All Forum Posts by: Luciano A.

I would say in theory that will be great and will protect you but in practicality, I don't see many so-called GC signing. Most guys that are in construction don't even have clean accounting let alone understand what they are signing. IF a GC is broke they will sign anything and everything to get that check so don't be fooled that a signed paper will protect you. It will still cost you in legal fees etc if you go to court. 

A few things I would do:

Get a GC from referrals from other investors you know and trust. 

Sign a contract that details the scope of work

Do a draw schedule so everyone knows when payment comes due

If they ask for % upfront to buy materials you can ask to have the store call you to pay over the phone. Now, this is not always possible and some contractors will not be happy with this because in many cases they were planning on using your funds to finish the last job. That can be a red flag. An option can be you buy materials and pay them just for labor plus a GC fee to oversee all trades. 

IF they have insurance ask to be listed as additionally insured. Or at least a Certificate Holder. 

Not sure what State you are in but here in Texas outside of Electrical/Plumbing/Mechanical you don't need a license. In my experience as a builder, if your trades have insurance and workers comp they are professionals so the likelihood of them running off with your money is less. Not saying it cant happen.

Best of luck 

If you could see yourself in five years, would you want to own and run 20 properties or would you prefer to have more time and freedom? Managing a rental can be easy, but as some people have pointed out, you need to educate yourself about the rules and laws. You can use an experienced realtor to help list the property, help get all of the necessary documents reviewed and signed by all parties, etc. Just make sure that they own rentals themselves so they can help explain what to look for when evaluating a prospective tenant. The old tale that tenants will call you at 2 am about their toilet, not flushing is possible--but very rare! If you rehabbed correctly, and properly screen tenants you will have fewer headaches in most cases. There is no "right" answer to this question. You are the only one who can decide what you want out of your investment, regardless of what anyone else says. It takes time and effort to learn new skills and develop yourself to become a good operator. I came into real estate knowing that I wanted to be an operator, not just an investor; this helped me learn all aspects of the business so when my portfolio grew, I knew exactly what I was doing. If your personality, work schedule, and previous experience allow you to be a good operator then go for it! You will learn valuable lessons from this first investment that will help you with future purchases.

Congrats on your first rental

Best of luck

Congrats on getting into your first rental. 

Best of luck 

@Amna Khan

Welcome to Houston. Houston has become a more difficult market to cashflow with traditional long-term rentals in the last few years. The interest rate, property taxes, and insurance can break a deal. Renting out a room while living there is one way to get into a property that would not otherwise cashflow. I am currently building duplexes with many bedrooms and their own bathrooms to attract MTR rental market. The area of 77026 Kashmere Garden may flood so check for any flood zones if you can help it. If you go into an area that is a little rough, drive around to see how much new construction is in the area--that will be a good indication there are still opportunities for growth there. Also, check crime statistics or drive-through when the weather is sunny on a given Saturday afternoon to get an idea of what's going on in the neighborhood.

Suburbs like Cypress and Katy are safe, but they are also saturated with rental properties. The school districts are great, so you're going to pay more in taxes, and renters who live in your properties might want to buy a home of their own someday soon. If you haven't signed a buyer's representation agreement, I would suggest getting in touch with as many agents as possible. Ask them if they work with investors, if they themselves own rentals, and if they understand what you're trying to accomplish with this investment property.

Hope this helps

Best of luck

@Tyler Lingle

Many people believe that starting an LLC by using the one-page form from their state or ordering online is all they need to do. If you've ever been sued, however—and most of us have at some point in our lives —there are ways for attorneys to break the corporate veil if your business structure isn't complete enough. You will need to schedule annual meetings, prepare minutes and maintain good records.

If you and your partner are excited to start a business, this would be the best time to discuss with an experienced attorney who can point out things you all never considered or discussed. Good times make us optimistic. But when disputes arise it's another story entirely. Investing $100,000+ in an asset is a big deal. Spending $500 to discuss your partnership with a local attorney will help you avoid costly mistakes down the road.

Best of Luck 

@Kyle Kipka

Not all new builds would work just like not all SFRs would make good investments. Some builders are offering incentives that could save you money, such as buy-down programs and warranties on certain new homes—which may not be the case with older properties. For new builds, you wouldn't have to worry about major CapX repairs, especially with the 2-10 warranties builders give. And because rents tend to be higher and they rent faster—you'll also see lower vacancy rates. In my area, some new homes are being sold at a lower cost per square foot than older homes in the same neighborhood.

However, I have advised many newer investors that not all markets make sense to invest in. As a builder myself with an edge, I can see people buying duplexes for $500k and ask myself: What is their play? Some people buy properties not necessarily for cash flow. Not everyone buys for appreciation. Some people buy to preserve capital for the long term, while others use cost seg depreciation to offset W2 income if their partner is a stay home parent. Investing in long-term rental properties with the goal of earning a double-digit return can be done—but it requires patience and diligence. You have to look at many deals before one works out for you.

Warren Buffet's quotation about being greedy when others are fearful doesn't always hold true, because sometimes you should just sit tight and wait. And work on improving your investment strategy—it's better to pivot than make bad moves out of panic or greed. People in high-priced markets are making their rental numbers work by relying on Airbnb. Perhaps there is another way you can make your numbers look good—midterm rentals or rent by the room, for example.

@Javier Rosales

I agree with everyone but also consider if there are any pre-payment penalties. If you have 5 years with no stepdown then it might be worth buying down the rate. It all depends on where you think this market will be in 2-5 years. Play out all different scenarios and see which fits your investment goals. 

Best of luck 

@Frank A Castro

Sounds like your agent is worried about becoming known as that agent that submits lowball offers. However, in this market in which we have no idea where the economy will be in 6 months, you need to find an agent that understands your strategy of coming in lower to offset potential correction. Agents are not all created the same. Find one who is hungry and will put in offer that you want to make. The worst thing a seller can say is no. However, if your agent advises from a knowledge point of view and understands investment then it's worth listening to them. But most agents are not investors.  

If numbers don't work don't waste your time. If listings are on the market for over 100 days and they barely dropped prices then that is not a motivated seller. 

I would look at new construction and see if you can find a builder that is willing to pay closing costs, buy-down rate, etc. Sellers of existing homes who have owed prior to 2021 are normally sitting in a good position so they are not in as much of a hurry to let go of their home. 

Another option is to look at listings that had a price cut but the property has been on the market for a short period of time. 

Best of luck 

@Nami Do

There are companies that help facilitate these types of transactions. Here in Houston, there is a company called Quest Trust Company. You should call them to insure it is done right as the tax implications can be very costly.

Best of luck 

@Erere Ovirevarie

I am sure you are anxious to get into your first multi-family but I would tell you to not be in a rush as I feel the market will get better for a buyer in the next 3-5 months. Get to Houston and drive around look at areas and find one or two that you like. Start becoming an expert in those zip codes. Houston is really big and trying to map all the properties around Houston might have you in analysis paralyzes. Another thing there aren't many new tri and fourplexes being built because of how the city treats them via code so more costly to build than a SFR or Duplex. So more than likely you will have to buy an older one and that might cause issues with FHA as they require a move-in property, not rehab.

Another thing to consider is what HCAD (property tax) has it valued at versus the price you are buying. Your property tax will readjust to that purchase price next year and thus can whip out cashflow. Also if a property is 50+ years old with no work done with permits the insurance companies will charge more for those so take that under advisement when crunching your numbers.

Meetups are found on this site but can try places like Eventvrite.com 

Welcome to Houston and best of luck 

 Oh if she is well below market then I completely understand.