All Forum Posts by: Jacob Pereira

You're right. Gone are the days where someone would just sell you their cashflowing property simply because they were moving on to bigger and better things, so the lazy investor could just buy something and sit on it. Now you will need to do at least a bare minimum amount of work to create cashflow, but frankly it's not that hard. Find a place with below-market rents or has been on the market for a long time, price it appropriately, slap on some new flooring, paint, countertops, and fixtures, and get rents where they should be. Voila! Very little time, money, and effort to force cashflow.

Of course there are many other ways to do this, but that's one of the easiest methods IMO.

I'll warn you about Austin; it's really hard to have turnkey cashflow in year one here. You should generally expect to have to do some work to make money here, or at least have to wait a while for appreciation to catch up. That said, I'm happy to set you up on an MLS search; I'll just need your email address and some criteria you'd like to incorporate.

@Ben Hunt, there are definitely conventional loans that allow for less down than that, although you would need to be highly qualified. I assume you've already talked to a lender about this? I've never personally had a client who got a loan this low, but you can get down to 3% without FHA if you check the right boxes. You will of course have to pay PMI.

as @Russell Brazil said, make sure you have an experienced agent involved if it's that close. I'd also like to add that a lender that has a good working relationship with your agent can help as well, especially when it comes to the vacancy estimate. There are a lot of safeguards put in place since the housing crash to keep lenders and agents from influencing appraisers too much, but there are definitely things that can be done in order to hit your numbers.

Can I ask why you specifically want to use FHA? There are low-down payment conventional loans out there as well that have much less stringent requirements.

Let me start by saying that you can make money in any market if you do it right, but gone are the days where you could buy a property in Austin, run it down while collecting rents, and then sell it for a massive profit a few years later. You at least need to do some basic value-add to make money now, but still not really that much. You'd be surprised how cheap and easy fresh paint, new flooring and countertops, and a few improved fixtures cost, and how much they increase the value of your property.

Also, I personally love the duplex strategy, so much so that some of my clients recently designed a coffee mug for me that says "SFRs are nice, but have you considered a duplex?" When I first started investing I bought exclusively duplexes and fourplexes and it has worked very well for me. Even now, I'd say a good 30% of my clients are only in the 2-4 unit market. That said, that particular niche is SUPER competitive right now. it's not uncommon to see 20+ offers on a duplex that is properly renovated and in a decent area. As of this writing, the entire ABOR MLS shows only 74 2-4 unit residences that are active. Additionally, they're all owned by investors, so you're less likely to find a seller who is willing to part with it below market and not have it listed publicly.

I'll end by saying this; Since I first discovered Bigger Pockets many years ago, people have been posting that the next market crash was going to happen and that they were hoarding cash so they could pick up sweet deals afterward. Those people are speculators, and will never beat the returns of true investors who identify where and how they can add value and make solid plans for their investments. 

Official unemployment figures for the Austin economy were updated today. Numbers for June have been finalized and preliminary figures for July have now been made available.

June

The unemployment rate fell to 7.3% in June. 87,500 positions were added, with only 43,000 workers entering the labor force causing the unemployment rate decrease. Nonfarm payrolls increased by 35,600. Labor categories with significant additions include Trade, Transportation, and Utilities adding 5,900 positions, Leisure and Hospitality adding 18,500 positions, and Other Services adding 6,900 positions.

July (preliminary)

The unemployment rate fell to 6.7% in July. 16,700 positions were added, with only 10,100 workers entering the labor force causing the unemployment rate decrease. The overall Nonfarm Payrolls figure did not change significantly. No individual sector saw significant employment changes.

@Andrew Bissada, it seems like in all these Austin posts @Jordan Moorhead , @Ryan Kelly, and I are all in lockstep, and since they almost always beat me to the punch, I usually don't bother to repeat what they've said. That's true in this case too, but I will add one thing; we're all in residential real estate. I do expect there to be a reduction in the demand for large-scale office space in the Austin metro area in the coming years. How that will manifest itself will be interesting to see.

I think maybe better advice would be: be careful, make sure you've fully planned out your investment strategy, and don't invest any money you can't afford to lose.

Very well researched and thought out piece, @Jarrod Covey! As an investor and Realtor in the Austin MSA, I've seen all this happen firsthand. I believe Austin real estate to be one of the best places to safeguard your money during these uncertain times.

@Dale Jiang,

I have to say that I agree with @Ned Carey and disagree with @Polo Vazquez. Talking to a lender and a Realtor costs you nothing, and will give you lots of good information. Be honest with them about your goals and timeline, and if they're worth their salt they'll at least give you the basic information you need to plan ahead.

A lender can give you a framework for how much money you are likely to qualify for, as well as any steps you'll need to take to get the best rates. A Realtor can discuss strategy with you and set you up on an MLS search so you can see what's going on in the market and how it's evolving. As a bonus, once you're set up with an MLS portal you can do your own searches and glean a lot of valuable information.

I'd be happy to recommend lenders and set you up with a search for Austin, or if you're more interested in other markets, I have agent contacts in all the major Texas markets.