All Forum Posts by: Bart H.
Bart H. has started 11 posts and replied 1128 times.
Post: Investor : How much to pay your real estate agent
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Priyanka Singh:
Deal real estate and Investment Gurus,
I am trying to understand what should be a fair term and fee that an investor should pay to their investor friendly real estate agent (Considering the maket focus on 80-100K homes all over metroplex). In this DFW seller's market, writing crazy number of offers and comps timely, so the investors can make a deal is very challenging and hard work for a realtor. Hence a good investor friendly realtor is hard to come by.
I am new in investing world, I'd like to know how do you set your tems with your realtor. Small weekly fee? Fee per offer/ comp/ run around showing homes. And how much is a good amount so that we don't end up wasting anyone's time. Also if we find a house off MLS, is that okay to ask for a commission percentage back from realtor?
Any input will be very valuable.
We pay the regular 6%, (3% listing agent/3% buyers agent).
We have long taken the philosophy that we don't try to nickel and dime our realtors. We pay the standard fee.
We want them to bring us good deals, so when something comes their way, are they going to the investor who pays the full realtor fee or the one who tries to knock the realtor down by a percent or two?
Our realtor is part of our team, she has helped us find contractors, helped us with property tax appeals, does our leasing and has helped us with our rehabs.
We take the viewpoint that we expect to do multiple deals over many years. We aren't getting rich knocking a real estate agent down from 6% to 5% on a 200K deal. 2K doesn't move the needle.
Our philosophy is to be relational not transactional., and I think over the long haul that gets you involved with more deals and makes you move money.
Post: Becoming a Texas Real Estate Agent
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Lucia Rushton:
Super excited to share - I passed my Exams this past Saturday!! Very much looking forward to being an added resource here in Dallas for our BP members.
Congrats!!!
Post: Possibly found my first deal... don't know if I should jump, HELP
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Kirsty Exner:
Hi! I am extremely new to this and THINK I may have found my first pearl. It is a Harvey house in Montgomery Texas listed for 66K. I am estimating my rehab cost to be right around 70K with an ARV of $185,000. On paper this looks like an amazing house for my first deal. I think it might almost be too good to be true. Is there anyone familiar with the Houston market that could help me analyze this deal? The house is on S Wiggins street in Montgomery Texas. Any help is extremely appreciated!
As others have mentioned, $65K is a Huge number on rehab for your first deal. Unless you have either serious construction experience, and or deep pockets, I wouldn't take on that big of a rehab on your first deal.
Basically take your estimate, double the price and double the time, and that is what it will take to complete.
Also, will you have difficulty selling the property if it was flooded? What will the insurance look like?
Post: Security deposit in Texas
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Eric Wehrman:
I am not an attorney, but yes I am fairly certain it is. We have requested a couple of times extra security deposits from tenants with low credit scores.
Honest question, why not pass on the tenant? And wait for someone with a better credit score?
I find that lower credit scores aren't worth it. Might get a few dollars up front, but in the long run its just not worth it, lower credit scores are highly related to good tenants.
We have learned thru the years its best to have a few months of vacancies over taking the first person with a pulse.
Post: Best city/area to in buy and hold for cash flow in the U.S.
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Caleb Heimsoth:
Originally posted by @Patrick Britton:
i avoid section 8 whenever possible. That’s not for me. Also I was helping out the OP. I’m already invested in the markets I’ve chosen
I would stay far far away from Chicago.
ITs a city and state with major major financial issues, and is hugely anti landlord.
Imo its not a place for out of town investors, and best left locals.
Originally posted by @Christopher Christian:
Hello!
I have been driving myself crazy trying to determine whether or not I should go the MBA route, so I'm hoping to tap into the wisdom of the BP community to help with this huge decision. I'm considering Rutgers Business School in NJ, which is the #3 rated MBA program in the NYC metro behind NYU and Columbia. Average starting salary for graduates is right at $100K, and upwards of 90% of graduates obtain employment within 3 months of graduation. The cost of the program is $60K.
A little about me:
-38 years old (would finish the program at 41)
-I currently work in corporate finance at a large media company with 2 years of experience in the department. I have been with the company for 10 years but worked in operations then account management for the first 8. Basically, I have 2 years of corporate finance experience in media.
-Current salary: $60K-$70K range (I live in the NYC metro, so this doesn't go very far.)
-My ultimate goal is to build a real estate portfolio to help me reach financial independence, but I currently own zero properties. Again, living is expensive out here!
Why I'm Considering an MBA:
-To increase my income to have more money to invest in real estate (I have already cut spending about as much as I can).
-To (hopefully) land a job in acquisitions at a large real estate firm (ex. Marcus & Millichap) to develop a deeper understanding of commercial real estate and to expand my network in the industry. I also hope to work in an industry I am passionate about.
-I love learning new skills
Concerns:
-That the $60K in student loans I would take out will be detrimental to obtaining financing for my own real estate acquisitions.
-That I may be able to make the career change without an MBA by teaching myself the necessary skills and by networking. I don't know how realistic this is, however
Ok. That's it in a nutshell. What do you think?
Thanks!
I have an MBA, and I think its great. It helped me to get my current job etc.
The knowledge you get from an MBA is fine, its helpful. HOWEVER, if you want to go into real estate I think there is marginal value in helping you get a job. Those in real estate dont care about your college background, and the only benefit is understanding the concepts like discounted cash flow, compounding interest, cap rates etc..
More to the point, I would NOT go back full time, lose 3 years and run up 60K in debt. IF you factor in say 40K/year in opportunity cost, you are giving up 120-140K in income. ($140K=60+40 from not working yr1+40K from not working year2.)
That money would be better served as your initial investments into real estate.
