All Forum Posts by: Pete Harper

Quote from @Damilare Wusu:

I live in Dallas and may have a 4 unit multifamily to close on soon that has 3 units rented and I would plan to live in one. Thoughts for the area? Is it stagnant? On the rise? Not familiar with the area. Thanks!

Welcome to small town East Texas. I don't have property in Anderson but can comment of rural East Texas. Population and job growth are pretty stagnant. That being said we have seen strong demand for C-class properties. Rents are slightly above similar properties in larger markets. Limited supply keeps prices high. Good solid cash flow but not tremendous appreciation potential. 

Quote from @Andrew Frowiss:

Hi Leslie,

I would recommend looking into Killeen TX. Austin is a really good rental market, but it's not really a cash flow city anymore and is more of an appreciation play. Killeen is a little more north of Austin and it still has properties that cash flow and give decent appreciation while having much lower purchase prices. You could get a triplex or a quadplex for the same cost of a single family in Austin. A lot of my clients are buying there now instead of Austin.

That was all true a year or two ago. IMO Killeen is currently overheated. See discussion on Killeen-Temple feels like a bubble. 

Quote from @Leslie Monroy:

Thank you so much! Will definitely look at Killeen.  Would welcome any recommendations for property management companies and contractors for the area.

I would like to give a shout out to Isbell PM in Killeen. 

I would not recommend Armadillo. 

Quote from @Alfonso J.:

HI @Pete Harper,

On multifamily you can get up to 80% leverage. Why not maximize your leverage and diversify your liquidity and get multiple properties instead of putting it all into one?

I don't like to carry a lot of leverage. My strategy is to buy properties with mostly cash that cashflow. I use the cashflow to drive appreciation organically. Properties pay for their own renovations as I turn over tenants. After the property is fixed up I refinance and pull all my equity out and buy another one. Classic BRRRR If I leverage at 80% I'm stuck once my capital is used up. This doesn't scale. BRRRR scales infinitely.

Quote from @Dan Kerch:

@Pete Harper Are looking to do any renovations or just finance? 

 Just financing.  I like to set this up so the properties self-pay for renovations with cash flow.  Its a bit slower but properties grow organically.

We are looking for financing for a 10 unit apartment complex in Conroe, TX. We will be doing a 1031 exchange and will be putting a substantial down payment. $700k on $1.1M property. Financing will be held in LLC. Property will provide positive cashflow after debt service.

I wanted to give an update.  I was in the ATT store yesterday looking at phones.  Browsing on an Android phone I was able to download the BP App from Google Play.  It appears as if BP is maintaining the App on Android but not Apple.

What gives BiggerPockets?  Are you IOS haters?

Quote from @Tim Rostro:

Pete Harper,

I have two properties in nearby Copperas Cove right next to Killeen, my first house I purchased back in 2005, and the other a duplex.  I've been stationed there twice in my military career, the first time in 1997 and the second time in 2005.  I've seen this place grow and I don't think it's a bubble.  From what my property manager has told me of the increased growth, people from North Austin, Pflugerville, Round Rock have decided to move to the Killeen-Fort Hood-Copperas Cove area for the lower home prices and rents which ended up driving the prices in that area.  One of the reasons was Tesla's move to Austin and their new truck plant.  People are willing to commute from that area.  It may not be the hi-tech workers but the ones who cashed out and the ones who need affordable housing.  

As for a "boring drab little town."  What?  Soldiers doing crazy dumb sh#$ on the weekend?  Typical Killeen and Fort Hood, "The Great Place."  

Not to diss Killeen but it has little to compare to 6th Street in Austin. ;-)

If you haven't been back in a while things have changed. The old North part of town has gone downhill. There was a recent article describing North Killeen as a "food desert" with grocery chains moving out of downtown to the suburbs to the South and West. Driving around I saw a Jack in Box going out of business.  

