All Forum Posts by: Andrew Herrig

The nice thing about rentals is they generally require a less expensive rehab than a flip, and if you're a little off you just end up having to leave more money in the deal than you otherwise would.

I would suggest next time you have a house under contract getting multiple contractor bids on the same scope of work to get some good data on what various things cost.

It gets easier the more experience you have.

My wife and I added $1M to our net worth in 5 years through real estate, and I recently started blogging about our journey.

We've done wholesaling, flipping, and buy and hold. Hoping to help others through our story!

I've got nothing to sell, just sharing some of our best tips for new investors.

Here are some of the most popular articles:

• Extra Income Report: How We Made $100K from Real Estate Last Year
• Our First Rental Property (And How You Can Learn From Our Mistakes)
• Rental Property Accounting 101 for DIY Landlords

If you have any topics you'd like to hear more about, please reach out and let me know!

It's getting tougher to find properties that cash flow in DFW (at least in Dallas and close in suburbs where I am). Properties we bought 3 or 4 years ago keep going up in value, but rents are not keeping up with property tax increases. 

Across our portfolio, property taxes alone account for 25% of the rents. If you add 15% for capex/maintenance, 5% vacancy, 5% insurance you are already at 50% expense ratio if you are self-managing. 60% or more if you have a manager (and you account for monthly management fee + cost to place a tenant).

The point is, to cash flow after expenses, you need to do better than the 1% rule. It can be done in certain parts of DFW, but it's getting harder.

I don't have a product to sell, just a guy that got into real estate trying to reach financial freedom for himself and his family. We've been able to grow our net worth by $1M in the last 5 years through real estate and I want to teach others how to do the same.

We have a small portfolio of rental properties (had 9, sold 2 last year), my wife makes some money on the side as a Realtor, and we've started investing in crowdfunded deals.

We made $100k from our real estate side hustling last year and I update our side income report monthly to show how things are progressing. I like to show the ups and downs, how we find our deals, and how we manage tenants.

If you're interested, check out my 2018 Year in Review: $100K with Real Estate Side Hustles.

Or if you want to see our latest report (after a $4000 repair bill at one rental and we still managed to make a profit), here is the January Side Hustle Income Report.

What I noticed from my own study of the metrics that the article didn’t mention is pending sales. Pending sales in DFW dropped like a rock vs. prior year, and since sales lag pending contracts by a month or two I would expect that it will start to affect the sales numbers shortly. 

@Stephen Green Did you really mean 6% ROI defined as annual rent divided by purchase price? That is $1000 in monthly rent on a $200,000 property. After factoring in 50% expenses, you are looking at the 0.5% rule. Or roughly a 3% cash on cash return. You would have to pay cash, as any leverage would send you into the red every month.

If that's truly your criteria, you could buy pretty much anywhere in Dallas and hit those numbers. For long term capital appreciation, I would look at northern suburbs - Frisco, Allen, McKinney, even Far North Dallas, etc. - along the path of progress.

@Jacob D. I think you are pretty on target. I generally budget around 15% for repairs/capex. Some of these numbers depend on what your rent is...capex on a house that rents for $1000 are generally going to be pretty similar to a house that rents for $2000, but if it's 10% of the rent at $2000, it's 20% at $1000. With your rent/purchase ratio target I assume you are looking in the $100-150k price range?

@Don Van Nguyen If in the long term you want to take over property management, I would not outsource it in the beginning. You are going to learn a lot more by actually doing it than reading about it on the internet, and better to make mistakes when you have 1 house instead of 10. Property management is really pretty simple (it can be hard because at the end of the day you are dealing with people, but it is not complex). There are a ton of tools out there to advertise your property, collect rent, get leases signed, etc.

In DFW, a 1% rule rental ($100k house rents for $1k per month) is breakeven at best due to high property taxes, so you are going to have to do better than 1% to get any kind of cashflow. You are going to have to go pretty far outside the core of DFW to find the kind of houses you are looking for (1995 or newer, good schools, low crime, etc.) and still get any cash flow. I see you are in Wylie, so I would be looking in some of the smaller communities out that way - Royse City, Princeton, Farmersville, etc.

@Eric Hassfurther What is right for me is not necessarily right for you, but since you asked what MY criteria is:

- 10% cash on cash return

- $300/mo cashflow after all expenses

- must be B- neighborhood or better (I don't have a specific IRR requirement, but a B neighborhood should at least keep up with average appreciation in the area)

In order to hit these numbers in DFW right now, you need to be willing to hustle to find good deals, and generally the good deals need a lot of work to get them rent-ready. 

Whether DFW is a good market for you or not probably depends how much sweat equity you're willing to put in. If you're just looking to deploy capital with minimal cash on cash return and take advantage of leveraged gain in real estate over time, there are a lot of markets out there where it is easier to do this than DFW.

@Scott Schober Are you buying off the MLS? If the tax assessor gets ahold of anything that shows the purchase price, expect your tax value to go up the next year to within a few percent of the purchase price. Not sure what city this is in, but taxes would be around $525 per month with a homestead exemption or $675 without. If you are running the numbers for the future when you move out, you need to use the higher number.

Insurance is probably too low. I would double that at least. Or better yet get a quote.

As-is it's not a great deal, but it's not bad compared to most 2-4 unit deals in DFW. At least it meets the 1% rule. I'm going to guess it's not in the best neighborhood, so you will probably not benefit from much appreciation over the years.