All Forum Posts by: Ben H.

Hello All. I am interested in hearing from some long term investors around how they survived the last real estate decline and strategies used. What were the surprises and if you were to do it over again, would you have continued to hold or would you have sold.

Hello Pete Owner financing is not an option with my mortgage terms as there is an acceleration clause. Also, it would not give me the lump sum I would be looking for to pay off my primary residence. I have entertained the thought of different ways to sell it to maximize my profits though. The property is on Preston Vinyards.

Brandon I would be interested to know what your investors plan to do before and after Q2 2018. Do they sell some and keep others? Keep all and buy more when the prices fall? Just more curious than anything.

Thanks All. And thanks for the articles and insight. When the shift does happen, this will be my first time riding it out with rental properties. So there is s little bit of the unknown around how badly it will hit and what the impact will be on retaining renters. I have lived in Collin county since 1985. We Texans are used to hearing about 8% + increases on the East and West Coasts but not here. I tend to agree that 2018 is when the shift will happen as that is when all these corporations coming will be fully staffed. I do have some logistics to work out with my renter as they just signed up for another year. Ideally, I want to put it on the market around Memorial Day. If I do, then I would likely have to sell it as an investment property or see if my renter would come to an accommodation in moving out early. Thanks again everyone!

Hello All It has been awhile since I have last posted. I have been taking my real estate classes and slated to take the state exam in January. The driver for me taking the courses is to educate myself about the business as well as being able to keep part of the sales commission when I do decide to sell. Which leads me into why I am posting this. I currently have 4 rental properties. Two of which I am full owner and the other two I am 50% owner. I financed all of them. I currently own a Townhome I purchased new and was my first home I bought back in 2002. When I moved out of it about 4 years ago, my wife and I purchased a larger home to start a family. The real estate market in Texas has gone gangbusters and the inventory of homes is starting to build. As of November 2016, we have 3 months of inventory. I believe last year we were at only one or two months of inventory. They teach you in RE class that 6 months of inventory is typically considered a balanced market. They also say that it does not stay there and will overshoot creating a buyers market. I have built enough equity in my townhome that if I sold it, I could pay off my primary residence which is very appealing to me for various reasons. If I did decide to sell, my thought was to wait until we get 5 months of inventory and put it on the market. As it is a starter home, I don't think it will go down much in value in Frisco. They are not building anything less than $350k. However, I think we may be through the bulk of the price increases and can't see it going up much more. Currently I would value the townhome around $250k. When I asked one of my professors when do you know when to sell, he said when you stop seeing cranes building. I don't know that I want to take that chance and lose out of paying off my mortgage if the property vales do go down. My question is would you sell and pay off your mortgage or ride out the next down cycle. Tia Ben

Hello Edward,

Welcome!  It sounds like you have big aspirations.  Honestly, I would highly recommend reading the book "More Than Cashflow: the Real Risks and Rewards of Profitable Real Estate Investing" by Julie Broad.  This will help steer you clear of many of the pitfalls, like the course that you took as well as set your expectations around what you are really getting in to.  It does not go into wholesaling but is a great book to start building your real estate foundation on when you start renting properties out.  Be wary of those get rich quick real estate courses with the celebrity endorsements.  Many are just a pyramid scheme to get you to buy more and more of their courses.  Julie talks about her experiences with these courses in her book. 

As far as getting your feet wet, my best advice I would offer is to start by purchasing a house for yourself to live in.  It is best if you find a fixer upper so you can take the time do get the things done.  Then you can take your time finding the right renter at the right price before you move out to a second property you purchase.  Depending on if you have the credit and income to purchase a second home, this could mean you move into an apartment again short term to allow the property to become a seasoned rental property from the banks perspective. (Usually 6 months in my experience) The property will then not go against your income because an established rent will be shown in your checking account. 

Anyway, good luck!  Especially in LA.  I am in Texas and I don't know how you guys can afford to live there.

I have a townhome in Frisco Texas where I am looking to capitalize off the recent run ups in home prices and sell it to a rent to own tenant. The drivers for this decision is that in the 14 years that I owned this townhome (I lived in it for the first 11 years) the property value remained constant at around $155k. In the last three years, the property values have exploded to a level I did not think I would see until I was well into my old age. Currently they are selling for around $230k. My townhome is 2100 sq foot and is a corner lot with one of the larger yards in the neighborhood. Though I see the value in using a realtor, I cringe at the commissions I would fork out if I sold it on MLS. I currently have a renter that has been there for 2 years and has stated they would like to rent it out for another year. They are looking to purchase a home after that but is not interested in my townhome for that first purchase. I have been reading the book More Than Cashflow by Julie Broad and I am very intrigued by their plan around creating additional cashflow through the rent to own process.

