Trouble Finding First Cash Flowing Deal

[Parker Smith]

Hey All,

This is my first post on bigger pockets and I'm super excited to join the community. I am about 6 months into my real estate journey and having been reading everything I can get my hands on. I live about 50 minutes north of Austin, TX and have decided to invest in buy and hold single family investment properties. 

I know I am fairly new, but have been analyzing about 3 properties per day via zillow (this is probably my first problem) for the last 3 months and havn't been able to find any cash flowing properties. I know its possible to find them but I feel like in Texas it is super tricky at the moment. I decided to get my license and according to the math I will break even on the board of realtors fees if I do one deal per year. I am hoping the education and access to MLS will aid me in finding better deals.

Would love to hear anyone's thoughts on dealing with super high property taxes, and getting your license as a newbie before even buying first property. Hoping I didn't make a mistake by doing it.

[Costin I.]

@Parker Smith Welcome to the BP and RE Investing! Allow me to add to the pile of free advice:

1. You should read Is Becoming a Real Estate Agent a Good Path to Investing—Or a Pricey Distraction?

2. You should check out the meetup scene - we organize one in Round Rock - and expand your local networking possibilities.

3. You'll have a hard time finding rentals that will cash flow after all expenses (!), even with 20 or 25% down payment. Short of buying something well below market value (70%ARV), which means you'll have to source those deals yourself - you'll not find them on MLS, and the wholesalers are peddling "deals" at 90-95%ARV plus repairs...which is most of the time 98% ARV)

4. The prices simply went too high, while rents didn't follow proportionally (IMO, because a lot of the house were bought by investors, thus the market rental saturation is quite high...and guess what, all those landlords are competing with each other and have to keep the rents lower to get them rented). 

Go on Zillow and look at all the active rentals in your area of interest (Zillow gives you a count). Compared that with San Antonio (like areas around 1604 ring), where you can get much better houses (newer, cheaper), but with low rents too, because there are so many.  Or run a RentRange report for your properties of interest.

5. And guess what else kept with the prices - the real estate taxes, which are also sky rocketing, eating more in your cash flow every year. I actually predict a influx of rentals of the sell market next year, when the new landlords of the current and past couple years realize the promised cash flow is nowhere near expectations, their property taxes have increased 30-50%, and they actually have to put money in every year. Now that, coupled with appreciation, might be a strategy in itself for high income individuals, but if that's not a large percentage of landlords, ...like I said, expect a sell wave at the smallest sign of economy trouble or appreciation slowdown.

6. Like @Greg H. said, I would not recommend deals that barely break even or negative cash flow. The market is closer to "euphoric" than it is to "distressed", and while you can't time the market, getting burned in your first deal might be too hard of a lesson to recover from. You make your money when you buy, not when you sell.

7. You don't need license. Just find a agent willing to allow you as an assistant.

8. Cash flow = Rents - PITI - Expenses (Property Management 10%, Vacancy 8%+, Utilities, Repairs and Incidentals, Capital Expenses fund, Legal and Accounting)

9. There are deals to be found, but not easy - @Ryan Blake and others gave you good directions, but you'll need a lot of work, time, resources and money to get there. Just be realist and don't drink the RE gurus "get rich fast" cool-aid.

10. You are in the right place to learn and get answers. "Ignorance is bliss. Knowledge is power, but also a burden. The cure to both - the 4 ions: education, action, progress(ion), not perfection".