All Forum Posts by: Chad Benedict

I signed up for and use Propelio but I think their comps are only limited to certain areas in Texas right now, not out of state. In Texas the only way to get access to the MLS is to be a realtor or use a service like Propelio (there are some others popping up as well to fill this niche). It may seem more expensive but when you add up all the other costs of being a realtor, and if you're doing it just to get access to comps, Propelio will come out cheaper and easier in the end. Texas is a non-disclosure state so sales data on homes isn't publicly available otherwise.

But also included in Propelio's monthly subscription are multiple lead lists that are culled from public records and sent to you every single day. That means if someone files for probate in court today, you get that lead in your email tomorrow. That alone is worth the monthly fee, in my opinion.

Chad

I second @Jackie Lange's recommendation of Bryan Dunklin.

@Calvin Clark That doesn't surprise me you've had trouble finding a property management company. You might have to offer more than their usual fee to get anyone interested. PM me and I can send you the name of another company, don't know if they'll take it or not.

I wouldn't trust the rent rolls unless you see bank statements as well showing those deposits every month and on what day of the month the deposits were made. That's not just for this property, that's for any property.

Based on the expenses provided I'm sure there's a good amount of deferred maintenance. Hopefully the inspection will provide more insight.

Chad

Do you already have property management in place? If not, I would budget 12%. It's a lower rent area, and likely will need more effort and time from the PM, so they may charge more -- or if they don't charge more monthly, there will be more fees added later.

I would use 10% for vacancy and probably 10% for repairs (or 15% total for repairs and CapEx). The vacancy rates and turnover costs can be higher in that area. And keep in mind repairs will be higher, too, as a percentage of the rent because the rents are lower. An hour of a plumber's time costs the same whether the rent is $600 or $1200. Also watch for any shared costs as mentioned above that you are responsible for (trash, lawn, water, etc.).

South Dallas/Fair Park is hit or miss when it comes to investing. There are plenty of investors who make good money in that area. Others are terrified of it. It just depends on your risk level and investing strategy. Finding an experienced property manager will make a big difference. That said, it does seem to be a bit of a tight deal, but it's very hard to find any available multi-family in Dallas right now. And investing from out of state means you'll pay a bit of a premium to find deals. I wouldn't count on appreciation of the property, though.

Good luck!

Chad

@Trevor Smith

I don't think you are as necessarily bad off as you think, as long as you keep moving forward and just get it done and sold. If you refinance it and rent it out there is no way it will cash flow based on what houses are renting for in Richardson, and if you lock yourself into a lease with a tenant, then you'll be losing money every month for at least the next year -- and stressed out the whole time. You could do a shorter-term lease, and then put it on the market during the prime selling season next summer, but you never know what the market will be like then. It's entirely possible with appreciation you'll have recouped everything, but it's a risk, and based on your description of what you're feeling right now, I doubt it's the type of risk you're in a position to take. This will never, ever be a cash-flowing property, and you shouldn't keep it as a long-term rental.

Keep in mind Richardson is very much in demand, and depending on which school district (elementary and JH) the house is in, some of those neighborhoods are still appreciating about .5-1% per month on average right now, subject to market conditions. That's about the equivalent of your holding costs per month. Not quite as much demand if you put it on the market for sale in winter, but you'd still be able to sell it at the right price.

You mentioned your rehab budget was $82,000, and you think you'll go over that by $15,000. That's an enormous rehab for a house in Richardson. I don't know your background or the extent of the rehab, but my guess is there are professional flippers who can do that same rehab for probably 60% of your cost. You could always just try to wholesale the house right now to someone else and get out breaking even depending on where you are in the rehab. Or just finish it up, put it on the market, and get it sold.

As you said, you could go over what went wrong with the deal, but that doesn't matter now. Just sell it and move on. Don't worry about how much money you're making compared to others. There's no general rule. I know guys who are flipping five houses a month and happy just to make $7,000 on each deal (I could never do that, but they do). Your success is based on whatever goals you set for yourself. If you lose money on the sale, well you've learned something, but at least you won't be stressed out anymore.

Good luck!

Chad

P.S. None of this is meant as financial or legal advice.

Try Bryan Dunklin, he set up my series LLC (although I haven't actually used the series yet). http://www.texasseriesllclaw.com

You can also have an experienced CPA set one up. I think Eric Lee at Proline Tax Advisors does it: http://www.prolinetaxadvisors.com/

The legal filing with the state is essentially the same no matter who you use. What's different are the LLC governing docs and how it's structured. That's the difference to look for, and what you're paying for with a lawyer. Otherwise you could file on your own for maybe $300 but I wouldn't recommend it.

Good luck,

Chad

It can often feel like a bubble, but real estate is just a cycle (and all real estate is local). It goes up and down, and it's past due for it to go down again. Whether it's a bubble or just a correction will be impossible to know until it happens.

Keep in mind that real estate, like most of the financial markets, is often more psychological than anything else and sentiment can change rapidly. The market is always strong, until suddenly it's not. The fundamentals are good, until they're not. Inventory is low, until it's not. It's different this time, until it's not. I have no idea what's going to happen, but the end result is usually about the same.

@Jose Belman

If your LLC has its own Federal EIN (tax number), you can apply for credit under that. They'll still run your personal credit, but it will start creating credit for your business. However, you should research and find out which credit cards will report just to your business credit or to your personal credit as well. In other words, some business credit cards will show up on your personal credit report (thus affecting your personal credit score), while others will remain solely on your business credit report. You want the latter if at all possible. If you have good enough credit to apply for your own credit card, you'll likely be able to get a business card.

I find www.nerdwallet.com to be one of the better places to research credit cards. You might need to google to find out which cards only report to business credit.

Best of luck,

Chad

(None of this is meant as financial advice.)

This is one of the dangers in purchasing property out of state or without someone local you trust looking into it. Did you use the standard Texas real estate contract or something else? If the seller misrepresented the facts when you signed the contract, that can be reason for backing out. Also depends on what's in the contract. Do you have an option period?

You should insist the property be delivered vacant (and have that in the contract), and have someone do a walk through the day of closing to be sure -- and then have them change the locks immediately. If there are still people in the house with no valid lease, it's a simple notice to vacate and eviction process as you would with a tenant not paying rent. I say simple, but trying to manage it from California would be very difficult, and I wouldn't do it. If they manage to find a copy of a valid lease, that could create problems, just depends on how good of a deal this is and how much you want to risk spending on attorneys and flying into town for court hearings.

The deal sounds a little off to me. What's your exit strategy for the house and what are your plans to manage it from California. Make sure everything is in writing and you have someone here helping you. I urge caution, but best of luck!

Chad

(Full disclosure: I'm a licensed realtor, but none of this is meant as legal or financial advice.)

Denton has a lot of competition now, but the prices are still lower than Dallas, and from what I can tell the price to rent ratio is a little more appealing. The nice thing about Denton is that it is growing rapidly and should continue to do so for the near future.

Sherman/Denison area also has good price/rent ratios and cheaper houses than Dallas. I know some guys who invest there. It's not quite as crazy and there are still deals to be had. I have no doubt it will continue to grow (as all of Texas is) but probably not at the rate of Denton or Collin County.

One thing to keep in mind depending on your strategy is that there's still a lot of empty land in these areas, so much of the growth is happening in new subdivisions, so if you're flipping you may be competing with new builds. Not a problem, just something to keep in mind when you run your numbers.

Denton's a college town, Sherman/Denison is a little more industrial. Both solid rental markets.