You make a good point about the knock on effect of working class families being displaced out of North Austin-Round Rock market.

Austin is another White-hot market. I lived in Austin in the early '90s and experienced the S&L crisis first hand. Every week there was a new foreclosure in our North Austin neighborhood.  People lost homes. I know of investors who lost everything when prices dipped. We were renting at the time and our rent payment wasn't covering the landlords mortgage. This is part of the reason I'm being cautious. 

I never thought I would be joining the chicken littles of the world but the Temple-Killeen Market sure feels like a bubble.  I own property in Killeen and have been following the market closely.  I have bid on multiple properties over the past three years and feel I'm familiar with the market, what areas to invest and the types of properties, rent trends and property values.  I've been focused on small multifamily duplex and four-plex.  We purchased a four-flex in 2019 and the property has more than doubled.  It's time to buy more; Right?

The current market is absolutely insane. I just tried to schedule showings on four potential purchases. My agent came back with sellers are no longer doing showings. You need to be under contract before you are even allowed in the front door. Even under these conditions sellers are still getting multiple offers, over asking price, and sight unseen. There are normally bidding wars with the property on MLS only a couple days. IMO this is totally insane! Who buys a property, waiving all inspections, paying all closing costs, at over already inflated asking price, with all cash? This is not a healthy market. This feels like speculation/gambling not investing. It has been my experience in business when you find yourself in an untenable situation the Market always corrects it's self. For these reasons this particular market feels like a bubble about to pop.

Don't get me wrong, I liked this market.  However the fundamentals don't add up.  Killeen is a one employer town with Ft Hood.  Ft Hood remains stable, war currently very bullish.  I don't see it closing however I don't see it growing either.  Meta just announced a new data center in Temple set to open in 2024.  It is expected to add 100 new jobs.  That justifies 100-200 new homes maybe.  Nearby Austin is going gangbusters with hi-tech.  I don't see these high wage earners living in a boring drab little town driving an hour plus to work every day.  OK, to the North you have Waco with the Chip and Jo Anna factor.  Dallas is too far away to be factor even for the most dedicated commuter.  

What are your thoughts?  Smell like a bubble to your too?

I'm evaluating two commercial deals and looking for feedback.  This will be our second commercial deal. Previously we purchased a 12 unit property off-market.  Both properties are in super small markets, city size 3000-5000 people, hence the road less traveled.  Being a small market there are no recent comps other than our own purchases over the past two years.  I'm having a bit of trouble coming up with a cap-rate; numbers range from 6-10%.

Property A 1985: 24 units, 2B/1BA, asking $800K, Rents $600-650, 90%(est) occupancy, water-sewer-trash provided, onsite laundry. Gross Rent=$180k (est), Expenses=$104k(est), NOI=$76k(est). It needs a new roof $100k, Closing cost $16k, all in $916K asking Cap-rate 8.3%

Property B 1981: 60 units, 2B/1BA, asking $3M, Rents $440-725, 82% occupancy not including 27% delinquent or 55% paying, separate meters, in-unit W/D. No amenities (pool etc). Gross Rent=$434k, Expenses=$289k, NOI=$145k From the curb I can see a lot of issues; boarded up windows, fogged windows, feral cats living in crawlspace and etc.. A couple things struck me going through financials. They are paying 7% PM fee to out of state company plus another 17% to on-site PM. At 24% PM fee I would expect better management. All-in $3.1M asking Cap-rate 4.7%

Other things to consider.  We currently own 18 units in the same city as Property A.  We have had near 100% occupancy for the past year. In fact we have a waiting list even pulling tenants from property A.  The only open units have been undergoing renovations.  If we purchase property A we will be the #2 landlord in the city. Property B is in a neighboring town about 25 miles away.  I can tell they have struggled to fill their vacancies by the "$675 first months rent free" signs all over town.  The numbers scream "miss management" to me.  Property B is the largest property in its city. (Big fish little pond?)

Thoughts?