All Forum Posts by: Brad Gibson

@Logan Turner I've looked primarily at Lubbock because it is less dependent on the vagaries of the oil industry.  Lubbock has TTU as well as a large health care complex that lends to pretty stable and steady growth.  

As you are probably well aware, Midland and Odessa have been white hot, then cooled.  Rents have come down some, but the prices for homes have not followed.  They're still pricey (relative to history) and seem to have plateaued instead of continuing their rise.

Long story short, initial cost to buy in has been a barrier.  

I'm a new investor without "Piles 'O Cash" lying around for the 20% down payment. I looked for SFR in Midland last Spring and found a 2 BR 1 BA shack in SW Midland for $110,000 firm. To bring it up to rentable condition would have required $50,000 in rehab costs. So approximately $70k out of pocket to get started, unless I could have refinanced the repairs. The numbers on rent for a 2 BR 1 BA made the return on 70k not optimal.

I looked at some duplexes that were being shed by a local investor's group.  The problem is I couldn't get traditional financing because a specific percentage of that neighborhood were rentals and not owner occupied.  Couple that with falling rents and guys in the real estate business shedding their properties made me nervous about the market in Midland/Odessa.

I'm new at this & obviously not an insider with respect to any housing market, but am I interpreting things about Midland/Odessa market incorrectly?

I do know one thing from my past real estate dealings.  If you are the retail buyer, then you are the mark.  Everyone makes their money off of you because you supply the cash either up front or in the form of debt service payments.  Seller, realtor, mortgage broker, inspectors, surveyors, appraisers, contractors, etc.  Caveat Emptor.

Hello @Jesus Vazquez.  The property is in Lubbock. While the rents might be low for Midland/Odessa, I also think the price is significantly lower than what could be found there as well. 

Do you find that to be true?  I've found the properties in Midland/Odessa to be significantly more expensive for equal or less quality dwellings. 

@Nathan Click I don't have any financing in place yet. Ideas?

The units need work. They need rehab, but the list price is 12k under tax appraisal & I think the sale price could be even lower than list leaving room for rehab expenses. 

Perhaps when rehabbed, I could raise the rents when leases end. 

Hi Tim. Thanks for the feedback. I will buy a landlord policy for the duplex that includes liability coverage. I currently have a personal umbrella policy that pays above the policy on the property. 

I have some concerns about the tenants & turnover issues. I have no desire to manage the property as both my wife & I have very full time jobs. I have a current property manager who will work on this one. 

Ditto on property taxes and insurance.  Prices for both of those in Texas are exorbitant compared to other states.  I think that might primarily be because there is no income tax & because the insurance lobby OWNS the Texas Legislature and governor, thus by proxy...they own the Insurance Regulatory Commission.

Im currently looking at a Fourplex in West Texas.

Unit 1 -- 3 BR 2 BA

Unit 2 -- 2 BR 2 BA

Unit 3 -- 3 BR 2 BA

Unit 4 -- 2 BR 2 BA

All four units are rented at $625, $525, $625, $525.  Total monthly income is $2300.  It has a new roof.

List price is $114,000.  I would say the property is a "C" or "D".  Tenants pay all utilities.  The area/neighborhood are not in the growth path of the city, so appreciation will likely lag.  This is a pure cash flow play.

Here's what I'm looking at 90% occupancy rate.  

$2,760 per year in management

$200 in accounting and legal

$3600 per year in repairs/capex

$1200 in insurance

$2,667 in taxes

$5,508 in debt service after 20% down

From those numbers, it looks like it might cash flow over $10k per year which would be a really nice return on equity.

Any thoughts for a newbie? I don't know how insurance treats duplexes and/or if the financing will be different than a SFR. I already have a $1 million umbrella policy.

Thanks in advance.

@Dmitriy Fomichenko 

Thank you for the response. Yes. If I leave the money with the Teacher Retirement System until I turn 63 (21 years from now), I can collect approximately 40k per year. The pension formula is complicated, but that should be in the ballpark.  All of that assumes the Texas Legislature doesn't loot the pension & repurpose for other intentions which has been attempted in the last couple of sessions.

While I see how 40k per year guaranteed would be hard to replicate, on a cash in the retirement account basis, if my wife and I are already maxing out 401k contributions with our current employers, would you still advise against trying to kick start REI now with the withdrawn proceeds?

10 rent homes of at least 100k paid off cash flowing 1k per month apiece in 10 years sounds like it could be a lot more than 40k till I kick the bucket.  Plus it leaves something to my wife and or son.

Thank you for engaging with me as a thinking partner.

Yes.  I have a property manager. They had a tenant ready the day I closed on the home & so far so good. It's just been 2 months, but they did a good job with screening & everything is rolling. 

Hi Alex. I just bought my first rental property in Lubbock & it is now rented out & cash flowing. I don't live in Lubbock, but think it has great buy & hold prospects. 

Best of luck to you.