All Forum Posts by: Shola Sulaimon

Hey Shola, 

I have been a licensed real estate agent in Texas for about 5 years and have worked exclusively with investors in the North Texas area for the past three years. I have bought and sold over 80 properties a year for the past 3 years - all of which were investment properties in North Texas including SFR, multifamily, commercial, and land. DFW and the surrounding areas have remained consistent in growth. However, several pockets in the area vary vastly in the type of deal you may acquire.

When working with first-time rental investors I recommend looking at a few things as every investor has different needs/wants from their portfolio. For example, some investors may not look at immediate cash flow if rental increases and area appreciation have remained consistent or future growth is apparent leading towards potential appreciation where other investors may or may not be using lending and require immediate cash flow. Other factors to consider - how long are you anticipating to hold onto the property? Are you looking for an area that is a steady, long-standing market (may have higher prices and less likely to find something with immediate cash flow but lower risk), or are you more risk-seeking and willing to get into a higher-growth area with potentially higher returns?  This also depends on the asset you are looking to purchase and who you're purchasing with. Are you looking for a single-family or multifamily? Are you buying with partners? 

Personally, North Texas areas such as Frisco, Aubrey, Celina, Melissa, Mckinney, Sherman, Denison, and surrounding areas have steadily had high demand for rentals over the last few years and have an increased need for housing in general as several industries are coming to the area.

Keep in mind that you will most likely not be able to retire off of one property alone. Do you want properties in diversified markets or are you honing into a single market? 

 Please PM me if you would like to discuss this further! Happy to share more insight.

@Shola Sulaimon chasing lower entry amounts and higher ROI often leads to disasters!

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.