All Forum Posts by: Lynn Dee Murrow

my advice is to start with your current living standard. Have a plan to pay off consumer debt. Once consumer debt is paid off ( use a process like Dave Ramsey's debt snowball) use the same approach to invest. Protect you credit score it will make you money if you keep it high.

All the money that previously went to pay off debt each month now goes into the investment account. You are always looking for property and you learn to evaluate deals quickly and accurately. When you find a distressed seller or property you can afford using a hard money to conventional refinance strategy (reduces cash out of pocket and increases cash on cash return) buy it. Have your team together and plan out the entire project before close. Stay on a tight timeline to get the rehab done and the property rented within 30 days then begin refinance. All income from each property goes into your investment account until you can buy #2. Keep doing this until you have the $2k you need to live on plus reserves for repairs and maintenance (about 10%).

I created $2,000 in cash flow with 4 houses but depending on where you are investing you can realistically expect to clear between $250-400/ house right now. My cash out of pocket was very low because my all in was less then 70%of ARV. In some markets your cash out of pocket will be higher now, but hold out for the right deals and you will be successful. Be sure to be looking between Halloween and New Years. Less competition, sellers more flexible because they want to close by year end and January is a good rental month.

Learn the business, don't look for short cuts, be a good landlord and rehab your properties well so maintenance does not eat up your cash flow, screen tenants well, enforce your lease and personal boundaries with your tenants.

I have known Tim Herriage for several years and I have attended all the Dallas Expos. My company has also been a sponsor of the Texas expos and Baltimore Expo. Tim is a man of his word so he will absolutely stand behind that guarantee. I am an investor in single family and multifamily. The REI EXPOs are a great place to meet other investors, find quality vendors and get great ideas for your business. Tim is very strict with expo speakers and if their classes are not content instead of sales pitch they are not invited back. The expo allows you to explore a lot of different investment approaches and investment vehicles all in one location. You will learn things you can apply to you current investment business or you may find a whole new investment approach that fits your lifestyle and goals.

@Sharon Tzib the last line says he plans to rent it until he can move there.

The Texas market has recovered and many areas are at all all time high. I am sure there are other lucrative markets across the country as well for buy and hold investors. The key is to find properties in your local market. There will always be distressed property and / or distressed sellers. Investors need to be patient and laser focused on their own personal investment strategy so they do not get caught up in any new hype and stick to the investments that fullfill their personal plan.

Josh I feel like we are bursting your bubble here. I am from California and moved to Texas 11 years ago. First, if you want to live in California make sure you have done a budget and included all your costs. It is an expensive move from where you are now. Cost of houses is exponentially higher. You will be disappointed in the age and quality of home you can get for the money unless, as previously noted, you are in a remote suburb with low demand. Remember to take a look at the State Income Tax Rate - and this rate will be going up since the state is practically bankrupt. The school systems are in shambles so if you have school age children (including college) choose the schools very carefully or plan on private schools or homeschooling. Most people in California are working so hard to live there they really cannot enjoy it.

When considering rentals, read the landlord tenant laws first so you understand what you can and cannot do as a landlord and how eviction works in California.

The important thing is to be realistic about your plans to move to California so you do not spend a lot of money only to be disappointed.

I have had all my single family properties under a professional property management company for the past 3 years. Although they do not always do things exactly the way I would, they have done a good job overall and I always receive my rent on the 10th of each month.

I have had my apartment (91 units) under professional property management for just over a year. Initially we had turnover in the onsite property management position until we found the right person. Now our occupancy is stabilized at over 95% and the budget looks good so I am very happy with this company as well.

Keys to success with a property management company:

1 - read and make sure you really understand the contract. Many owners get upset about things they would have known if they had read their contract.

2 - communicate in writing clearly and concisely and require the same from your property manager.

3 - expect some initial maintenance expenses when a tenant first moves into the property. even the best rehab will miss things that will be discovered when a tenant moves in. Good maintenance will result in lower turns on the property.

Hope this helps!

@Glenn Espinosa I agree with you. I think investors have to think long term and stay focused on your investment model and don't let the current market discourage you or make you buy something that does not fit your model just because "you need a property." ( I hear that a lot.)

