How's this deal? (Investing first time in Houston from San Jose, California)

[Sandeep S.]

I have been following BP for sometime but hardly ever posted it. So you can consider me newbie on BP. However, I am not so much a newbie in RE investing.

I am primarily a buy and hold investor in SF bay area. I have a full time job in high tech industry here and started investing in 2008 when I saw rent to price ratio (even in bay area) to cash flow easily. I started slow for first 2-3 years and then went "all-in" when I saw market turning around big time in 2012. As a result of my high salary, access to mortgages and lucky timing, I have accumulated a portfolio of ~10 nicely cash-flowing properties in the bay area.

It's all going good except that there are no more deals to had around me. Short sales and REOs are practically over. I could cash out of my rentals and make a ton of money but that's not my strategy. I want to generate enough passive income to be comparable to my day job.

That's the background of why I am now looking out of state for buying. For no particularly great reason - I have narrowed down to investing in Houston. (I have been to Houston couple of times). I could go the buying turnkey route but that would be too "boring" given my experience)

That brings to me the specific deal. After doing analysis for couple of weeks, I made offer and am in contract an REO property: 23527 Hidden Maple Dr Spring, TX for $100k. I never expected I will pull the plug so fast but I did. I "expect" it would need $5k-$8k of rehab and then rent for $1250-$1300.

I already am in touch with one property management company and couple of wholesalers. And I have one agent helping with MLS properties.

Here are my questions where I think fellow BP'ers can help me:

- is it a good deal? I think the retail value of this property would be ~$125k. As such I hope to buy several more properties so even if it is not greatest of the deals - I am hoping it a good start. Knowing myself - I will strive for every deal to be better than the previous one.

- Is my rent assumption reasonable?

- Are there some areas I should avoid in Houston? Similarly are there other areas which produce higher cash flows (without compromising in quality of property or tenants)?

- Can others recommend property management companies they have worked with?

- What are others' experiences on out-of-state investing, especially in Houston?

- Can others recommend great wholesalers they have worked with?

- Right now I am buying cash (from equity of my California properties). However, I'd love to be able to finance my purchases in Houston. Can someone recommend any portfolio lenders? I am not interested in hard money. And given that I am approaching 10 loans - I don't think I can get conventional financing either.

- Or some credit unions or local banking institutions that would give me line of credit against properties in Houston? (This is how I raise my cash in California!)

- What do others' think on buying via seller financing in such a scenario?

- All other thoughts/tips are welcome!

If there is enough interest - I promise to keep BP posted on my experience with the first acquisition in Houston and beyond.

Oh that is too long a post already.....

[Sandeep S.]

I thought I will provide an update on this first acquisition I had done in Houston. I closed this deal as planned in beginning January. The rehab came within budget (~$7K).. And it got quickly rented at $1325 (which was above my estimate of 1275-1300).

So I called my "experimental" first buy in Houston as success!

I have been busy buying several more since then. And have a baseline first deal - I was able to get better deal (than this one) every time. I will write about those purchases in another post.

@Johnson H. - did you pull the trigger on buying in Houston? I would love to learn about your experience.