All Forum Posts by: Andy Webb

@Jason Sung - most of the leads we review are ultimately from wholesalers, and you are correct, very few of them make any sense. I am seeing more activity on the MLS now compared to a few years ago, especially outside of DFW proper. Nevertheless, cash flow remains thin due to high mortgage rates, high property taxes, an high insurance rates at the moment.

We are also looking out of state where the taxes and insurance are less onerous.

One highlight with respect to property taxes in Texas, if you do buy a rehab property.  If it is a rehab property, you should be getting it at a discount...be sure to protest your taxes down to your purchase price.  A constitutional amendment recently passed in TX that puts a cap in place for non-homestead properties (used to only be in place for homesteads), capping possible annual increases, I believe at 20%. So if you protest your value to $100k this year, it can only go up to $120k next year.  They plan to run this for 3 years and could extend after that.  What this means: you can lower your tax burden by purchasing a distressed asset, protesting the value down, and then will not have to worry about it jumping 80%, 90%, 100% again the following year...should put a little more cash flow back in your pocket for a longer period of time.

Andy

 Hi Jason - Why do you view HM in this market as being risky?  If your numbers work and you are buying with a decent equity buffer, I don't see a problem.  In fact, in most cases I would prefer to buy with hard money or some type of private money - I will have a lower out of pocket = lower capital at risk in the long run.

We are shopping for properties in the DFW area (and elsewhere) right now, and mostly look for distressed houses that we would buy using Hard Money. Know your numbers, know the cost of renovations, and have a clear game plan to buy, do the rehab and get back out into conventional or some sort of commercial/DSCR product on the back end - you should be fine.

Andy

 Those are two different products.  Hard Money you might think of as a short-term bridge loan or construction loan that I use until I can get the property into condition that allows conventional or other financing.  High interest, you only want to be in a HM loan for a short time.  

DSCR is a 30-year program. Rates right now on DSCRs (and this will vary from lender to lender) are not too far off from what you would get with a conventional, Fannie-Mae backed product, but you will want to have that conversation with the lenders out there.

Ha ha - nothing very scientific:  My last day was the Friday before my birthday (a Saturday) - happy birthday to me.  I had a certain age as my target and hit that.  That was in the Spring, and I rode the COBRA train till the end of the year - not cheap but worked for us.

RE health insurance broker - I met one that sponsors a local REIA group I go to sometimes. They are paid a commission from the insurance company.

Buy a distressed house at a discount and fix it up thereby creating your own equity through the process.  Then you don't have to worry about appreciation or a huge out-of-pocket downpayment.  Cash flow will be minimal, but should be there.  Sell in a few years and cash out that equity and reinvest.  Easy process to repeat.

I think you are understanding correctly.

I encountered this when retiring early in 2022.  We wound up on the market place for 2023 and getting a sizable subsidy based on my income "best guess" for 2023.  I used a health insurance broker (and might be worth your talking with one) - he never used the "MAGI" term, just discussed income.  In any case we picked a number that results in a discount now - and I think a pretty reasonable income number....barring any major capital events (e.g. apartment investment selling).

So we enjoy a monthly subsidy now.  If I guessed wrong and we come in higher on our annual income, we have to return some of the subsidy via the tax return.  If we come in lower, I suppose we get a credit of some sort.  So I have understood - first year in now, so we will see how this shakes out at filing time. 

By the way - retiring from the corporate world was the best darn decision, even if other variables like health insurance come into play...we can figure those out.

Talk with a lender that is doing DSCR loans. DSCR = Debt Service Coverage Ration and is basically a commercial loan that considers the property cash flow for underwriting. They can lend on STRs so I imagine an MTR is in that vein. There is an long-time area lender in DFW that I use called Investmark Mortgage that does both Hard-Money and DSCR loans that you might speak with.

The DFW area is huge with a ton of municipalities - can't really paint it with a broad brush.  Dallas city proper is probably what you are thinking about, thought other cities have their own programs/requirements/or have taken no action at all.

Are you cash flow positive on the rental at the moment with that rate?  What if the rate goes higher?  If you are cash flow positive, I would not pay it down.  But I am quite a bit younger than you and tend to keep my properties leveraged.

Hi all - any GCs, handymen, HVAC and other trades you have used in the Knoxville, TN area that you would recommend?  Or conversely, advise against?

Thanks!

Andy