All Forum Posts by: Andrew Herrig

@Travis Stafford As any good real estate investor would say...it depends.

What are your monthly carrying costs on the condo? What is your monthly rent on the apartment? How long would it take you to flip the condo if it was vacant? If you lived in it?

In general, I'm in favor of renting your primary residence and putting what would have been your downpayment to work in other investments earning you money. Of course I say this as someone who owns their primary residence for purely non-financial reasons. My family gets more "utility" you might say out of owning our home than the alternative of earning more money but renting. Something you can't measure with ROI.

I will say that one of the primary benefits of live-in flips is the Section 121 exclusion on your taxes (no capital gains taxes on sale if you live in it for at least 2 years). However, while the 2018 tax plan has not been implemented, both the House and Senate version amend the exclusion so that you have to live in the house for at least 5 years, effectively killing this benefit.

@Homa Teramu There are a few good articles on BP about estimating capex. In my opinion, if you plan to hold a normal 3/2 rental property for the long term, I would expect capex to be in the $150-250 per month range.

@Travis Howser You can still get cash flow in Dallas if you are willing to go into a C neighborhood, which is where a lot of the turnkey operators are working these days. Be careful of relying on pro formas from the turnkeys, they generally understate repairs and capex, and as soon as you buy the house the taxes are more than likely going to rise significantly. As a general rule of thumb, 1% rule is breakeven in DFW (e.g. $100k house that rents for $1000 per month).

As far as other markets, I have not done a ton of research, but I like some of the midwest markets for cash flow. There are some turnkey operations in Alabama and Florida that I believe are still pretty good cash flowing markets as well. My personal preference is for areas where rents are at least $1000+ per month. On paper you can get a lot of cash flow with a $30k house that rents for $600 per month, but capex and maintenance costs are generally going to be the same whether your rent is $600 or $2000 per month, and they eat up an enormous percentage of your rent in cheaper markets.

@Travis Howser What are your goals? Are you looking for cash flow? Appreciation? Turnkey? Set up a team and find/rehab off market deals?

In my opinion, if you are looking for a turnkey investment there are much better places to go than Dallas for cash flow and minimal headache. If you are looking for a stable market with some upside potential for appreciation and you are willing to break even on cash flow (even if you are buying off market at 75-80% of value you are not going to see much cash flow in an area that has any chance of appreciation), then Dallas is still a good place to buy.

@Eric Du Off market is definitely the way to go. You won't find a cash flowing small multi on the MLS these days. Even off market they are tough to find, partially because there was just not a lot of 2-4 unit properties built in the DFW area.

@Randy Bell $150k is a tough price point in DFW. You are going to be looking at C- neighborhoods at best.

Why are you looking at rent to own rater than FHA/conventional? Rent to own is not very common in Texas due to laws making it very difficult to legally implement.

@Francis Dinh I don't know what your goals are, but this particular property is not an investment, it is purely speculative (gambling). You will be losing money every month hoping that future appreciation makes up for it.

DFW is a strong market. Maybe it will appreciate beyond your expectations. But that is completely out of your control. You are taking a huge risk for a relatively small return (9% IRR).

@Shelby Sample I have called a lot of local DFW banks and have yet to find one that will do a HELOC on an investment property. If you find one, let me know!

Since you have completely debt free property, you can approach it from a different angle with a local bank. I recently got a secured line of credit using a free and clear rental property as collateral from a local bank I already had a relationship with.

As @Greg Scott mentioned, another option is to get a 30 year mortgage on your rentals and put that equity to better use long term.

@Jerry Thompson Your analysis looks pretty good. Taxes seem a little low. If you have a homestead exemption, I usually assume 2.1%. Once it's a rental, more like 2.7%. 

Make sure you research the neighborhood and are comfortable with it. A house under $100k and at a 1.5% rent/price is a red flag for a potential war zone. 

@Oren H. How far out of tolerance is this foundation? Generally +/- 1" is considered level. If it's a rental house, I personally would not worry about it unless I saw exterior cracking through the bricks or there was some issue other than the constantly shifting Texas soil at the root of the problem (e.g. sewer leak under the slab).

If you want the peace of mind, get the opinion of a structural engineer, not a foundation company with a vested interest in installing piers. If you go forward with the foundation repair, you will need an engineer's report anyway.