All Forum Posts by: Mike Arias

I'm a college student, and I plan to start investing in multifamily homes once I graduate, and I recently started looking at deals on Zillow just so i can practice underwriting. But I hit a wall.

First: Trying to find out what similar properties in the area (10 m radius) rent for, I used rentcast and rentometer for this, but they gave me two very different results. So I'm asking, What is the best way to utilize the results they both gave me and narrow it down? Just so i can do the preliminary analysis on the property

Second: I'm finding it difficult to get a clear price estimate of the CapEx's that might be needed. So what I'm asking is if there's a better way to estimate CapEx on a property during preliminary analysis, i.e., without having to go to the state where it's located and asking around, i say this because there has to be a good way to estimate these things before going deep into the deal

Any insights on this guys?

@Monica Gonzalez You can also try Dealcheck free version dealcheck.io

Pros:
- Builders have many homes to sell at one time so it is easier to negotiate a better deal than with a home owner in the same neighborhood who is trying to sell their primary residence
- Buyers bust out of deals all the time and builders don't like holding completed homes
- Lower maintenance which leads to easier property management expenses.  I literally don't expect to speak to my tenants more than once a quarter.  Most of the homes come with a one or two year warranty so we set it up so that they can communicate with the builder directly to handle maintenance issues.
- Taxes are usually much lower the first year.  How much lower depends on what time of year the home was completed
- Usually can charge a much higher rent for new homes. People like new homes
- It is easier for me to identify with which homes will be more marketable in the future years

Cons
- Cash flow usually isn't as good (which is ok with me, because it is always an equity play for us).  For example, if a home has an accurate value and list price of $450,000 and I can get if for $400,000 (because of incentives and timing), and it sells for $490,000 three years later, I am not as concerned with a monthly break even cash flow scenario.
- Some builders aren't as friendly to investors

I hope that helps.

Hello fellow Bigger Pockets investors! My name is Donald, and I am a Realtor and real estate investor based in the Greater Houston area. I specialize in identifying, negotiating, and investing in new construction homes.The main focus of my investment strategy is to negotiate the best possible deals on new homes in growing communities. By securing favorable terms upfront, I aim to maximize my ROI when selling within a 3-5 year window.I believe that connecting with like-minded investors is key to continued growth and success in this industry. If you're interested in new construction investments, share your experiences, and let's explore potential opportunities together!

Quote from @John Michaels:

I came across this BP thread listing the Top 10 Real Estate Markets for Cash Flow in 2024
https://www.biggerpockets.com/blog/best-real-estate-markets-...

However, it didn't mention some of the markets I see talked about the most like
Ohio and Tennessee etc  I don't see anyone talking about McAllen or Idessa Texas.
What am I missing? Would you agree with this list ? It was printed in January.

McAllen, Texas
Odessa, Texas
Corpus Christi, Texas
El Paso, Texas
Decatur, Illinois
Fayetteville, North Carolina
Mobile, Alabama
Lubbock, Texas
Rochester, New York
Flint, Michigan

Texas can be good to find better value for properties than other parts of the country. I bought in the Rio Grande Valley, where McAllen, TX is in. However, be aware that for investors (who do not live in the property as their primary residence), there is NO LIMIT to how much your property appraised value, and therefore your property taxes, can increase from year to year! (If you live in the property so that you can claim the Homestead Exemption, your property appraisal can "only" go up a max of 10% per year. But if is a rental, there is no limit to the increase.)

I bought a 4 plex in 2023 and the appraisal district valued it around $407k. This year the valued it at $490k!! Nothing has changed about my property - I made no improvements - that caused it to increase 20% in value in 1 year! A 20% increase in property taxes (or anything higher than 5%) can really screw up your multi-year pro-forma and your projected returns.

In Texas, you are allowed to protest the value the appraisal district appraises your property at. And it can be definitely worth it, IF you win. I paid about $10,000 in property taxes last year. Now I am looking at $12,000. So I will definitely try to protest the appraisal increase. And there are professional tax protesting companies in Texas. They are usually paid a fee of 25%, 30%, or 35% on the taxes they save you, IF they are able to achieve a property value reduction. 

In my example, I paid $10,000 on a property valued (by the appraisal district) at $407,000. $10,000/$407,000 = 2.46% tax rate (approx).  This year my property is valued by the appraisal district at $490,000. $490,000 x 2.46% = $12,054 potential property tax bill. Let's assume the tax protester I hire charges 30% on any tax savings achieved, AND they are able to lower my appraised value. Let's say they convince the appraisal district to lower the value from $490,000 to $445,000. They knocked $45,000 off my value. $45,000 x 2.46% = $1107 in tax savings. I would have to pay the protester $1107 x 30% = $332.10. This does help, but my property taxes still went up more than 9%!  ($445,000-407,000)/407,000 = 9.3% increase. 

I also don't think it's common to convince the appraisal district that your property did not appreciate at all, unless you can back it up with pictures that your property was damaged or is in worse shape that it was the year before. The best I've seen anecdotally is just to limit the increase to 10%, but again, many other states limit the increase to 5% or less. So 10% is still high, IMO.

So I'm not saying McAllen and the Rio Grande Valley aren't good places to invest. But just be aware that the property taxes are hard to control, and you would want to fight them every year (b/c the appraisal district will likely increase your property valuation every year). Good luck!

@Rhyna Orillaneda

There are some good options in CA and people still want to live there despite all the bad press. I'm a former CA resident now in Tahoe Reno Nevada. Nevada has many of the draws of CA and the added benefits of low property taxes that don't assess on sale, landlord friendly, no state income tax, and multiple tech and manufacturing jobs like Tesla, Apple, Google in the area. Tesla is in the middle of building the Semi truck manufacturing plant. Reno is also geographically restricted from over building forcing appreciation. While not the cheapest market in the USA there are all the signs of strong appreciation without the hassles of CA investing. There are also multiple strategies STR at Lake Tahoe, MTR and LTR that can be used. Happy to share more data and insights.