Can I trust the MLS for good deals?

[Victor Nguyen]

I am a first time real estate investor trying to buy my first property to rent out. I am mainly looking for a single family home in the DFW area. I have been talking to a real estate agent and he has been sending me a lot of properties to look at but the numbers just don't make any sense. Most of the single family homes are around $290k-$300k and the estimate rent for the area is around $2,100-$2,300. After calculating all of the properties, the average cap rate is around 5% and the COC ROI is always negative (I am putting down 25% for a DSCR loan). Most of these properties are going to take me 6-7 years to actually have positive cash flow. Is that normal? Or should I take my time and wait for my real estate agent to find me a better deal?

I understand that for single family homes, it takes a while to get positive cash flow, but is 6-7 years way too long?

[Travis Timmons]

There is no easy money. There are no mystical sellers that have no idea what they own and will sell it to you for a discount. Sure, you can find off market deals, but just because something is off market does not mean that it is a good buy. If you don't know what you are doing, that's not a great strategy either. To get a deal, you have to fix a problem...the more serious the problem, the better the deal. That sounds great, but it is expensive, stressful, and really sucks to actually go through it.

I would posit the question "What can you do that is really hard?" as it relates to real estate. That's how you are going to find a deal in this market. 

If you want cash flow in DFW (or to simple break even month to month in many cases), you have to create it right now. The only options that I see are rent by the room, mid term, short term, or just putting more money down. Each come with their own challenges, and every property has a best use or strategy, but you get the idea. 

You can renovate your way into some equity if you feel confident in your underwriting, but that doesn't solve the cash flow problem.