All Forum Posts by: Bart H.

Bart H. has started 11 posts and replied 1128 times.

Ok best website ever. Thought it might come in handy for finding Scott's dad jokes. Love the show, keep it up, its a great weekly inspiration.

https://dadjokegenerator.com/

1 Vote

Originally posted by @Manpreet Kaur:

Hello, Has anyone invested with Memphis invest and how was the process? Also, what about other turnkey? Thanks

I haven't ever done anything with them, and do not know of anyone personally who has.

But everyone I hear comment on them who has seems to find them as an ethical above board company. If I was an investor with a really long time horizon and wanted passive or near passive exposure to SFH's, or wanted exposure to passive real estate in areas I didn't already work, then I would consider Memphis Invest as a company.

Now having said that, remember what you are getting, you are in a hot real estate market, EVERYONE is buying properties as fast as they can. And its nearly impossible to get any real discounts on rehabs. SO you are buying a property that has been rehabbed, and is being run by a first rate company. But they are going to be selling the property at retail value, and then managing it for you.

If you end up being able to get a property whose returns work for you, then great. But that is almost certainly going to be a long term investment. It is highly unlikely that you will get outsized returns in this market, at least in the next 3 or 4 years. I don't think anyone has a magic wand that will sell you a fixed up property, with huge cash flow at a below market price. And I don't think we will see the same capital appreciation that we have over the last few years.

I personally think we can do better as investors than using a turnkey company, but we are willing to be active investors to do so.

2 Votes

Originally posted by @Steve Burt:

Hi, I have been researching this online but have not found a definitive answer. I will try to keep the question simple though I think there are a couple of scenarios (whether you own a rental via an LLC or without one, whether you use conventional or FHA loans).

If you purchase a duplex, with let's say 10% down. You make payments for a couple of years, but then a recession happens and the value of the home is much less than the remaining mortgage, so you opt for foreclosure. Could the bank pursue other money (IRA, 401k, taxable brokerage account, savings, checking etc) to try and recoup what they owe? Would that very by state, I am in Texas.

Additionally would this foreclosure ruin your credit even if the property is in an LLC?

Thanks

Not an attorney, but I believe your 401K and IRa's are exempt. I think the bank can go after you, but I don't think they can garnish your accounts in Texas.

An LLC wouldn't matter because you almost certainly have a recourse loan and are personally liable for the loan even if the asset is in an LLC.

I haven't tried it, but I hear its pretty tough to get non-recourse loans out of an LLC, unless the LLC has a reasonably long track records of earnings and assets. And even then the rates are higher.

I would hope that you have enough reserves that you could withstand a downturn in the economy.

0 Votes

Originally posted by @Mitch Price:

I purchased my first duplex in March of this year. With it, I have a tenant already in place on the other side. The sellers (who were investors themselves) raved about how good of a tenant they have been for years! They pay their rent faithfully every month! I don't have any problem or issues with them thus far. HERES THE TWIST.....they have been so faithful with paying because their current rent is $550 and the market I'm in ask for $780! Now of course I can't touch the inherited lease until January 31 of 2019. My question is should I inform my current tenant early (say 6 months) of the incoming rent increase, once their lease is over in January. They have been a good tenant so far, Id want to give them plenty of time to think it over. Legally I have to give them a 60 day warning before the lease is up. But I'm thinking of doing it earlier than that.

Good idea or not?????

If they are great tenants, I think I would be inclined to get them half way at a time. ie go to $650 as soon as possible and a year later 700 or 750.

If you raise it 200 at one time you probably run a greater risk of losing a great tenant on the hope that you can get a little higher rent in the future, with the chance of ending up with vacancies and/or poor tenants.

0 Votes

Originally posted by @Jacob R.:

Good Evening BP,

I'll start with the expenses:

Mortgage (principal and interest): $1426
Insurance: $146
Property Tax: $218
Maintenance/Vacancy/CapEx: $326

Total Expenses: $2116

Currently I am living in one side and renting out the other which brings in $1125/mo. The side I am living in should bring $1125/mo or more when I eventually move out. I paid $290k and got into the property with zero down. With these numbers my cash flow is $135/mo.

