All Forum Posts by: Mark Sewell

Houston seems like it is about 25 little towns that grew together.  The place is just different from one zip code to the next.  It just seems hard to make any kind of blanket statement that really applies.

Flood events make it just a little more interesting, as does the lack of zoning laws in most areas.  But you already knew that.

The areas around town that I keep hearing about are Indy Heights, Acres Homes and south of the Med Center in 77033.  Those are rough areas that sound like they might be starting to turn.  Would love to hear others in the area share their opinions on this.

Think about who is moving there.  You flip a house, usually a better house, and sell to end buyers that want a pretty forever home to raise kids, and so on.  Everything has to be really good.

You rent a house, that is a temporary housing situation.  Renters might be younger (or way older), may not even have kids.  Renters are looking for a decent area, but maybe not a really good area - they need something they can afford, something safe, something reasonable.  But I am guessing they don't plan to be there forever. 

I think it probably matters more for flippers.  Could be wrong.

If you want to meet the real HM lenders, probably best to go to local REI meetups/events. Try to find the local ones that are actual investors themselves.

Forget EADO.  Seriously.  Unless you are a developer, and you have experience.  @Ryan Johnson is spot on. 

Areas with great school districts: Spring Branch, Bellaire & Katy.  Might be others, but those the ones that I know.  But those properties will be priced higher, so 'cash-flowing' rentals might be tougher to find there.

Move out past Beltway 8. Look in those neighborhoods, where the working class folks live. You can still get houses that cash flow -- maybe not right off the MLS but possibly even that way.

Look out for flood areas.  Don't worry about what flooded in Harvey, worry about what flooded repeatedly before that (like Bear Creek and Braes Bayou).  

Be on somebody else team.  Find somebody that is doing what you want to do. 

I've meet a handful of people locally just from being active on BP.  I've tried to help them with their lead generation to buy properties in their areas, and I have learned a lot about what they are doing.

You want a mentor?  Go find a local hard money lender.  Learn what their lending requirements are and starting running deals at them.  Trust me, if they don't like your deal, they will let you know.  You just need to be willing to listen.

Not sure I follow... Can you share some numbers?

The HELOC is going to be on your personal residence, right? So think of that as short term money. Use it for a period of time, maybe long enough to do your project.

I gather the plan is to use the BRRRR strategy, so you buy a house with at least some degree of equity in it. You renovate it, and rent it out. It appraises now higher than it did before, and your equity position is enhanced, at least a little bit.

At this stage you would either refinance the rental property and pay off the HELOC on your primary residence, or you would simply leave the refi on the existing financing in place and figure out some other way to pay off the HELOC. Is this what you are asking?

If so, then it makes a lot of difference what the rates are. HELOC rates will probably be quite a bit higher than whatever bank loan or mortgage terms you get on the rental house.

Also from a risk management standpoint, you would want to protect your primary residence and make sure that HELOC debt doesn't put your own home at risk. Remember when the next down turn rolls around, the banks will probably take away that HELOC facility or modify it somehow -- or that is what I gather from the old salts around here on BP forums. You cannot count on it always being available.

@Account Closed is a pretty knowledgeable guy in the MF space here in Houston.  I think he might have some really good insights.

I agree with your comments here.  

You could justify the risk of using the HELOC (secured by your personal residence) if you are buying a deal that has some equity in it.

If you are buying pretty houses, and looking for appreciation, maybe this isn't a wise move (unless you really get it cheap). 

If you are buying a house that needs some work, in a good neighborhood, that you can fix up and refinance, then it might not be a bad plan at all. It just becomes a math exercise at some point. You calculate the reserves you will need, the holding costs, and all that. Can you increase the ARV enough to make it work?

Then you look at it all from a risk management perspective. What happens if you fix it up and rent it, and then it doesn't appraise like you thought it would? Maybe you only are able to get part of your HELOC funds back out of your refi? Do you have adequate earning power and/or reserves to ensure that HELOC gets paid back, should this deal not go exactly according to plan?

I'm not going to lie, I am also seriously considering doing this same thing with my personal residence at some point.  I owe just under $110K on a house that should appraise close to $200k.  It is one of a several small buckets of funds that I am seeking to leverage at some point.  Might be a year away yet, building those reserves and getting my own financial footprint reduced (might knock out the car payments first), but we shall see.  I am not going to do that until my wife and I have some self-imposed 'risk management rules' established for ourselves and some kind of reserves in place.