All Forum Posts by: John Franklin

CADs use “mass appraisal” which is more dependent on regression analysis and doesn’t dive as deeply into your property specifics.

You can protest because the value is above market value and/or because the value is not equal and uniform to similar properties.  I’ve always found the latter easier to prove up.

So I would look at the assessed values of all the comparables in your appraisal.  Are they more supportive of the CADs value or your opinion? 

Yes there can be a range of value, because the value is an individual appraisers opinion.  But unofficially, a reasonable range of value is generally interpreted as being within 5% and most always less than 10%.  (I said unofficially as there’s no standard).

The law requires the property to be assessed at market value annually.  If you wouldn’t sell it today for that price, it’s likely not overassessed by much.  If you’d love to sell for their assessed value, then fight them by showing similar properties assessed for less PSF.  

Similar to the CAD generally means similar in location, size, age, condition and use.

Commercial protest is best handled through a tax agent and it sounds like yours dropped the ball, so I’m sorry to hear that.  If you lose this year, you can always start over next year with a new agent!

I will be honest and say that TCAD has historically been more close to market values than any other TX CAD I’ve dealt within a major metro, but they’re aggressive to get there.  

Many out of state investors don't realize there are no limits to assessment increases in TX on non-homestead property so 50-80% in one year is not uncommon. That's a big expense jump that wipes out many a property's cash flow, so always pro forma taxes based on sale price or ARV before investing in TX.

Ahh Austin, Seems like just  yesterday I was out looking at newly constructed retail and office buildings off Bee Caves and off 620 sitting with sub 20% occupancy.  You could purchase with cash below base construction cost, but you couldn’t find a lender.  Ok maybe it was 2005-6, but as I recall, Austin RE was especially hard hit for years after the last tech crash.

I too hope the good times keep rolling in TX but I have a detailed stategy and a little vulture money set aside if they don’t. 

If you’ve never lived through a protracted downturn in RE markets, understand banks will cut off most folks access to any mortgage or investment lending.  Hard money will get real hard to find.  If part of your strategy involves short term cash out or refi, you may want to develop a Plan B now.

Seriously, you’ll be shocked how fast banks can cut off the credit Kool aid! (Don’t ask me how I know).

If you're sitting on bank loans, now would be a good time to go back and read the promissory note terms and covenants. Pay attention to any statements that mention "risk to the bank's collateral or security" (queasy stomach clauses) and make sure you understand you may get cash calls if your LTV drops.

If you want to assess the residential market, monitor multi-family rents, occupancy and concessions.  “Free” rent and declining condo sales are where I recall first noticing problems the last time.

Population and employment growth are key and they’re both very positive right now.

However; there’s never been a period in my lifetime where Texas RE developers couldn’t oversupply market demand and spoil the party. 

But hey, this time could be different!!

Thanks Jeff.  This stuff is important, especially when flipping or investing out of state!

Most commercial real estate contracts between private parties include non-disclosure agreements that include sales price.  

This makes appraisals of commercial properties in non-disclosure states less accurate because comparable data is more limited.  Something to think about when bidding on a commercial property. 

If you're dealing with residential properties, especially flips, it is important to know the specific comp data used to derive ARV. ARV is a subjective opinion of value, usually developed by a party with bias. An appraisal is supposed to be a subjective opinion of value developed by an unbiased third party expert. Don't confuse the two.

Sorry if that sounds harsh.  Maybe it takes you 4-6 months if your salary is at the lower end.  But the point is a tight written budget creates extra income out of thin air.  Eliminating luxuries short term maximizes long term investment returns.  I’m all for lowering interest rates and paying off the lowest balance first, but if you’re anything like myself at 24 or my kids, or any others at that age and making that much money; you’re likely leaking cash every day.  

When you have a seven or eight figure positive net worth, do it your way.  Until you do, just try it Daves way.

Most people are pretty good at math, especially comparing pricing, interest rates and ROI. Most people are also pretty poor at calculating and mitigating risk or accurately remembering bad past mistakes. We tend to look back on our prior results, highlight the positive and rationalize the negative.

Daves not always right, but you do have way too big a shovel to be putting off paying that measly student loan debt.  Debt is for real estate leverage and 3-5xing returns, not ex students or luxuries.  

Execicse some financial muscle and Pay off the student loan in three months.  If you really miss it and don’t feel better without it around, you can always go back and reborrow the money.

A few years back, the online data sites were not allowed to share MLS residential closing sale prices with the general public. However, in many states this info is public record so they could get it there. Some states do not disclose the actual value of property sales to the public. Non-disclosure states include: Idaho, Indiana, Kansas, Mississippi, Missouri, Montana, New Mexico, North Dakota, South Dakota, Texas, Utah, and Wyoming. There may be a few ways to back into values in a few of these states, using closing tax info, but not all of them, for sure not in Texas.

