DFW newbie looking for motivation and tips

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DFW newbie looking for motivation and tips

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Member since 2012 · 17 posts · 1 vote

Hi folks!

I've been looking at REI for years, but been too afraid to actually do anything about it. I've read tons, saved up some cash, and am psychologically ready to make a deal. There's still a fear element, but I'm good at crunching numbers and going through contracts, so think I can remain unemotional about a deal. (I have a web development/computer science background so I'm pretty good at thinking analytically :))

I've checked into my financing options, and won't have any problems there, whether I go with hard money or a conventional loan.

The biggest issue for me is how to find a deal. I know, in theory, how to evaluate a deal, but in practice, I'm sure I have a lot to learn. I'm hoping to be able to lean on the advice of this group, or some mentors to make sure I'm not hanging myself the first time around.

As far as finding a deal goes ..I keep hearing there are tons of them .. so I'm hoping it won't be too difficult. I'm curious what you guys think about the following approach to finding a deal, or what you did to find your first deal.

1) Use Realtor.com. I've been scanning realtor.com looking for homes nearby (Fort Worth, TX) that are in the 40-60k price range. I'm looking to capture equity by buying distressed and rehabing (that is the way to go, right?)

2) From this site, I found the "myhousingdeals.com" website. It looks like listing service for wholesalers, so I'm a bit leary. Wondering what you think of that approach, and if it is viable?

3) Was thinking about contacting a hard money lender, whom I most likely will use to finance a deal initially, and see what leads they may have.

The other issue I'm concerned about- if I do happen to find a deal- how can I evaluate it correctly? As far as ARV goes, I know about checking comps- since I'm not a realtor I've considered using a service like investway.com, but haven't signed up yet.

To evaluate rehab costs, I'm thinking my best bet is to find a vendor who will be willing to visit a property with me during the evaluation and give me an estimate of repairs. Is that reasonable to expect? Will contractors/vendors actually do that?

Appreciate any thoughts, advice, contacts, etc. you can offer.

Thanks,
Bryan (Dallas/Fort Worth)

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  • Greg B.
    Homeowner · Burleson, TX · Member since 2008 · 756 posts · 376 votes
    14y

    Welcome to BP Bryan. How well do you know your farm area? What do you plan to do with the RE once you buy it?

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  • Account Closed
    OP
    Member since 2012 · 17 posts · 1 vote
    14y

    Hi Greg,

    I know the area pretty well- from having lived in the Mid-Cities DFW area my entire life. So, I know the neighborhoods pretty well, and do what I can to keep on top of fair market prices, though without access to sales data it's a bit hard. Mainly use realtor.com and TAD to see what houses are going for, as I don't really trust Zillow's valuations.

    Sorry I forgot to mention what I'm interested in ..I forget there are many different ways to approach REI.

    So, perhaps naively, my desire is to purchase SFR, trying to capture 10-20k in equity, and generating positive cash flow each month.

    I'd like to get my feet wet with 1 or 2 homes ..see if being a landlord is something that I can cope with, and if so, fairly rapidly bring on another 3 or 4 homes.

    If this works out for me, ultimately I'd cash in on the equity of the homes and try to go into a small multi-unit apt, but, there's tons I need to learn to determine if that's really a good idea for me.

    Mainly, I don't trust the stock market and I want to convert my savings into REI as an investment vehicle for retirement. And if it so happens that I do well and can generate significant income in the short term, that'd be great :)

    Thanks,
    Bryan

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  • Raymond B.
    FL · Member since 2009 · 2k+ posts · 357 votes
    14y

    Bryan Ingram,
    Welcome to the forum.

    If you're going to purchase rental property, I suggest that you spend some time here:
    http://www.biggerpockets.com/forums/52-rental-property-questions-landlording-issues

    Also, I suggest that you spend some time reading this to use as a guide:
    http://www.biggerpockets.com/forums/52/topics/18371-help-me-understand-this-deal-and-5-2-rule

    Raymond

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  • Account Closed
    OP
    Member since 2012 · 17 posts · 1 vote
    14y

    Thanks guys... I've read over the 2% and 50% rule and they make sense, and obviously are techniques to "screen" or do top-level analysis to help quickly triage a deal.

    As I've crunched numbers on hypothetical deals I've always pulled out PITI (principal, interest, taxes and insurance) out of the monthly rent to assess what the cash flow might be. I have to admit that seemed to overlook maintenance and other costs and it made me nervous. At least now you guys have shown me what seems to be an industry best practice for a top line assessment of operating costs. From what I've read here I'll pull put P&I and assume all other expenses will average %50 of monthly rents, where, again, we're shooting for rents to be ~ 2% of purchase price. Obviously, these aren't hard and fast rules but tools to help find deals that merit closer scrutiny.

    Sound right?

    If so, still curious about how you guys typically find your deals, MLS, what seems to be wholesaler sites like the one I mentioned earlier? Also, is it reasonable or even workable to expect a contractor to help estimate what a rehab might cost (as part of a detailed on-site deal evaluation) since I don't have the experience to accurately estimate that myself?

    Thanks,
    Bryan

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  • Timothy Rogers
    Investor · Garland, TX · Member since 2010 · 99 posts · 92 votes
    14y

    Bryan Ingram Welcome to BP. I am a wholesaler and I use to used www.myhousedeals.com fews years back to find motivated sellers and the site had quite a few to call on. But, you are right about the site now. Mostly wholesale deals.

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  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    14y

    Hi Bryan, welcome to BP!

    The mid cities are in my back yard (I'm in Irving), and my favorite out of all DFW to work in.

    Just a couple of stray thoughts from reading your 1st post in this thread....There are plenty of people from BP here in town that can help you analyze and evaluate deals as you come across them. I and others can help you with comps. You mentioned Investway, and I absolutely recommend them. (Not affiliated in any just a former highly satisfied customer).

    And as for evaluating repair values, once you've done it a time or two, it gets easier. Deal analysis is in and of itself the small potatoes. Analysis paralysis is what stops most folks from moving forward. So you zeroed right in on the tough part....finding deals.

    I'm not familiar with Realtor.com, but I can tell you that "my house deals" is a waste of time. The 'free" version is no more than excuse for them to constantly hound you to upgrade. Once you do, you're right, mostly a wholesaler clearing house. Stuff I saw come across my desk last week and passed on. Every so often a "motivated seller" deal worth calling on.

    What I have learned from a large number of Investors around this area is that the MLS is not producing near as many deals lately either. The margins on REO, like the margins on Auction properties are getting slimmer and slimmer.

    So what's left is marketing for your own deals. Instead of spending money on Agent commissions, spend some money on marketing, and see if you can get a piece of the distressed deals that don't go to market. Market like a wholesaler, keep the best ones for your self, and wholesale or trade off the rest to pay for more marketing. Works pretty well for me and the others I help.

    Give me a shout some time neighbor!

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  • Account Closed
    OP
    Member since 2012 · 17 posts · 1 vote
    14y

    Thanks for the reply, and that's great to hear about the mid-cities area.

    Hope you don't mind if I take you up on your offer to shout out!

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  • Townsend Derick
    Real Estate Agent · Fort Worth, TX · Member since 2011 · 53 posts · 23 votes
    14y

    @Jerry,

    What do you mean by "Instead of spending on agent commissions"?
    Because helping individuals acquire properties as a Buyer’s Agent is free of charge to the individual purchasing. Realtors get paid from the sellers in the transaction not the individual purchasing the property. Unless you’re talking about when he goes to list the property after repair then there are some cost associated with that when using a Realtor.

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