This year the Dallas Central Appraisal District increased the appraisal by roughly 288%. My monthly property tax payment will go from $218/mo to $627/mo; clearly this will negate my anticipated positive cash flow.

I'm looking for opinions on what to do in this situation. Should I sell? Should I hold?

Ultimately, I learned a valuable lesson and tend to blame my naivety in addition to my eagerness to get into my first deal.

v/r

Jake

Do you have it on a homestead exemption, because the homestead should keep your taxes from going up that much? Or does that 600+/month include a deficit from the prior year?

The taxes seem a little on the high side, even as aggressive as the tax appraisals have been.

I would wait it out. A couple of things, you are house hacking so that part of the value proposition is the tax deductions, the principal paydown, the cash flow, the price appreciation and the cost avoidance of having to pay rent elsewhere.

Think of it this way, if you have a 5% price appreciation, that is $14.5K in capital appreciation, you will have probably another 300/M in principal paydown, or so 3-4K year.

Plus you have cost avoidance, if you were paying rent in an apartment you'd be $1,000-$1,500 or more a month.

I sound a bit like an informercial....and then there is THIS.....your rents, they should be going up $50-$100/M per side every year.

So your property might be earning you $15K-20K or so a year. Yeah there is some additional headache or risk. And I would strongly suggest putting some money away each month for repairs.

But look at it long term, where else can you come close to saving that much money with almost no dollars invested out of your pocket?

I wouldn't buy a property that I wasn't going to live in for $135/month in cash flow. But I think a lot of people over hype the monthly cash flow, and drastically under represent the long term effects of appreciation and debt paydown when thinking about long term gains.

At least in texas the rental game is more about long term gains, not short term cash flow.

1 Vote

Originally posted by @Christian Balbuena:

Hi Lydia, my name is Chris.

I'm starting to get the real estate bug and looking to begin to build up my investment portfolio. I have been looking for deals but everything looks to be a little out of price point. I'm not looking to fix up a property because the funds won't allow for that. Any suggestions?

House hack, buy a duplex or triplex, live in one unit then rent out the other units. A year or two later, move to the next property

0 Votes

Originally posted by @Lance Middleton:

Hello everybody, Been on the RE learning train for about a year now and I'm excited to get started with it. Here is the situation: I recently graduated as a mechanical engineer and got a good job in Huntsville AL. My entire family is in Texas so I definitely plan on moving back down there in a couple of years so I'm a little torn on how should alter my real estate investing strategy. Ideally, buy-and-hold rentals makes the most sense to me but I'd like to avoid buying long term properties in Alabama knowing I won't be here long. Long distance investing scares me. I know there is no right answer here but I'd like some feedback on whether I should try and get my feet wet with a live-in-flip(this might be a worse idea than buying a rental property) or just keep saving cash to safely increase my liquidity for a buy-and-hold strategy when I settle in Texas. In any case I KNOW I won't be in Alabama for more than three years, possibly as little as 1.5 years. My initial thought is to just save save save but I think it would also be good to jump in with something even if it doesn't align with my precise buy-and-hold rental goals. Any feedback appreciated!

Lance

Are you good with construction? A lot of people get in over their heads on projects and those projects just sit.

do you might dust? IE I don't think I would have a baby in a 60 year old house where you might be raising dust.

If you are just putting down a little tile, have multiple bathrooms where you can work on one at a time, or maybe you just need to do a little painting, that is a lot different.

For the most part we have just gotten either ourselves and/or our contractors in to get work done before we move in.

0 Votes

Originally posted by @Andrey Grebenetsky:

Wanted to post this to introduce myself and run my logic past people who have more experience than me.

Feel like I don't know what I don't know yet so it would be good to see holes poked in my logic here:

Hi everyone! I'm a newbie real estate investor and have been living in the far north Dallas area (Carrollton) for the past 3 years. 4 years ago, my wife (then girlfriend) and I moved to Dallas for work and 3 years ago, we bought a new condo with 5% down as first time home buyers. We didn't know anything or really consider anything about it from an investing perspective. We just knew it was new, and a condo, so we wanted minimal headache and upkeep at the time. Monthly payment including HOA is around $1550.

