All Forum Posts by: Bart H.

 I am late to the party but I would recommend you look more closely to your numbers.

1) When you say the property is worth X, why do you think that is the value?  did you get a real estate agent who said as much?  Are there comps that lead you to that conclusion?  Did you look around Zillow or some other third party source to get a decent idea of what a buyer might be looking for?  Ie if I am a buyer what are my other choices in that market.

Once you have done that, ask yourself, is the neighborhood improving?  getting worse?  or staying about the same?  My most profitable deal of all time was a property where we had trouble finding comps, I think I even had to bring extra money to the table because the appraiser couldn't find a decent comp.  Net net, we bought it for 180K, we are sitting on a value of about 450K+/- 4 years later.

2) I would highly recommend as the only information you take from the current owner is what is the on signed leases actually says. Get a few comps from your real estate agent. See the property I talked about before. When we bought it the seller had most recently rented it out for $1,300. 3 years later we just leased it out for $2,800/month. We did so by turning a loft into a 4th bedroom, expanding out a master bathroom and marketing a large house near downtown at a cheap rent per room, ie each bedroom @$700/month (times 4), vs a SFH for $1,400.

Sometimes sellers will tell you a property will rent for $1,500/M, but your realtor will tell you that you will be lucky to get $1,000/m

3) If you are new to investing, and have no construction experience, I would look for houses with minimal repairs.  Especially if you are not sitting on a ton of cash.  Because rehab is super expensive, and will cost you twice as much and take twice as long as you expect to complete.

 A lot more info is needed.

What percent of equity do you have in your existing properties?  stability of the renter base?  have you had to release any of your properties yet?  What is the condition of the properties?  Do you have any AC units or roofs that need to be replaced?

If something went wrong, what is your exit strategy?  Could you sell one or more of you current properties tomorrow?  

What kind of shape are you in if you lose your job and have a tenant move out?  Do you have a job that pays you enough to cover your real estate expenses if something goes badly for a month or two.

What is the local economy like where you invest?  is it a one company/industry town?  Or are they in a large growing metro area?

Also what is your risk tolerance? Some investors like to own paid for real estate, some want to leverage up as much as possible.

As an example, this summer within a 2 week period after putting a house under contract, we had tenants move out that gave us full notice.   we got a 3 day notice to vacate from another tenant (an inherited tenant), and then found out my step daughter wanted to quit school and that potentially was going to leave another of our rentals vacant.  And on the house that was going vacant, we decided we needed to do an impromptu rehab. (full kitchen rehab),  having some room to absorb those unexpected expenses is a big deal.

 Scott, if you live in Logan Utah, and its growing, why not invest locally?

Personally I think new investors are best served to start off locally in their home town.  you know all of the streets, the good places, the fun places, the shady places.  You know Fred up the street is about to open a new bar and grill and all of the artists are moving into that area nobody thinks about.

Its my personal belief, but one of our advantages as investors is that we have a great relationship with our contractors.  And since we are learning about construction, being able to go after work and measure cabinets for the 4th time, or compare the tile to the grout, or pick up supplies so your expensive contractor doesn't have to waste his time picking out paint colors, flooring, appliance etc... are all things that are easier to do in person.

If you have a lot of experience flipping houses, or working construction,  then yes go for it, you can be successful as a long distance landlord.  IF you have experience and have the means to pay for project managers or other someone who can be your boots on the ground, great.  But that does have a cost associated with it, we would at this point in our lives supplant it with some sweat equity.

 HEre is the thing, a property that cheap will be tough to get to cash flow.

The problem you will have, is repairs on really cheap properties aren't that much less than repairs on expensive properties.  Other than it being smaller, painting a house between tenants is going to cost the same, a new roof will cost the same, a new air conditioner, hot water heater, furnace will be the same cost etc.

For instance, it costs us about $1,000-$1,500 plus a months rent as a leasing fee. each time we change tenants, by the time we paint, do landscaping, repair damage, change locks, patch holes, paint walls that need to be painted get a make ready clean. 

Now maybe in a lower priced property, you don't do all of those items every time you change tenants.  But those costs aren't insignificant.

I think when you really add up all of the costs, you will find that your house isn't cash flowing

At that price point you are likely south of 30, or at best just south of the Santa Fee trail.  As others have mentioned, minutes from Baylor you can be in a very wide range of home prices.

