Relatively new to real estate - want to improve my cash flow

[Moe Soliman]

Hello fellow BP investors,

I'm a busy physician working full time and after settling in my practice decided to start investing in real estate. After doing my fair share of reading I decided that acquiring buy and hold SFH and renting them is what I want to do for the coming few years. I did acquire two properties (one 4 years ago and one 6 months ago), and plan to try to acquire 2 or 3 more each year. Both properties are class A properties in great neighborhoods and have been understandably very modest in net cash flow ~ $100/month and 200/month after all expenses.

So in order to improve my net cash flow to $300 to $400/ month I decided to start looking at cheaper older homes (built in the 60’s and 70s) in the 150K to 180K range in Friendswood, Pearland, League city and surrounding areas ( I live in Friendswood, TX). I will use a conventional loan with 20% down for now. I have no time or experience to rehab properties that’s why I need to buy properties that are ready for move in.

Here are the issues that I need advice on:

1.Galveston and Brazoria County require a separate Windstorm insurance which makes insurance even more insanely expensive than it already is. Should I focus on Harris County instead? Or should I just shop around for cheaper insurance companies ?

2.Every time I find a good deal, the property would get multiple offers in a few days and I would have to raise my offer until it’s not a good deal anymore. Am I doing something wrong?

3.Is expecting $300 to $400/month from a SFH realistic in the Houston market?

4.Am I looking in the wrong area of Houston to get that kind of cash flow? I don’t have a property manager so wanted my properties to be close to where I live (Friendswood, TX)

5.Am I looking at the wrong investment strategy for this area or for this kind of cash flow ? Should I be looking at multifamily units instead?

I would appreciate any input or advice from other more seasoned investors, especially if you have experience in this area of Houston.

Thank you

Moe

[Michael Le]

Hi @Moe Soliman,

1.Galveston and Brazoria County require a separate Windstorm insurance which makes insurance even more insanely expensive than it already is. Should I focus on Harris County instead? Or should I just shop around for cheaper insurance companies ?

ML - Insurance is going to be crazy regardless but hard hit areas especially so.

2.Every time I find a good deal, the property would get multiple offers in a few days and I would have to raise my offer until it’s not a good deal anymore. Am I doing something wrong?

ML - You're buying properties off the MLS so you won't find a lot of great deals and the ones you do find will be highly competitive. You'll have to find better sources or source them yourselves through direct mail marketing. Being a physician I'm not sure you have the time for that or want to.

3.Is expecting $300 to $400/month from a SFH realistic in the Houston market?

ML - Yes, it is possible, if you find the right deal.

4.Am I looking in the wrong area of Houston to get that kind of cash flow? I don’t have a property manager so wanted my properties to be close to where I live (Friendswood, TX)

ML - It depends on your goal. Lower class properties will cash flow more but they came with increased risk and time requirements.

5.Am I looking at the wrong investment strategy for this area or for this kind of cash flow ? Should I be looking at multifamily units instead?

ML - What are you goals? How much time and energy do you have to devote to this? If you have more time than money that might be one path. If you have more money than time that might be another path.