Flash forward to 2018 and we are very grateful to have discovered biggerpockets and have really jumped into learning about real estate investing and all the possible strategies available to us. Really excited to learn and absorb as much as possible here as well as connect with like minded people. I'm really grateful we have discovered this community in our 20s because it opened our eyes to all the creative ways to both gain wealth as well as passive income in real estate.

We came to the conclusion that a great first move for us as real estate investors would be to house hack. Luckily, our condo has appreciated about 25% in these 3 years. Also, we routinely overpaid on the principal because we weren't thinking of doing anything else with our money at the time, and before we decided to house hack, we made a sizable principal payment in order to get a larger HELOC to use for investing purposes. We changed our minds and decided to go for the house hack first and to sell our place since the equity would be better used elsewhere and plus since we could only get an 80% LTV on a HELOC, we'd rather pull out 100% of our equity in the condo towards buying a place to live in.

The intended goals for the house hack:

- minimize our monthly payment out of pocket so that we are effectively reducing our own living expenses as compared to living in our condo now. Rather than focusing on positive cash flow off the bat, we want to first minimize our monthly expense. If we move out of the place we house hack, it will cash flow. The low monthly payment also protects us in case of hardship. I figure we should cover ourselves in the worst case scenario that if the sky falls, at least our place is nearly free to live in.

- gain equity through loan paydown and hopefully appreciation and be able to use that equity later to help with future purchases/rehabs whether we want to flip or to BRRRR and whether we want to focus on long term renters or airbnb, the more equity we gain on the primary residence, the more resources we will have to use through HELOCs or home equity loans.

- continue saving up as much as possible through our regular incomes

Now, since we are going with conventional financing and looking for homes to live in, the two best opportunities we found are new duplexes in Buda, TX (through a company called Duplexes of Texas) and new fourplexes on the northeastern tip of San Antonio around a town called Live Oak (through Clark Realty).

Wholesalers would be out since we're using conventional financing.

For our primary residence we also continue to lean towards new constructions with a builder's warranty (this is an emotional aspect of the purchase, but we have not been able to get personally interested in any older duplexes/4plexes that are out there). Also based on what I'm finding on MLS, the new constructions in desirable areas are competitive on price and return with older properties needing upgrades if we're talking about areas we'd want to live in. It seems hard from both an investors perspective or a primary residence perspective to consider an older property with older appliances, HVAC, roof and needing cosmetic upgrades to be competitive with a brand new one of similar size when the prices and rents aren't that different.

Considering we live in the Dallas area and are considering a move to Austin and San Antonio, we would be making a bet on appreciation and not expecting to hit the 2% rule for cash flow or anything like that. But by minimizing the monthly payment, we would be making it safer for us in the case of hardship and free up more money in the future.

That takes us to the two options - a duplex for $370k or a 4plex for $565k. Both would tie up a lot of money via a 25% down payment, but the fourplex would tie up a good amount more ($92k vs $141k).

We would expect to gain equity faster through loan paydown and appreciation in the fourplex because it is more valuable to begin with and a larger loan.

After accounting for PITI, HOA, vacency, capex, property management, utilities, and maintenance, the 4plex would cost roughly $576 per month and the duplex would cost $1076 a month out of pocket in the first year (not accounting for yearly rent increases and expense increases). If we were to hypothetically rent out all the units on day 1, the 4plex would get about 3.2% cash on cash and the duplex would only get 1% cash on cash. But since its a turnkey property and if we're betting on appreciation and living there, the low potential cash on cash return seems OK.

So both options would tie up a lot of money but we're OK with that because of our savings rate, lowering our monthly expense, and a future HELOC to use.

The 4plex would be perhaps the largest and most valuable property we could get other people to pay for in effect.