Generally the local MLS maintains a database of closed residential sales accessible only to Realtor members. Historically, most MLS member residential listing agreements required the seller to make the sales price and info available to other Realtor members. I would be curious to know if any Realtors receive and facilitate client requests to exclude sales price data from sold residential listings. NAR has long known that it was proprietary access to sales prices that gave Realtors an edge in pricing and selling homes, so they want to restrict the data where they can.

Most MLS data across the country has now been aggregated (sold) into many databases and major lenders have access. These agreements may differ and disclosure terms may vary.

So to answer Jeff's question, your local Realtor probably has all the sales prices of brokered residential transactions in your area, if they were listed through the local MLS. If not, they may still be available from the recording documents. Can't speak to TN for certain.

In Texas, if I sell my home (or any RE) without using a Realtor to place it in the MLS; no one but the buyer and seller will ever know the true sales price. Of course the lender may know (and anyone they sell the info to) and my mortgage amount will be shown on my deed but that doesn't confirm the price for the public.

Or as my teenagers say, “Dad, Privacy is sooo last century!”

I’ve seen self storage facilities built from shipping containers and I’ve seen RV and mobile home parks bring them in to lease for additional storage.

I suspect your greatest hurdle will be not offending your municipal government and neighbors.  I’d look around the immediate neighborhood and check with commercial businesses to see if they could use additional storage.  Focus on anyone who stores inventory or prepurchases raw materials for manufacturing.  

Where I am prices range from $2500-$4500 for 40 footers and maybe 20% less for 20 footers.  It’s tough to multi tenant a box so I’d probably start with 20 footers.  I think price is directly related to the distance from a major port where they come in.

In the past, I’ve leased small tracts of commercial land I owned to rock, soil and sod retailers.  I brought in a portable building for them to use, sold it to them, then financed it separately for them.  Worked out well.  You might consider just trying to lease the land for storage and use the box as a leasing incentive.  Don’t forget;  you can charge much more in interest on personal property than you ever can with real estate.

Not sure how large your site is but fencing the land might make it appealing for outdoor storage of boats and RVs.  Self storage facilities regularly charge $50-$125/month for a 10x20 outdoor parking space.  Bring in some stabilized rock and security fence and you’re in the storage business!

I think you’ll be pleasantly surprised by leasing your excess land.  I love seeing people think outside the box with RE.  There is huge untapped value in well located raw land and few ever effectively extract it.

Good luck!

In my state a listing agent has a fiduciary responsibility to the seller.  This means they must work to obtain the best price possible for their client, first.  The state considers an agent to be an RE expert and non-licensed people uninformed.

Foregoing open market exposure, even with the consent of the seller, skirts the fiduciary responsibility and is a sure way to open yourself up to an agency complaint and lawsuit after the sale.  I personally know of agents and their brokers who lost their license and the lawsuit over this very issue.  

Attorneys love these cases and sometimes take them without retainer because they’re usually a slam dunk and backed up by the agency recovery fund followed by a personal judgement from the state against the agent/broker for all costs.   

A fiduciary is required to advise you from making financial mistakes, like taking less than market value for your RE.  If you sell pocket listings, and want to have any chance in a dispute, you’d better have a thick paper trail showing you discouraged it completely from the start.

There is always a boom in pocket listing activity going on in an up market.  But neighbors talk and sellers get angry when they learn they lost money because an agent convinced them to take a bird in hand.

If all I wanted to do was invest in RE, I would never get a RE license.  It increases your responsibilities and personal liability 10x.

Hi Rosie, 

I’ve used wireless trail cameras on my properties for security purposes, with good results.

They immediately send you text or email photos when triggered.  They generally have about a 75ft sensing range and can be additionally equipped with external battery and solar charger, so no AC power required.  They generally require a cell phone SIM card that runs about $20/mo.

They’re also easy to relocate.  Be sure to get one with “black flash” so it’s not visible at night.

Here’s where I’ve ordered mine:

https://www.nativeoutdoors.com/cameras/game-cameras/mms-game-cameras

Here’s a synopsis of the problems in the A&M market.

https://www.bloomberg.com/amp/news/articles/2018-0...

I’ve got friends with A&M rental property who’ve done well over the years.  Rents don’t grow much but there’s always a tenant for the right price.

Speaking of large projects, in Texas, new construction traditionally comes in waves.  There are few restrictions on new development, construction is faster, occurs year round and when rents and occupancies began to peak and easy credit is available, it’s a developer free for all.  

Historically, supply always outstrips demand, Then the credit spicket shuts off.  Next all new development stops. Generally takes at least 5 years to restart.  If you look at historical construction and absorption stats for any property type or city in TX, you’ll see this pretty clearly.  It’s just the cycle.

I don't think you'll see many new A&M student housing projects announced in 2019-2024 So I think that helps the small investor going forward as NOI should rise.

I would also be aware that Many colleges have been lured into public private partnerships (3p) and developed more new on campus housing lately.  I guess they want to be RE investors too!  Hard to compete with them as they can require students to live in their properties.  

SH is a niche and every college is a different market.  So know your market before not after.

Disclaimer; I’m just referring to the TX RE history I’ve observed since 1976.  This time could always be different.