All Forum Posts by: Evan Shiels

Good job with the properties under your belt so far. As far as large properties vs SF and small 1-4 multifamily, the growth of property returns can scale well once you get into larger units. That being said, your overhead can increase dramatically. I take it that these units you own are under local property management, but larger units usually require more/ different oversite. I have investments in Central Texas and often the biggest struggle is the management of those properties rather than finding them. Being in an all cash position is not bad, as you will beat out a similar offer using financing 90% of the time, but I would advise studying the expected CAP of those properties from the seller vs what you get with an independent appraiser. There are a lot of fantasies sold to buyers at the end of the day. If your family is willing to spend a little bit of money up front, there is a wealth of money to be made in small multi-family complexes.

A while back a family member went to get his first house. It turns out that going your entire life without ever having a credit card or a student loan does not help you to get a loan for over 100k USD. If these people have never had credit before, they should have NO score, rather than one near to the bottom of the barrel. Were these credit reports that you had an agency pull, or were these submitted by the applicants themselves? Also, were these two applicants a couple, or were these two people in fact separate applicants? 

As for paying to have their reports scrubbed, I want to learn that technique. You can ask them a few questions for sure. Such as, oh, do you have any credit cards? If they do, then they SHOULD be on the credit report, so the red flags raised by a blank report will only grow. What service do you use to pull their histories? Does it include rent histories? I recently used Turbotenant for the first time during a round of rerentals for my properties and it works pretty good imo, but there are a half dozen other services that can pull records for you just as well. 

I'd love to join you all tonight, but sadly I have a previous engagement tonight. Are y'all planning on making this a monthly thing? 

There are many things I wish I knew about investing, properties, home builders and so many issues of property ownership than I did at the time. I decided purchase my first house in '06 in Central Texas while I was Serving in the Army and it ended up being a new home in a new development in a town with no history of large scale developers in a county that also had little to no oversight into what towns accepted or not in their developments. I will condense the story, but I am happy to follow up with any questions this post generates. 

1.) Lennar Homes, the builder of my house in this development, made up their own rules and more or less did what they wanted when it came to following the architects plans for the house. I did not know that as the purchaser of a home, I had more rights than just the final inspection. 

2.) I did not have my own inspector as they provided me their "Engineer" for inspection after the home was completed. My realtor, who I thought fondly of as she helped a young couple with the financial limitations imposed by a military income budget was not the greatest. We were looking for a home in what was a booming pre-crash housing market to look for our first home, but she did not even suggest that I have an inspector as it was a in her own words, "new home." Let me tell you something, if your agent does not suggest or rather insist that you hire an inspector, she is most likely letting you down in other areas as well. 

3.) Look at the fine print of warranty contracts. A guarantee on a 25 year roof is not 25 years, let alone 15. 

4.) HOAs. This development as with most in Central Texas came with an HOA. In this case its board members were the original land holders and their kin, who ran it as if this land was still part of their family ranch and now we were their cattle. Not joking. As a Soldier who had to be gone from literally the signing (did it via POA while preparing for a deployment), to dealing with the covenant, to having them move the board meetings to a different county to avoid having to see the people in the development, it has inspired a lifetime avoidance strategy going forward.

5.) 30,000 dollar millionaires. I bought an affordable house. I also bought within my means. In a new neighborhood it is hard to get any sort of data about the income of your neighborhood. It turns out that in the Wild West days of lending in the Oughts you could get a loan if you at least had a pulse and there were waivers for if they could not prove that you had one. Long story short most, as in 23 of 26 houses in the first part of the Lennar build in this development were foreclosed upon within a year and a half. I am not against new house purchases by any means, but if are going to do that for your first purchase, look out. I managed the housing crisis well because we purchased the home based upon a single income rather than as a DINK, but not so for most, so even before the crash of '08 started, my neighborhood went into foreclosure. I came home from overseas at the end of '07 to see that only three house on my part of the street were still occupied. 

6.) Loan rates. I know, I was in the Army, VA mortgages all the way. Right? Wrong. Even for your primary residence, you should shop rates and look at different type of loans be they conventional, FHA, 30 YR, 15 YR etc. As a first time home buyer I might have thought I knew what I was doing, but I clearly did not. I got a VA loan with suboptimal rates because if I recall correctly, I only had a quote from two lenders. I did not know that I did not need a new credit check for each one, so I tried to preserve my, then, suboptimal credit score by not looking around. My agent could have helped by asking me more questions or being more involved, but at the end of the day, she just wanted a quick sale, which vacant new homes represented to her and we never talked about how I was going to finance as I just said VA and that was that. I learned to do all of my financing setup before I even start to look for a home. Well usually, as sometimes a steal of a deal does fall from the realm of a fantasy into reality and there can be a bit of a scramble to line up financing, but hey noone's perfect.

The list could go on, but the bottom line was that I ended up over paying on financing, with a poorly build new house. As soon as I deployed, a month and a half after closing, the nail pops started as the poorly engineer homes roof started to buckle and warp the sheetrock. My spouse had to contend with a re-roofing of the new home after they threatened Lennar with court (by one of my few neighbors who was not in the 30k club) as this happened to every home in the neighborhood. They laughed at my wife when she brought the same things up with them, and told her it was "normal". I had to call from the warzone just to get someone to acknowledge that our home was not the only one having an issue and that this sort of issue was in fact covered by the contract. Remember, contracts are king. This is especially true in Texas.

TL,DR: Contracts are King, Get a good Agent, never buy a Lennar home, Shop your Rates, be wary of new neighborhoods and their HOAs, always bring your own Inspector. 

How much of that 130k for the rehab ended up being eaten up by holding costs? It sounds like a nice turn around, but my brain always craves the often untold story of money spent out of profit. I find in my own deals that the hidden costs, especially those associated with time always come back to kick me in the face. As I am a sucker for making the same mistakes multiple times, my face has grown a bit haggard over the years. 

I am going to parrot @jarrod Covey here. The area between Belton and Copperas Cove has many SFHs going for around 100k to get in the door that can be renoed under 30k. There has been a bit of a spike in prices over the last four months or so because of the COVID shock on housing prices, but as more properties have hit the market, the prices are cooling off as well. There are many that can be had for a fraction of the 100k max, but results will very with renos on these lower end properties. As for the ARV being at 75% of total cost, there are a few that can be had here, but if you are looking to BRRR, it will depend on the neighborhood and we are looking at a year wait in the neighborhood for forced appreciation to get you there. 2020 has been great in the Greater Fort Hood Area for it, but I suspect that next year's foreclosure market will wipe out some of those gains, but in the long term I have not had too many issues with the 190 (I-14) beltway.

I am game to set something up when the coast is clear. ;-) I know people have been a little leery of face to face meetings for the last few months. I invest mostly in the Killeen /Cove area myself. Now if only I remembered my meetup password.