We are leaning towards the 4plex, but also considering the extra cash it would tie up and if that cash put elsewhere could more than make up for the higher monthly payment , lower equity accumulation, lower tax savings of the duplex. The duplex would be a little bit nicer to live in but we are willing to overlook that for a better investment in the 4plex.

Also has anyone worked with either Duplexes of Texas or Clark Realty? What was your experience with them?

Please feel free to poke holes in my logic. I'm sure there's quite a bit I'm missing here being a newbie at this.

Thanks so much! Really appreciate being able to connect and learn here.

I am a little unclear if your numbers include you living there or as a stand alone investment. On a house hack, calculate the returns as though you are not living there. IE what would the duplex numbers look like with only renters.

Now, think of what you would spend on a SFH, what would your payment be? Would your duplex (or quad), payment end up being about what the duplex would run?

If nothing else if you are buying a house to live in and you have a manageable payment, then ANYTHING you get from a tenant is gravy.

I think this is a good way to start into real estate. For instance if you end up hating being a landlord, and you cant sell the place, you can just continue to live there like a SFH. There are options.

We personally have done house hacking several times, and the best part of it is that if you are buying within your means that your risk is much lower, because you have the ability to live in the property and wait for the value and/or rents to go up.

0 Votes

Originally posted by @Vivian O.:

So, let me just say, this market is nuts! My boyfriend and I have been actively searching for properties and submitting offers and we don't get picked. Our realtor who also invests in real estate has helped us submit strong offers. A couple weeks ago we submitted and offer on a home with 30 offers! We were too two but still didn't get picked. It has been discouraging. I dont want us to stop looking, hoping the market will change. Cause I dont want us to miss out on potential properties. I'm curious, are any of you buying or bought in this current market? Are you going through the same things? Is there anything different you guys did?

I also want to add, that we run the numbers and we go based off what makes sense and would give cash flow.

Yep, it is what it is. Here in Dallas there seem to be very few properties worth offering on, and those that we have bid on over the last couple of years have been competitive.

We had one property that we looked at, and there were 35 other offers. Last year we put in 6 or 7 all cash offers, and didn't even get asked for a highest and best.

I think the best thing to do is just be patient. Know what a property is worth to you and don't chase. Its really easy to get caught up in the frenzy of the market.

We personally are looking at a lot of properties and have made a few bids, but really I think its better to stay on the sidelines than do a poor deal.

1 Vote

Minneapolis, Minnesota

Originally posted by @John Clark:

I have considered buying houses ($150-200K value) in Texas for rental income. However I'm not impressed with my expected annual return. If someone could help me with my analysis; it would be much appreciated. Below is the math (all in % of house value):

Rent: 12.0%
Taxes: -2.8%
Average Long-Term Maintenance & Repairs: -1.7%
House Insurance & HOA: -1.6%
Average Vacancy/FinderFees/Tenant Issues: -1.0%
Property Management: -0.8%
Total Average Annual Return: 4.1%

I have heard landlords making 10% (no leverage) and 20-30% (with leverage). What am I missing?

Two things you are missing is annual rent increases, say 3-5% (or more) a year, and price appreciation. Call it 3% a year, although in Dallas you have been at 8-10% a year for a the last few years.

I have one property that we bought in Nov'15 for $185K, its appraised last year around $315, and I think it might be worth $400K or more. (Have to love getting in ahead of the path of progress.)

Now that was a REALLY unique situation, and we hit big time on a neighborhood that was about 18 months from having a really big uptick in development.

On that particular property, we have done a cash out refinance, and literally have none of our original money tied up in the property.

1 Vote

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All Forum Posts by: Bart H.

Bart H. has started 11 posts and replied 1128 times.

Post: Dad Joke Generator Website

Post: Memphis invest versus other turnkey companies

Post: Consequences of Foreclosure for Landlords

Post: Should I Inform Good Tenant Early???

Post: Dallas Duplex Drama!

Post: Starting out in Dallas

Post: Live in Flip or Rental Property

Post: Newbie from Dallas, TX - buy a duplex or a fourplex?

Post: Have submitted 6 offers so far....

Post: Texas House Rental - Annual Return?