All Forum Posts by: David Schmiediche

@Joe Scaparra is right. At least in BCS, duplexes typically cashflow better than SFH. I was talking to another investor, similar to Joe who has made millions investing in Real Estate. He mentioned that new builds (nicer homes in general) are great to show people, because they look and show a lot better. Although all of his most successful deals, have been 1970 - 1980 builds with 2-4 units. This is especially true when you start talking about forced appreciation. Forced appreciation will make you richer quicker, if done correctly. With nicer homes, there's no more room to force the appreciation. Or, at least it will harder to find ways to force appreciation.

I fully agree with @JD Martin. My father just retired from a job at A&M where he disliked the management, and how they handled a lot of situations. He still works a part time job in Austin remotely, so he isn't fully retired. Yet he'll tell people that he's retired. 

My broker is another great example of this. He owned 6 KW brokerages across Texas. He had the goal from a young age to retire at 60. When he was 59 he sold the brokerage that made the least amount of money and caused him the most headaches. He still owns 5 brokerages and he told us this story saying that he met his goal of retiring by 60. 

So, if someone says their retired based on their definition of retiring, I have no issues with them saying it. Owning 5 brokerages is not my definition of retirement. Although, I don't have any issues with my broker saying he's retired, because to him, it meets his definition.

Welcome to the community! With this world feeling daunting and confusing, what can we do to help you get started investing?

I know I'm late to the post, although here is my advice from doing direct mail in this market for the past 5 years.

What’s working best for you at this budget?

-Letters directly to the owner of the property have had the highest return for us. We tried post cards to save money and it didn't return anything.

Should I stick with mailers or explore cold calling, PPC, SMS, etc.?

- Mailers work really well for us. Cold calling, PPC, and SMS haven't worked for us in the past

What lists have been most effective for motivated sellers?

- Out of town investors. It doesn't necessarily focus on finding motivated sellers, although we have had the highest response rate with that list, meaning a higher likelihood a motivated seller would call us. Also, even if they aren't a "Motivated" seller, you can talk to them about listing to get a commission on the sale.

Any lessons learned from your experience?

- Stay away from post cards, and EDDM. They are of interest because they are cheaper, although the return is significantly lower. Pay more to send out letters, even if it is to a smaller list.

 @Kyle McVay I literally just had this issue with my lender. I transferred my properties to an LLC and three days later asked my loan officer about a cash out refi or a HELOC. He told me we couldn't do it while the property was owned by the LLC. We had my attorney convey the property back into my personal name, did the refi, and now will have him transfer ownership back to the LLC. If you plan on pulling money out, do it before transferring it to an LLC. It will save you time, headaches, and money.

If you're looking to get into multifamily, College Station is definitely the way to go. Bryant and Greg mentioned good reasons and the main reason I would say to look in BCS is because of the abundance of multifamily properties. I haven't seen many other markets that have as big of a multifamily selection. Right now there's over 50 multifamily properties to chose from. As a buyer, you have options in our current market.

Here's a small tip for new investors that I was never told about real estate investing.

I purchased two properties in 2024 and early this week I got a text from my tenant that they received mail for me at the rental. To my surprise, it was a 1098 from my lender that originally held the loan for less than a month before selling it on the secondary market. So to new investors, set a reminder around January 1st to get your 1098 from the company that originated your loan.

What are some other tips and advice do y'all have for new investors that no one told you about in real estate investing?

I'm an agent and investor who has been growing my sales business for 6 years and my investment portfolio for 5 years. Having a real estate license has been a huge benefit because it has allowed me to grow both my businesses by doing the same work. Here are a break down for the reasons that you should or shouldn't get a license.

Perceived pros:

1) Access to MLS Data: The realtor MLS will have access to more information than Zillow, that will be beneficial for an investor (Primarily the Rent Roll)

2) Save on commissions: The commission would be paid directly to you, so you would get a 3% discount on all properties you purchase

3) Networking: Being licensed helps you build relationships with agents, brokers, and investors to help find deals that may be worth pursuing.

4) Off market listings: Since you will be lead generating for listings to sell as a real estate agent, every deal you come across is a potential property to purchase.