Near Baylor, its going to be very tough to find something that cash flows, there are some very high prices being paid for properties by developers, and a lot of multi family apartments have been rehabbed down Gaston/Live Oak/Ross etc.

We have looked at a lot of properties in that area, heck walked thru a house just to the east near the Santa Fee trail that was about 200K that had no electric, and whose pier and beam foundation was sitting on the ground.  

It was leased, but I sure wouldn't have leased it in that condition, and imo the property was beyond saving and needed to be torn down. IMO not a project for a first timer.

If you can find something that works, more power to you.  

Honestly, if you know Arlington, why not work that market?  My sense is it might actually be the better market.

Tashinga, unless you have a pretty solid construction background, I would recommend staying away from flipping until you get some experience. IMO the BRRR or buy and hold method is a lot more forgiving. You don't have to be as precise on your numbers, your purchase point etc, because time will erase most minor mistakes.

We lost some money on our first flip.  It was a great experience, I am glad we did it, and we are a LOT better off in terms of knowing how to manage other rehab projects, and frankly it helps us a lot when evaluating new potential projects because we know what to look for and how to estimate repairs.

More or less assume your first flip will cost twice as much, and take twice as long as you initially planned.  Without reserves you really run the risk of having the first flip take you down.

And IMO hard money, if you can get one as a first time flipper will be very expensive and more importantly, leverage will magnify what ever you do.  It makes good deals better, and poor ones much much worse.

IMO if I was starting out with little to no money, I would house hack, and/or find a deal, then take that deal to an investor who will partner with you.  Then go from there

 I don't know about other states, (and I am not an attorney, and this isn't legal advice), BUT in texas if there is a lease, the lease is passed to the new owners in its original form.  IF, the tenant is no longer on a lease and is month to month,  you can have the previous owner as part of the deal give a notice to vacate, I believe its 30 days.

 Very often beaten down landlords are selling their houses to get out from under poor tenants.  It seems like the prior tenants are usually a problem, and there is a greater than 0 chance you are inheriting a professional tenant.

Personally, I would prefer to get a property that is empty. We have a property whose inherited tenant gave us a 4 day notice that he was moving out.  Gee great...  Can you hold them to the full month, sure, but its not like you have a great chance of collecting money from a tenant who doesn't have much in the first place.

I think you are missing insurance, and I think your property taxes might be a little light.

 If it is a house hack, I think it is  decent purchase.  But if it is a pure investment, by the time you add insurance and property taxes, I think it will not cash flow.

I would also check to see if you have enough for initial repairs.  I don't think we have ever bought a property we didn't end up spending a couple thousand dollars on to get ready for first time tenants.

DFW, mostly Dallas.

When I run our numbers, I usually look for an 8-10% return with some form of "kicker".  Ie can we eventually build on the lot, or can we do a rehab, or is the property in an up and coming neighborhood.  We really focus on properties that "break even" if we do nothing, but that have a lot of upside if we unlock hidden value.

Main source of leads is more or less anything. Zillow honestly works well, but we have gotten FSBO, and pocket listings.

We budget for rehab whatever we think should be done. 

We mostly have invested in SFH's. But increasingly are interested in small multi family or commercial properties were we can bring a value add component to the table.

Our biggest criteria is does the property break even or have a decent return if we do nothing, and then are there other exists?  Ie can we rehab it, fix and flip, live in it as a house have, reconfigure the layout, does the property sit in the path of progress?  is the neighborhood on the way up.

 Congrats on attending a great school!!! :)

Personally I am a big believer that you decide where you would like to live, and then do real estate, the markets will change drastically over the course of your career.  And there are always deals to be had, even if different cities lend themselves to different types of investing.

I think as long as you pick a growing metro area that you will be able to be successful in real estate.

I would suggest as an example that over the long term, I think DFW will be a good place to invest over the next 25-30 years.   We just had a huge run in property prices, and for several reasons, I get the feeling that the market is a little frothy.  Not 2008 frothy by any means, but in the next 3-5 years, I think the market will be fairly flat.   and a quick 5-10% correction wouldn't be out of the question.

(assuming Amazon goes elsewhere, if Amazon comes to Dallas.....then hold on tight, we will go up substantially over the next few years.)

Best of luck to you!!!