All Forum Posts by: Eric Guiltinan

@Aaron Mazzrillo Thank you for sharing the chart.  There is a little more explanation behind it on John Burns Real Estate Consulting website.  I'm not writing this to say the chart is wrong or right, but reading between the lines on their website it appears that it is just the creator's opinion.  By that I mean that it doesn't appear to be based on any quantitative analysis.  I'm not sure what the Y-Axis is supposed to represent but I think its the cost of real estate?  Its not clear.  

My 2 cents - I think a lot of the exuberance behind Austin real estate investments has dwindled due to the higher prices but that doesn't mean we are heading towards a contraction.  More likely a period of steady, yet slower, growth.  I'd call this the "Mature Market" phase and put it between 3 and 4.  

I disagree with the assessment of Houston.  From their website, this is based on the oil market.  However, Houston's economy is much more diversified than when the oil price collapse of the 80s took out their economy.  Also, I believe the oil route has run its course.  

Finally, I agree that the direction interest rates head is probably the single most important factor to the real estate market.  They have been heading down since the 80s but unlike bond yields they can't go negative.  So the real question I think we are all asking is when do they stop going down?  And, when they inevitably do, will they go up?

Yes!  You can do it and its a great idea!  I did it 3 years ago, but then decided to buy a second duplex to live in, and now I'm closing on my third duplex in two weeks.  My advice is to always plan out one step into the future.  For instance, if you borrow too much for your first place then you'll find yourself handcuffed by your debt to income ratio and not be able to qualify for your 2nd place.  Make a spreadsheet with your hypothetical income and expenses once you live in the duplex.  Then limit yourself to a number that will allow you to get that 2nd place.

Another tip... do some research on your financing. I was able to get a 5% down conventional loan on my first duplex using a first time home buyer program through US bank. This allowed me to use an FHA loan for my second place. Using an FHA loan for the 2nd place is ideal because not only does it allow you to use a smaller down payment it also allows you to go much higher in your debt to income ratio. If you use FHA for the first one then your only option left is a conventional.

I am under the impression that if the house is in bad shape... (needs a new roof, or foundation work, or something else) that I would struggle to get conventional financing.  Is that not that case?  Also, I see a lot of places closing within a week or two in the areas that I'm looking.

Hi BP.  Long time forum snooper here. 

My wife and I currently own two duplexes in East Austin. We occupy one unit and rent out the other three. We have a little over 50k in liquid assets which we would like to use to buy a SFH to rehab, then live in, and refi as owner occupants. We both have good credit scores. The places we are targeting are around 150 to 175 but will probably not be able to be financed through a bank. I should say, we are currently approved through UFCU for over 300k on a conventional loan because we are looking to buy a 3rd duplex but the prices just seem out of touch with rent this time around. We have a decent amount of equity in one of our duplexes but I'd like to leave that alone since we have that with an owner occupant loan with a good rate (from when we lived in it).

Are their hard money investors in Austin who might be interested in working with someone in my situation?  This would be my first rehab although I am very handy and do all my own work on my units... including a kitchen remodel, shed built, new fence, plumbing, painting, roof repair, etc....  Other than our student loans and our mortgages (which are offset by our rental income) we have very little debt.

Any advice?  What would you do in our situation?

This was our situation with our first duplex. It wasn't a VA loan but I don't think that matters. Our offer was contingent upon the owner negotiating with the tenant. The owner offered the tenant 1,000 dollars to move out within 60 days of the date the loan was set to close. The contract between the tenant and owner was included in our documentation to the underwriter. We collected rent from both sides for two months and then moved in. This gives the tenant plenty of time to make plans and means you don't have to start off your real estate investing career by kicking someone out. As Chris said, you generally have the right to kick them out if you intend to move in. So from the tenants perspective the option is 1,000 dollars and 90 days notice or nothing and they get kicked out. Treat them well during the two months after you close and they will leave the place in good condition. Thank you for your service!

Bought our first owner occupied duplex in East Austin in March 2014. It was on the MLS for a while and had multiple price reductions. We were nervous that we had made a mistake but in hindsight it was a fantastic decision. We are now looking for a 3rd duplex and possibly competing with you. Good luck.

Sergey, I'm doing what your doing in Austin but I may be couple of years ahead of you. My wife and I are currently living in our second Austin duplex and are looking to move into a third (we lived in each for over a year to satisfy the occupancy requirement). In fact, I'm considering the same property as you. I suppose that means you should take my advice with a grain of salt, but I'm sure that property will sell for more than 200k.  If you find a duplex in a half decent neighborhood in Austin that works based on those rules (2%, 50%) then run away.  It must be too good to be true.

Get good tenants at slightly below market rate, treat them with respect, handle the repairs yourself, don't buy in really bad areas, and your expenses will be much less than 50% on average.  

Just my 2 cents. 

I moved here in the summer to begin a PhD program at UT and found there was a lot of availability near the university for short term summer rentals.  This is somewhat true all over town as UT is a big pool of renters. My wife and I secured a place sight unseen a month ahead of my move and then found a more permanent place after getting to know the area.  We got a great deal on it, too.  Finding a place sight unseen can be dangerous though.  I suggest dealing with professional listings to avoid scams.