Replicating my Wisconsin Business in Houston?

Question

Hi guys - I own mostly one up one down duplexes (plus a couple of triplexes & a quad) in and around Appleton, WI.   These are older (normally 100 years old) in urban  core areas.   I rehab them within reason, although I do like those where the main need is mostly cosmetic.  My cash on cash returns are north of 15% and I use one bank here which will lend me 80% on most anything I spot based on a phone call and a few calculations.

I have few questions and would be grateful for some ideas/guidance:

Are there decent cash on cash return markets in Houston?

Is the landlord basically free to rehab and work on the plumbing and electric etc?

How aggressive are lenders there (with experienced landlords/operators)?

Andrew W. · Answer

@Joseph Medina thanks much for the additional comment.   I made it down to Houston on my first research visit this weekend and while I think it will take a lot of research I was pretty impressed with the action I saw in many of the areas close to the city (lots of building, lots of rehab crews at work).    In particular the Near Northside looks promising.    I absolutely agree that noone is going to give you profits in this market and I am probably a bit spoiled by my experiences in WI.    But I do see plenty of scope for intelligent remodeling, where you’d get some cash flow, but I do also see why now there are those who continue to be strong believers in solid appreciation here.   I get it that banking on “appreciation” is more like “speculation”, but Houston does seem like it wants to continue to move ahead.  I am not sure on the next move yet, but do know now that there are options.

Andrea Lane · Answer

Andrew,

We are just starting our move in the Houston market (and surrounding areas).  Based on allot of research here is what I found.

- Some areas of Houston are appreciating at $3K a month, so finding great cash flow is tough.  But there is allot of surrounding areas.

- The lending criteria is no different in TX than in the other states I own property in.

- As far as the rehabbing rules, they have allot of HOAs that manage what you can do, so you need to know the locations rules.

I hope you get some Houston investors to respond, I would like to hear from them as well.

Michael H. · Answer

lenders will do typically 75% to 80% cash out refi, 80% to 85% rate and term.

im getting 300 to 400 dollars a month gross cash flow per SFH, but im sourcing my own deals off market.

most wholesalers in the area, that ive seen, mostly blast out class C & D deaals.

I'd try to stick to class B or C+ areas if you can. this is a great market with low regulations

Malek Bohsali · Answer

Not sure of bigger pocket rules, posting 2 duplex examples here, though they're self-serving.  1st example is my own SF which is converted into a duplex: https://www.har.com/homedetail...  It's under contract, ~ 9% cap rate.

Second example is a friend's duplex which is currently off-market, will be listed at ~ $395,900 when he's ready in ~ 3 weeks.  https://www.har.com/homedetail...

Malek Bohsali · Answer

I've completed ~ 20 flips in Houston/ Harris County.  Highly recommend pulling permits for new electric panel, roof, foundation work, shower pans when doing rehab.  For new construction, additions, footprint expansions, recommend submitting drawings / all permits/ inspections. City is not horribly onerous in that regard, just safety and code-minded.

Stuart Grazier · Answer

@Andrew W. I'd love to connect and help in any way I can, as I have connections in both Wisconsin via our turnkey company in Milwaukee and in Texas as a mortgage loan originator and originally from there. I'll send you a PM.

Luciano A. · Answer

@Andrew W.

In regards to doing the plumbing and electrical yourself....if it is minor like changing out the ceiling fan or light fixture it is ok. But if you are re-wiring a house or changing out the main water line then you will need a permit. If you don't have one and the city inspector drives by and sees you working it will be red-tagged. With all the new builds and rehabs going on there are more inspectors driving around. Cheaper to just pull permits than to cut corners.

Matthew Rolf · Answer

@Andrew W. hope you had a good trip to Houston!  If you're looking for small multifamily you definitely would be best served staying inside the loop.  Inside the loop in areas of homes needing rehabs, you won't be dealing with HOAs (generally), that's more common in the suburbs.  I'm sure some people pull permits for everything, but in general, I think you'd be fine to DIY as needed.

There's a few good threads on her for specific neighborhoods inside the loop.  Feel free to reach out if you have any questions.

Mark Sewell · Answer

Honestly, I think nobody really knows right now, if they are being honest.

Still not clear how many are really going to pay the premium to live in close - none of us knows what the commuting schedules will be, or said another way, to what extent this 'work remotely' thing will be part of the new normal going forward.

Also rental rates will go up.  There is a big lag right now, but eventually we'll have a stable market again and rental rates will catch up.

Replicating my Wisconsin Business in Houston?

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