All Forum Posts by: John Franklin

I felt that way in college and wanted to quit and jump into a career too. It’s completely normal.

I’m not sure what you’re studying now, but if you want to excel in RE investing you’d be wise to understand things like contracts; depreciation; economics; accounting; RE law; amortization; discount rates; leases; marketing; capitalization; geometry and a dozen other critical real estate related topics.  

I found a place where they have a complete program to teach all that. it was in the college of business building.  Maybe if your RE career would benefit from a RE education, you’ll enjoy college more?

Added bonus; all those classes usually count towards a RE license, so I got one of those with little effort.

In my experience, the tougher path usually yields the best fruit.

Hi Liz and congrats on graduating!  It sounds like you have a nice job lined up and I see no reason why you can’t become a full time RE investor over the next few years.  

However, Investing now without a solid income and knowing the market would not be my recommendation.

I would suggest you diligently save you up a personal emergency fund to help you get established in H town.  You’ll also need as much cash as you can to take advantage of the best RE opportunities.  There’s no reason you can’t start that part now. 

While you are doing this, study everything you can about house hacking.  BP has plenty of podcasts and posts.  You are a prime candidate and I’d make it my first goal to own where you live.

Follow some examples of others just out of school.  Save up enough to buy you a duplex so you can and live in one side and rent the other.  If you can’t afford that look into SF homes or even condos that would make good airBnB or long term rentals after you move up.

I truly believe RE is the fastest route to financial security, but I’ve also personally known dozens of people who wound up bankrupt investing in RE.  It happens, so learn why and how to mitigate the risks.

IMO, self discipline is what sets successful RE investors apart.  If you can shrewdly manage your work, savings and finances now, you will do the same with your RE portfolio and succeed.  

Best of luck!

In my past experience in TX RE purchasing lots or vacant land from taxing entities and sitting on them until the right of redemption passes turned out well for me with few issues.  I never tried it with improved RE.

As I recall title companies are hesitant to insure title on tax sale RE until the right of redemption passes. If you plan to flip, that could impact the ability for your buyer to obtain financing.  Although there is interest compensation for a tax sale redemption, it might not cover the time and energy you’d invest in a rehab.

I’m sure some experts have ways to get around these hurdles, but I’d recommend talking to them and a title expert before sinking a ton of money into this.  

There are also some pieces of RE out there you don’t want to own because of all sorts of issues (access, title problems, environmental, ETC).  Those frequently end up on the delinquent tax list and stay there forever!

If you are starting out, there are so many more easier ways to invest in RE today than there were 10-15 yrs. ago.

AirBnB, house hacking, crowd funding and a ton more I’ve heard about on the GP Podcast.  None of these were around when I started.

Bottom line, I’m not a TX tax sale RE expert, but I believe it is not as simple as it is in some other states. So I’d find a TX mentor and learn the ropes before diving in.

Good question.  Thats how I operated my own real estate company tax wise 15 years ago but none of my agents were INCs/LLCs, so they were paid strictly as contractors and 1099d.

I’d ask my CPA relative to US tax compliance and I’d find an acknowledgement and interpretation from TREC relative to TX RELA compliance before jumping in.  That second one might be tough though.

Hi Jonathan, 

Welcome to my hometown!

Houston is made up of hundreds of sub markets.  If you find a part of town you like, start near there.  

Because there is no zoning in the city, and land for miles in each direction, New Development is less restrictive than other cities.

Additionally, almost 100,000 residences were flooded in 2017 and a lot of SF homes you’ll look at (all over town) are rehabbed flood homes with potentially higher insurance costs and possibly less appreciation over the next few years due to market stigma.  Do your research on TX seller disclosure law and know the right questions to ask.  Or better yet, hire an experienced Houston Realtor.

Not sure if you’re new to Texas but make sure you understand the property tax system and that taxes are generally higher than many other US areas.  They can jump up quick if your RE is under assessed.

Good luck!

Hi Aaron; I don't want to confuse anyone regarding cap rates, since they are already too widely misapplied in RE.  

From his post it appeared Shak was comparing stabilized cap rates to implied cap rates (his property NOI/Asking price) and I sensed he thought the asking price was favorably discounted compared to stabilized properties. Maybe I read too much into the post, but my point was the value would certainly be discounted since the below market rent and NOI is locked in for a 15 year term.

Here is the only point I should have made; you can not accurately value a property with below/above market rent based solely on cap rates.   Unfortunately, it happens all the time.

To accurately value a property with rents below/above market, you must value the property at the market cap rate and the market rent, then deduct the present value of the rent loss over the term of the lease, from the stabilized value.  The resulting value may imply a cap rate, but that is specific to the terms of the lease on this one property.  Any comparison of cap rates should always be based on sales of stabilized properties (Market terms, rent and occupancy).  

In Shak's case, with a smaller property, I'd look to the local market's price PSF for sales of similar, empty/owner occupied buildings and try to buy below that range, knowing I'm locked into a below market rent on a property with a leasehold premium.  I do appreciate you pointing out the apparently conflicting logic of my comment and I hope I've clarified it well enough here.  

It is a lot easier to rent a previously flooded home than sell, but over time the stigma to the resale market will always diminish so BRRRR is a good plan. Its always a gamble but the flood variable adds risk that is hard to quantify up front. I suspect you will see TAR/TREC come up some new mandatory Realtor notices for future buyers in the Addicks/Barker Dam Pool areas. That may dent sales prices for a few years. After 5-7 years no one will care. That's what happened after Allison.

Hi Jorge;  Native Houstonian myself.  Sounds like you have a bright future ahead of you.  You can easily leverage your EE degree and be a great RE investor at the same time.   Building passive income while learning the RE ropes and earning a fat paycheck as an EE is an awesome plan for financial success.    

Hi Keith;  Regarding the taxes and flood damage, the assessed value in TX is pegged to condition and market as of January 1 each year.  The Harris County Appraisal District (http://hcad.org) has a lot of info on this online and I believe I saw an article in the Houston Chronicle that went into more detail.  Just search in Google.

If the house is still damaged, I recommend you have a 3rd party document with photos (maybe a Realtor or Inspector), on or before 1/1/18.  This will aid you greatly if you have to protest the 2018 assessment to the ARB in May.

I'm guessing Amy was correct, they are waiting to discuss at the next board meeting.  They'll roll out all the offers over coffee and donuts and form a subcommittee to evaluate them.   I'd expect to hear back in 60-90 days.  What a royal pain!

If you asked for the option period, just start looking for another property and hope you hear back before you find a new one.   As long as you have options on your TX offers, you can float as many as you like (can cost you no more than the option checks).  Just don't let em lapse or it can cost you a lot more.