5) Additional income: You can earn commissions by representing other buyers and sellers to purchase properties that you decide to pass on.

Cons:

1) Time & Cost: Licensing requires education, exams, fees, and ongoing continuing education.

2) Almost every benefit I mentioned above can be done without a real estate license, so there is it's a lot of money and time for no benefit.

Yes, the biggest con to getting a real estate for an investor is that it doesn't help at all. I put perceived pros, because you could do the most of the pros of having a license without getting one, as listed below.

Why the pros aren't really pros:

1) Reach out to your number one agent that you've been growing a relationship with. If that doesn't work, reach out to the listing agent directly to get the missing information.

2) After the first one or two deals, you'll be getting more than a 3% discount because you should be getting better at finding/negotiating deals, on and off market. Even as an agent, if another agent brings me a deal 10% or more below market value, I want to pay him 3% (Even if it is out of my own pocket) so that he continues to bring me deals. Some people will say that agents buy all of the good deals, so there aren't any deals left for the investors. Statistically, agents don't own investment properties, and if they do, it's just one or two units. This means, for all of the great deals they find, the only way they can make money on the deals, is to get a commission form selling it.

3) You can network with agents and investors, without having a license. Find the agents that do a lot of multifamily investing in your market and call them to schedule lunch or coffee. Network with them and make sure they know that if they bring you a deal that goes to closing you will pay them their commission of 3%, even if the seller doesn't pay it. You don't need a license to network with people.

4) All the lead generating that you would be doing as an agent can be done as an investor. Door knocking, cold calling, direct mail marketing, etc. This is the work you would be doing as an agent to find leads to buy or sell. You can, and should, be doing the exact same thing as an investor. Sadly, just because you have a license, doesn't mean off market deals fall into your lap.

5) This is the only real benefit to having a license. Since you will be lead generating to find off market deals and buyers, if you find a good deal that isn't perfect for you, you can sell it to someone else and get a commission. Although, if you are doing this, you are becoming an agent. An being an agent isn't easy, 70% fail in the first year.

All of that to say, the only reason you should get a license is to sell real estate. If you wish to be a real estate agent, get a license. If not, there is no real benefit and it will cost you more time and money than it is worth.

@Kyle McVay talk to your loan officer about the different options available. Depending on your current loan you have three main options. 

Cash out Refi)

Pros:

- Typically lower interest rates than the other two options

Cons:

- Higher closing costs

- You lose your current interest rate that is probably significantly lower than current rates

HELOC)

Pros: 

- Lower closing costs

- Interest only for what you use

- You can choose to use it or not depending on your future plans

Cons:

- It is a second lien, so they typically have higher interest rates

- Sometimes it is a variable rate

Private Lender)

Pros:

- Less government restrictions that you need to follow

- HUGE amount of flexibility because everything on it is negotiable from interest rates, to payment options

- Not required to leave 20-30% of equity in the property, and no PMI if you have less than 20% equity

- Closing costs are minimal. Hiring the attorney to draft up the documents is the most expensive part, depending on the lender

Cons:

- Finding private lenders who aren't charging 10% or more is hard to do (Not impossible, just hard)

Private lenders is my favorite, because we have found private investors who know us, like us, and trust us, so we are able to work with them and get rates just as good as banks provide, without much in closing costs, and flexibility to set up the loan how we want to set it up instead of Fannie and Freddie regulations. Obviously, finding these lenders are very hard to do. A HELOC is probably your next best option.

I'm curious if y'all are seeing a decrease in tenant qualities applying for rentals. I own multifamily properties in College Station that primarily get rented out to working class individuals. Every now and then we get a few students, although most of our tenants are working individuals. Over the past few years we have required a 600+ credit score for every tenant and income from all tenants adding up to 3X the monthly rent amount. If that requirement isn't met we require a cosigner for the individual with less than a 600 credit, or a cosigner for both if the income from all tenants is less than 3x the monthly rent amount. Typically we haven't had any issues renting out our units and this year we are having a hard time finding tenants that meet that criteria. Are other investors in the area seeing this as well?