Being I am already flabberghasted at the current price of my townhome, I want to see how far I can maximize the market to get even more out of it.  The reason why I would be selling the townhome is to cash out for other ventures that will require all the equity in the home.  Based on the structure articulated in the book, if I structured the deal to be a 24 to 36 month rent to own lease and incorporated the 3% increase in price each year, the property would be around $250k.  That number is even more unbelievable to me.  I have lived in the same Dallas suburbs for the past 30 years so I am very familiar with the area.  I have to think that eventually there will be a pull back. (probably when / if the Fed raises rates)

However, until then, I want to pursue the rent to own option so that I can lock in a higher price than the market yields today and not have to pay 6% commissions in realtor fees.  The question is how do you market for a rent to own population.  Is it Craigslist or some other website.  Also when you find interested parties, what are the main things you look at that they have to give you some level confidence that they will be able to get financing within the next 2 to 3 years.  If they need a little more time, I am open to extending the lease to get their affairs in order.  The things I see that they need to get the deal done from a banking perspective is credit score, low debt to income, and down payment.  Taking that the down payment should be resolved through the rent to own process, I would opt that the credit score be the only thing out of whack because that is easier to fix. 

Anyway, I would appreciate any advice from those that have any experience at this.  Mainly, how do I find good tenant prospects that are genuinely on the mends from their financial situation versus someone that will continue making poor financial decisions down the road. 

My ideal scenario would be:

2 to 3 year lease with the option to purchase.  Lease would be $1675/month

Purchase Price of $250k

$5k deposit

$500 over the rental price per month as credit towards the down payment making the total rent $2175.  This is a lot in Texas which is a concern. 

They pay for any repairs $300 or less

Thanks in advance!

Thanks everyone for your advice.  Yes, he is looking at renting it out until he can sell it for at least what he put into it.  Owner finance is something he is staying away from as he does not want to be held into a long term contract with anyone.  I think he is going to rent it out for a year and then try and put it up on the market a year from now.  We will see what happens!

Thanks again!

I could use some creative thinking on this one. My buddy flips houses and uses the proceeds to buy rental properties. His most recent flip in McKinney Texas was a historic home (for Texas standards) built in the early 1900s. When he put it up for sale, he got a lot of interest with one being full ask. Long story short is the people did not have the down payment they stated they had The bank appraised it for $60k less than what they offered and the deal fell through. The loan was a VA loan which means he did not get the earnest money. On top of that, he spent another $5k based on repairs that came out of the inspection. The deal took 3 months to fall through. When he put it back up on the market it lost its mojo and everyone thinks the deal fell through because there is something wrong with it. He has lowered the price to his break even and it is still getting no interest. Now he is looking to rent it out but he has a ton of his money tied up in it that he would use for another flip. Here is the kicker. The property has a main house and guest house. Both on separate electric meters so it would be a great rental. However, he is just wanting to get his money out of it. Any thoughts on how he can unload it or get the money back out of it without refinancing would be appreciated.

I live in Frisco and have one rental property in Frisco and one in McKinney. I too have found it to be a little challenging to find good deals in North Texas and am mainly concerned of how fast the properties have risen. They might be used to these kind of fluctuations in California and New York but this is not common in Texas. I question whether Texas will have any pullback or if the word has gotten out how great Texas is and this will become more of a norm. Something that I have done on my last deal and have another one in the works has been to solicit with my Family's friends that want to cash out of the equity of their home that I will buy their home directly if they reduce the price by half the realtor commissions. I will them finance the home over 15 years instead of 30 as I want to build equity value over cash flow. The hope is that I buy one property per year and in 15 years from now I would get an annual raise from a property being paid off. It helps our friends out because they get another 3% in their pocket. I also let them do a month to month leaseback from me until they find their perfect replacement home. Being they have already cashed out of their home, they have the cash in the bank to make an offer with no contingencies. This is needed in today's market if you want a chance to get the house. It helps me out because I have an immediate renter when we close. This also allows me to put up a for rent sign immediately when they find their new house. In a normal home purchase, you have to wait until you close before you put up your sign and typically lose a months rent getting your first tenant. I also manage both of my properties and have a rule that they need to be within 45 minute drive so I can easily maintenance them.