Plus honestly at your age, a premium MBA doesnt really help. Its not like you are trying to get a job on Wall-Street or with some top level consulting company.
IF anything, keep working full time, and take some night classes to get your MBA. Have your company pay for the tuition, and get investing as soon as possible.
Its more important to buy a couple of properties than it is taking classes to prepare to become a real estate investor.
Post: Can I re-rent while current leaves the house after paying ?
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Jerel Ehlert:
Re: Broken lease fee: Sure, but it has to be in the lease beforehand and should be reasonable, and should not double-dip.
Re: Make-ready: I disagree that there is a set cost to turning over the unit. That cost *should* be factored into every lease because no tenant is going to live there forever.
These things are a symptom of not looking at rental properties as a real business. Rent covers a lot of different expenses that new LL's don't see going in, then try to recoup from tenants. New LL's consider all rent as "profit", less the obvious taxes and insurance.
There is *vacancy loss* which should be factored into every lease.
There is *wear and tear* to replace EOL (end of life) components. I.E., replacing parts to maintain value.
There is *cap ex* (capital expenditures) to make improvements. I.E., replacing linoleum or shag carpet with ceramic or laminated wood when it goes out of style.
LL profit is what's left after taking out the obvious expenses and not-so-obvious expenses. THEN your cost of financing (principal and interest) comes out of LL profits. AND THEN anything is left - THAT is your net profit.
Analyze a few multi-family or commercial deal and see where the line items fall. Gross rents - vacancy loss + ancillary revenue (like laundry machine rental income) = Gross Operating Income. Add up all your expenses (payroll, leasing commissions, maintenance, make-ready) = Operating Expense. Gross Operating Income - Operating Expenses = NOI. NOI - Cap Ex = Profits.
Out of your Profit, you deduct debt service. Most banks will work from NOI, but expect you to set aside part of the profits for Cap Ex. That's why they won't (or shouldn't) let you use all of the NOI for debt service, and have a DSCR (debt service coverage ratio). An average is 1.25, which means for every dollar of NOI, you can only use $0.75 to service the P&I, and expect part of that last $0.25 to be reserved for Cap Ex.
As you rightly point out there are a whole bunch of costs that new landlords don't take into consideration. Capex, vacancy etc.
Respectfully though, if I rent a house to you for 12 months, I have agreed upon a price that should take my costs into consideration. Lets say it costs 1,500-2000+/unit to turn a property between marketing expenses, paint etc, lets call it $1,800/turn . Implicit in that lease is an amortization of that cost across a 12 month lease. IF you cut the lease 4 months early on me, you have cost the landlord 4months of that amortization, or $1,800/12*4= or $600. Shortening the lease does have a real cost to the landlord.
Post: Can I re-rent while current leaves the house after paying ?
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Jerel Ehlert:
Hold on a second. Re-read the 1st post. Tenant leaves 1 month early, but paid for last month's rent.
Yes, LL has a duty to mitigate, but if T pays rent, it is T's right to occupy. LL cannot collect 2 months rent from 2 different Ts for the same month. Either return the full last month's rent to old T or delay turning over occupancy to new T until old lease is up. (Most leases permit showing towards the end of the lease, though.)
If old T pays through end of lease, it is NOT a broken lease, so no broken lease fee.
Texas also has a law that states you can have only a single satisfaction; no double recovery. California (not licensed there) should have a corresponding statute.
THIS is how LL's get sued and lose.
But cant you mutually agree to a fee for breaking the lease?
Ie either keeping the deposit, or collect a fee to break the least?
There is a cost to turn over a unit, usually runs a month or a month and half in rent.
Post: Young couple looking to house hack
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Steffany Jensen:
@Cherie Orellana that's what we've been thinking about, but we are worried about the mortgage insurance, closing costs, etc. and are wondering if it's really the best option? We've even looked into a 203k depending on if we decide to buy more of a fixer-upper. Do you know much about those? We're looking mostly in South Salt Lake, North Salt Lake, and anything that's East of I-15 in the Salt Lake Valley. I would love to receive the hotsheets, if you don't mind. We are also keeping our eyes out for basement apartments and mother-in-law.
Unless you have experience fixing up properties, and/or deep cash reserves, I wouldnt start out with a fixer upper. TOO much can go wrong. Usually take twice as long and costs twice as much as you expect.
Post: Young couple looking to house hack
- Dallas, TX
- Posts 1,165
- Votes 744
Originally posted by @Steffany Jensen:
On your first house hack, I recommend you find a neighborhood you want to live in. Then view your purchase as though you are buying a Single Family home. That way you dont need to have it rented to make the payment. Also IF you find out you dont like being landlords, you can leave the unit empty.
I also would worry less about having a great return by Bigger Pockets standards. Find a place you would like to live, even if the return is a little lower. On your first rental its more important to learn the process of being a landlord, how you will review tenants, how you will do maintenance, credit checks etc etc. Sometimes that is a little easier to learn how to be a landlord in a slightly better neighborhood say a B+/A- trendy neighborhood vs a b-/C+ working class neighborhood. Even if your return is a little lower.
When we got in, we bought a duplex we would like to live in, paid a little over asking but about what we would have paid for a SFH. And ANYTHING we got from our tenants was a bonus. But if it went unleased, it didnt ruin us financially. I suspect that if I went back to my original model of the deal, we barely broke even if we moved out and it turned into a rental. But you know what? as we lived there the rental market went up, and the price went up. And it ended up being a really GREAT deal.
My point is less that every deal turns into a great deal than get used to the mechanics of being a landlord, live there and let the rents move up a2-3%/year, let the mortgage get paid down for a few years, and then it probably becomes a nice solid cash flowing deal.