated this is what was presented to me and my interpretation of the numbers based on a Q&A with the lender.

Thanks Jon! I'm still learning the Austin market and everything seems to be ultra competitive which may push me out of this market for rentals if deals can be found that make the numbers work.
If I can't find anything in Austin, I will look at other places but need education on finding, buying, and managing out of town properties.
I've read that DFW real estate is actually the most undervalued real estate in Texas. Having family in Waco and Dallas, I'm thinking those markets are definitely worth considering.

I recently moved back to Austin and am planning on purchasing my first income property this year. I'm looking for a duplex or fourplex if possible however I am considering single family due to the potential appreciation in the Austin market.
I would love to meet up with other BP Austin members to discuss strategies and even potential partnerships.
My long term goals are multi-family properties. I would like to start out in smaller units and eventually and up to increase cashflow and networth.
This site is extremely helpful. Hello everyone.