How do you find properties earning 1% of value in rent?

[Alpesh Pandya]

Full disclosure: Newbie here.

After going through many tremendously helpful podcasts, articles and forum discussions, I have decided to get in action. 

At starting out, what struck me is that it is almost impossible to find non-foreclosed properties in decent areas. Check price per sqft in any decent areas within metros and range abround $100 to $140. With such price ranges, and having to compete with large scale apartments, is it possible to find properties with potential to earn 1% of value in rent? How do you go about finding such properties? Is it recommended to focus only on low-income areas or foreclosures? To be honest I am lost...

[Hattie Dizmond]

(Suddenly the @ function for names is not working)

What you're using for your expenses will play a big factor in whether or not you can find deal that meet your criteria. Depending on where you are investing in DFW, you may be very safe in lowering your Vacancy Reserves. Also, if you invest in the property upfront, basically taking care of the things likely to become an issue in the next 3 - 5 years, you can significantly reduce your monthly CapEx reserves. Being realistic about these items will definitely help your cash flow.

However, I strongly recommend, particularly in the current market here in DFW, you stop worrying about 1% or 2% of any of the other "rules".  Those are all great theories, and in some markets they probably make perfect sense and produce the same results as looking at the investment from this perspective...

• What is the minimum monthly cash flow per door you're willing to accept?

As long as a property meets that criteria, what difference does it make what "rule" it conforms to?  It don't think it matters at all.

Now, with that said...lack of inventory + high demand + property taxes = cash flow that is very difficult to find on listed deals, in areas of moderate to high desirability. Difficult, but not impossible. Here are a few (not all) areas where cash flow is still possible on the MLS...

• Little Elm
• Rowlette
• Forney
• Red Oak
• Grand Prairie (north of 303)
• Mansfield (various pockets)
• Arlington (various pockets)
• Duncanville
• Lancaster
• Balch Springs
• Pleasant Grove
• White Settlement
• Saginaw

Some of those areas are more desirable than others.  Some have better quality schools than others, but there are properties that will cash flow, at some level, that list in those areas.

As for realtors, yes...you can work with multiple agents, as long as you don't sign an exclusive right to represent buyer's agreement with any of them.

My advice, narrow down your focus around the properties you are looking for...size, configuration, max purchase price, max rehab budget.  Determine what your minimum monthly cash flow is.  Give your realtor the exact specs on the type of properties you are looking for.  Let them do their search thing.  All you have to do is plug the numbers into the Buy & Hold analyzer here on BP or create your own in a spread sheet.  Just be ready to move quickly, because it's a hot market.