All Forum Posts by: Jacob Pereira

Had that happen to me about a year ago. She literally told me she wasn't paying and there was nothing I could do. I ended up doing cash for keys to get her out. It hurt, but it was the best business decision at the time. It does sound like that time is coming to an end in Texas, though, have you been keeping track of the latest developments?

Originally from NOVA, so I feel your pain...

What you're describing is something I have to talk to my clients about on a regular basis. We are no longer in a turnkey world, where you can just stumble along with some money and make a living in real estate investing. You literally HAVE to do some degree of value-add. In rare situations that can be as simple as slapping some paint and flooring down, but more often now it means developing land, subdividing lots, scrape and build, etc.

If that's not your cup of tea, that's okay; the stock market is perfect for passive investors, and returns are quite good. No one will judge you for choosing not to get a second job, and honestly, you'll do a lot better than many of these real estate "gurus" here who brag about doubling their money in five years.

Traditionally I would've said that with such a poor rent to value ratio you should sell, but I also own a number of properties in Austin and I don't see prices going down anytime soon. Added to that, there don't seem to be a lot of good alternatives for where to park your money if you do sell. I can tell you one thing; I'm not selling my properties right now.

As my man @Victor Steffen implied, in Austin we're no longer in a time where you can just buy something, do nothing, and watch the checks roll in. You have to use creative investment strategies, such as (in Victor's case) rent by the room, or (in my case) rehab value add. If you truly don't want to make any kinds of decisions, chances are good that you can sit on appreciation for a few years and you'll cashflow then, although I'm sure people said that in 2007 too (for the record I don't think we're in a 2007-style bubble because the rules have changed, but who knows if there's a new thing we haven't considered). The truth is that those who truly want a turnkey investment have almost always been better off investing in stocks. Real estate is a good investment because of leverage, you have control over it, and if you're willing to live in it, because the government subsidizes live-in homes.

I don't have access to the CC MLS, so I can't tell you anything about the value of the property(s?) on which you're bidding, but I can tell you based on the numbers you're quoting it looks pretty strong as is. That said, the fact that you backed out and they came back to you implies you have the upper hand. My advice is to go with what your Realtor suggests on this one, but on the aggressive side of what they're telling you.

I took the liberty of doing the math on the numbers you gave. Here are my assumptions:

You end up with a loan of around 240k (210 price +30k repairs). Based on that, for easy math and with limited info I assume around a $1000 a month mortgage payment. Obviously if you'll live there and have a large downpayment it'll be less.

All your listed expenditures are annual, whereas your listed rent is monthly

That would make your annual income after expenses $11,098, or about $925 a month, or $231 a door, which is above your stated range.

I see a lot of people, and I've been guilty of this early in my investing career, throw away a good deal because of a few thousand dollars, which is nothing in real estate terms. Like I said before, negotiate aggressively, but don't throw away a good deal in pursuit of the perfect deal.

I remember seeing posts about the oncoming crash back when I first got on this site in 2014. Back then the market fundamentals were strong, and now they're even stronger. There's always risk in investing, but in my opinion, there's less risk in a calculated, leveraged investment now than in any time in my lifetime. 

My man @Joe Scaparra is a smart guy and I hope you take what he's saying to heart. One thing that I disagree with that everyone including Joe has said is that you should sell now. If you sell with a tenant in place you won't be selling at retail prices, you'll be selling at investor prices. Retail buyers want a property that's move-in ready, and having a tenant in there for another 6 months will scare most of them away. You could try and see if they're amenable to a cash for keys deal if you're in a hurry, or you could just wait for the lease to expire. I'm not that familiar with the Fayetteville market, but if it's anything like the Austin market then there's no longer a selling season and annual timing won't matter much, although to your point interest rate timing might.

I'm a buy and hold guy myself, but I have a few flipper clients. Knowing that you already have a contractor team together makes me feel much more confident in your future success, as right now it's incredibly hard to find good workers at a price that still makes sense in this town. Most of my clients who flip are now looking at scrapes and condo regimes. Gone are the days where you can buy a place that needs new paint, flooring, and fixtures and you can make a quick buck with a one-month turnaround. Feel free to run a deal or two by me if you want an extra set of eyes. No strings attached; I live for this stuff.

Like others have said before, Austin and Denver are very similar markets, so if you're frustrated there be prepared for more of the same. That said, this town is awesome, so come on down!

#3 stands out as the clearly wrong move; as far as the other three go, that depends on the opportunities out there. At the very least, a no-brainer return on investment would be to refinance that 5+% interest rate down to s sub-3%. As far as whether you should take money out to further invest, yes, but only if there's a good opportunity.