New Jersey to Texas - Newbie

[Charles Pallas]

Hi,

I currently live in NJ and have put in a transfer with my company who has business units in Texas. I received a call from the Austin, TX business unit about a position that will be opening later this year. From my conversation with them, I should be moved and settled in by end of 3rd quarter. Once settled in, I am looking to buy a rental property, aiming for a 3-4 unit building to get started. This would be my first rental property ever. I have a few questions about Austin:

1. How did most Texas real estate investors on here begin? Was it by house-hacking? Or did you go right into larger apartment buildings?

2. What is one unique part about investing in Texas that a new investor should be aware of?

3. For people who own 3-4 unit properties, do you manage it yourself or do you have a property manager?

Thank you in advance for any information you can provide!

-Chuck

[Bruce Lynn]

1.  I've never seen stats, but I would think most people start with single family, not apartment buildings.  Never seen any stats on house hacking.  I would think those are tough to put together.  How do you know if people are renting bedrooms?   That seems like a prime opportunity now in Austin for a lot of different reasons.

2. Get on a list for 3-4 unit apartment buildings now. My quick thought is there are not a lot of those for sale in Austin. Some duplexes, but we just never built a lot of 3 and 4 unit places like other parts of the country. So be open to other opportunities. Start working now on what your lender requirements will be.....let's say you invest in a 4 unit building. Will they allow you to count rent from 3 units? How much of that will they allow you to count? What kind of reserves do they want to see? Then see based on all those things and your DTI, how much you can borrow and buy.

3.  People do both self and PM.  There are advantages to both.  PM is expensive, but there are things they do great that most individuals don't or can't do.  Self managers often have trouble or delays evicting people for non-payment of rent or other lease violations.  They're nice people and buy the story...and there is always a story, until they are 3-4-5 months behind.  I normally say if they can't pay $1500 this month, how do they catch up $3000-$4500-$6000 in month 2-3-4.   Most just can't do it.  Self-managed are also horrible raising rents each year.   You see lots of properties advertised with under market rents...why...because the owner was chicken to raise the rent.    Self managed does save you a significant PM fee.  You have more control perhaps on tenant qualifications, you can shop repair providers....you may market hustle vacant units better than PM, so have less vacancy....so there are advantages and disadvantages to both.  PM is also probably better at keeping you legal...for example with landlord locks, peepholes, smoke detectors, pet fees, service animal regulations, etc.

4.  Maybe you get PM in the beginning and meet with them quarterly to learn the ins and outs, and gradually take over management yourself of the easy units and let them manage the difficult units until you're an expert.