We are buy and hold investors, but we look for lots oequity. We have slowed down recently and we are turning to individual distressed sellers for property now. There always seems to be a niche. The key is not getting caught up in the excitement of overheated markets.

What do you think the end result for the hedge funds will be? I have a theory and I am curious what everyone here thinks...

I agree with Mike. I am a big believer in clarity and enforcing my leases as written, but when someone has to move I am a little vague. I want to work with them so they do leave the property looking great and pack in a way that allows me to show the property. In the end, I will deduct everything from their deposit that is allowed by the lease. It sounds like they will leave the property looking good and, as others have said, this is a great time to be leasing property so you should not have a loss on this one. Someone suggested seeing if they can move a few days early and that will help too with tenants who will want to move in on the first.

Let us know how it works out!

The great thing about real estate investing is that people will lend you money (at incredibly low rates right now) to invest and your equity does not have to be locked in the property, you can re-finance the equity out. Higher short term returns can be earned on distressed property but a long term hold of either single family of multifamily (called a yield play) is around 10-15%. I use 12% for my calculations.

The eal advantage is the ability to leverage you money. I do this through mutifamily investing. Here is a symplistic example of what is possible.

Multifamily is valued based on what cash flow it will produce.
Lets say you have a property that generates $300,000 / year in income. It has $200,000 in expenses. Your net Operating Income is $100,000. To determine the value of the property you go out to the market and ask, "What would you pay for an income stream of $100,000/year? If someone will pay $1 million on a $100,000/year cash flow they are saying they want a 10% return on their money. That is called the Capitalization Rate.

Now lets take this same property and look what happens if we can raise occupancy (and thus income) by just 10%. Lets say we are going from 70% occupied to 80% occupied. Reasonable assumption. Investors know how to do this. We will spend some money, but we will also save money through better operations so for the sake of easy group math - and to isolate the point I am making - we will say our expenses remain the same.

Here are the numbers:
We begin with
300K income
-200K Expenses
- 70K Debt Service
= 30K Net Operating Income

If property cost $1million
We put 20% down or $200K
about 5% in closing costs $50K
Need $250K (yourself or with a group of investors)

$30K/$250K =12%
$30K was your yearly cash flow/ $250K investment

Now, if this property is distressed and you can increase Net Operating Income by just 10% look what happens

330K Income
-200K Expenses
- 70K Debt Service
= 60K Net Operating Income
You just doubled your income and your returns because
$60K/$250K = 24%

gets better though...
Now, at just a 10% cap rate your property is worth $1,300,000
You can re-fi
1,300,000
x80%= 1,040,000 this is what the bank will refi for
$1,040,000
- 800,000 (original loan $1mil asking - $200K down)
- 50,000 refi cost (that may be a little high)
= 190,000 cash back in your pocket
or 76% of your original investment
AND...your property is still cash flowing...

330K Income
-200K Expenses
- 90K Debt Service (higher now because you have a bigger loan)
= 40K Net Operating income
$40K/60K cash you still have in the deal
= 66% return.

and your ongoing budget for expenses includes a budget for repairs and maintenance and capital expenditures....

MF investors can usually get this property to 90% occupancy, create other areas of income like laundry, create savings through things like water conservation so in 2 years or under you can pull your initial investment out and go into another "value play" or sell it and take all your initial cash plus your gain (we are seeing 40-130% gains right now) into a bigger deal. You continue to do this until you are in a big enough deal that when it is stabilized and you have re-financed it the 12% it yields is enough to fund your Lifestyle.

Long example and rounded figures to make group math easier, but you can see the power of using other peoples money and a little of your own to create this passive income. You hire a management company and oversee them well and you can create a great lifestyle with the passive income. This is possible with MF because of the way it is valued (appraised)

In Single Family you can refi too but you will not double your equity through operations like you can in MF.

Others here will also chime in with returns on a lot of other real estate strategies they use. There are some very successful investors here who are buying property with very little to no money down through owner financing, subject to etc....

Bottom line....the key is buying at the right price, and getting the education and help you need to move through the deal. You are looking in the right place for information and answers!

You do have more disclosure requirements as a Realtor so make sure you understand that before getting your license. Also ask around about real estate schools. I did an online school and the materials were terrible. What you will really enjoy is the real estate investor community. Amazing people who are willing to help you learn.