Buying newer homes to rent

[Greg Meech]

So my first rental home was an old beat-up home that wasn't worth much and not in a desirable area, but generally safe. It was a home that I aquired at a good price from family and started my rental career. I stil rent this home, wishing I could sell it for just what I owe on it, but I have made a lot of money off the deal over the past 10 years and this home is worth $65K and rents for $800. I cash flow $146/m with no turnover, no repairs, and I manage myself. But cost keep going up and I cannot push rents much higher.

Because of that home my next 8 rental homes were nothing like it. These homes were all SFH in good desirable neighborhoods, that I could sell on the MLS for retail anytime I wanted. (My exit strategy). The cash flow is fantasitic, the repairs are negligable, and the turn over is very low with an average turnover cost of $150 and 1 to 3 weeks. These types of homes are year 2000 or newer, 3/2/2, 1700-2700 sq ft and about $120 ARV.This method has made me a lot of money, with very little headaches.

So whats the problem?

First problem, Texas realesate is getting expensive. The low hanging fruit is gone.

Second problem, I can't find these types of homes with much of a discount. The typical investor tries to by homes 70% ARV. I have never been able to buy these preferred type homes at that price. I thought I was lucky to get them at 85% LTV some even above 90% LTV. I was able to get excellent financing on them normally 4% 30 year mortgages, but required a lot of money down. $25K per home. I am very good at keeping track of my numbers and my Cash on Cash ROI is amazing at 15%-25% ConC ROI.

So I am seeking some group advice. Should I continue to buy these premiem type homes that rent well and cash flow great but keeping dropping $25-$35K cash per home. I could only do about 2 a year at that cash flow rate.

Should I do what everyone else does and by older homes in less quality neighborhoods with no money down at 70% ARV? I could expand my homes a dozen or more per year?

I have spend a lot of time and money on marketing that has paid off, but never for the type of homes I prefer. I just don't think they are out there.

Whats your thoughts on newer SFR in great neighborhoods, compared to lower end homes at a bigger discounts? What has been your experience?