All Forum Posts by: Brian Adams

What I wish I had known when making somewhat similar decisions a decade ago was how to do a professional underwriting. 

The BP calculators are fine, the 50% rule, 1% rule, 70% rule, etc. But when you are trying to compare how to spend money versus non-real estate alternatives like stocks and make sure the juice is worth the squeeze, IMO you want to do a proper underwriting. 

This is an example one a SFR I was reviewing today. It shows the kinds of terms necessary in order to have an 8% IRR

Sometimes you do these numbers on what otherwise looks like a sensible investment and it shows that, even with rosy assumptions, you are losing money. Or making far less than what you could by just sticking the cash into $DJIA.

Why not more LTRs?

The screenshot you posted does not show a particularly soft market by itself. 

If you turn the display to the Satellite display, those many hundreds of purple dots are spread out amongst literally 100,000s of homes in the area. That entire area is basically pure residential housing. 

Zillow is perhaps one of the better gauges of rental market temperature because many PMs don't use the MLS to advertise rentals. Zillow shows the rental market is warm and rental prices are up versus the same time a year ago.

https://www.zillow.com/rental-manager/market-trends/plano-tx...

I was going to try to make this meetup in Dallas this Thursday during lunch. I haven't been and am curious if it is any good. Dallas Multifamily Meetup. 

https://allevents.in/dallas/elevate-multifamily-investing-me...

I have done a report on Dallas 2-4 family multi-families. There aren't a lot. As mentioned, Killeen-Temple has a much higher concentration of duplexes and fourplexes. But they do exist! 

I would pitch my market, the Killeen/Temple market. 

It is in the Texas Triangle on I-35 and within 3 hours of every major Texas metro, but without the insane prices of an Austin or Dallas. 

It is VERY heavily biased toward renters because of the military base, meaning picking up SFRs is easy and keeping a good one full should not be a problem. Military get paid BAH, which means rents are fairly predictable. 

It also has an unusually high concentration of 2-4 family multi-family options to make your dollar go a little further, if a duplex or fourplex is your cup of tea. I wrote a recent update on the 2-4 unit market in our area just recently. Killeen-Temple Fourplexes and Duplexes | 2024

Just today I began working on creating my first email list for local SFR targeting an 8% IRR. The market has increased and those kinds of deals aren't as plentiful as they used to be, but that is true everywhere in the USA.

Zillow, of course, cannot tell when a home is in distressed condition. So that would be the first explanation for significant mismatches between the asking price and the Rental Zestimate. 

But Zillow also struggles with property types. For example, several of the homes you are sharing here are manufactured homes, but I believe the Zestimate algorithm generally conflates those with brick and mortar single family homes. 

Zillow is also at the mercy of agents who upload the listings. If a listing agent calls a "mobile home" a "manufactured home", then it will be misclassified in the algorithm and affect the price. 

Zillow has a lot of property data, including from third parties against which it might check that data. But many of those companies (Corelogic, Black Knight) get their data from error-prone sources as well.

Data in the real estate world is poorly digitalized and structured, despite the best efforts of programs like RESO. 

Which is a good thing for us! Those are information asymmetries we can rectify and profit from!

It's more efficient for managing the properties. Less "windshield time". But you are less diversified if that building or area does poorly versus geographically dispersed alternatives?

So I take it you are an American living abroad and not English?

My wife is British, and I am also military! I bought my rentals in Killeen while at Fort Hood early 2010s, including quadplexes. 2-4 families seem to be especially popular around military installations perhaps? I can't speak for Fayetteville. 

If geographically agnostic, I did a study just a week ago on the state of the duplex/fourplex market in the Killeen-Temple area. My broker's property management company is local to the area and very familiar and comfortable with this product type if you want hands off management. Duplexes are probably too expensive but fourplex prices have stabilized at reasonable-ish prices for a long term hold.

https://www.biggerpockets.com/member-blogs/10185/103223-kill...

I've you've already used $315k, you have $451,550 left.

https://www.veteransunited.com/education/tools/va-loan-limit...

Even though $515k>$451k, You CAN still use your VA loan on this duplex (and I highly recommend it). If the purchase price is greater than your remaining entitlement, you merely have to do a 25% downpayment on the remaining amount. In this case, you would do a 25% downpayment on $63,450. ~$16,000. Still less than an FHA down payment and without the permanent MIP.

I would confirm all this with your lender. I am a Realtor and may not be up to date as things change all the time. But this is exactly the situation we bought our current home in 2021. Make sure you're working with a lender who understands the VA loan (if you are in Killeen-Temple or San Antonio, basically every local lender should have a good understanding of the VA loan).

It sounds like the seller agent is not familiar with VA loans?

Only your primary residence is exempt from taxes as a disabled Veteran. Once you purchase the duplex as a primary residence with VA financing, THAT will be the home that you will be exempt from. You would want to get your homestead exemption on it.

This is what I see when I click "See the report" - not sure if I am doing something wrong?