All Forum Posts by: Owen Hehmeyer

My tenants have bounced paper checks and also bounced electronic payments done as ACH transfers via a popular online rental management software. The 3 to 4 day delay on a paper check or ACH transfer is hard for them to budget for. My lease appropriately says that after a default rent must be paid via money order or cashier's check, both of which are "certified" funds, meaning the financial institution takes the money from their account before issuing the order or check. What is the electronic equivalent of certified funds? I know a wire transfer is electronic and certified, but they cost $25 apiece, require going to the bank, etc.. Venmo and PayPal both credit my account instantly, but I don't think they are certified funds - my understanding is that they would claw back the money if the ACH transfer later did not clear. And they allow partial payments (ugh!). So, is there such a thing as low or no fee, certified, instant, electronic funds?

@Axel Norvell

Sounds like you did very well. I also live inside loop on the north side. Great place to live and also invest. I own rental property in the area, too. I like the concept of a multifamily but the average age of these tends to be really high and I couldn't see myself dealing with 100 year old homes. Awesome you found something that suits you. I think 9 months is fast from concept to move in!

Mitchell Paras, I own two rental townhomes in Montie Beach, kind of the edge of the Heights. I am doing okay. Both were estate sales in poor condition and could not be sold to owner occupants using conventional financing. I live in a three story townhome inside the Heights proper. The home I live in would be a poor rental because it is too big and too expensive. Stay away from big stuff and three story stuff. Anything that could sell for over $300,000 would almost certainly never cash flow. My two rental townhomes are 1493 and 1722 SQFT and 1722 SQFT was already really pushing it. That deal is probably breakeven. The 1493 SQFT is a good investment.

@Bryan T., I also noticed that there is plenty of leasing competetion in my area. I purchased a fee simple townhome in Montie Beach and there were many other investors in the same complex with similar units for sale or lease. When fixing up my unit I opted to shoot for being the best unit available, rather than the average unit available, kind of ignoring the concept of shooting for being average. This was part by design and part by accident (my Realtor talked me into improving more than I orignally planned and more stuff was broken than I thought). It turned out my Realtor was right. It leased quickly because it was the best looking unit. The nearly identical unit literally attached to mine did not lease, even at a lower price point, because it was not up to date. Renters want nice stuff, too, just like owners. If you buy a commodity type property like I did, with no floor plan differentiation, you have to be prepared to have the nicest unit or the lowest price, I think. Also, my outstanding Realtor showed the house 17 times and held open houses. He worked his rear off. 

@Carlos Batrez I have been hunting for property and I even considered buying a new build in Indepedance Heights and renting it out while waiting for the path of progress to bring it up in value. Went I got home and checked the flood maps, I saw we are indeed still building new stuff in 100 year floodplains (do we learn?). It wasn't apparent to me that the builder raised the house or added drainage. Some of Indepedance Heights is quite floodable. Some some people this problem presents an oppurtunity (lower prices), but for me it was a deal breaker. As always in Houston, check those maps, and then check 'em again. Nonetheless, clearly this neighborhood is going places. 

@Candace S. The special assessment was for siding repair. It was made of wood (real wood, not wood look cement board) and was for around $180 a month for 3 years. Major HOA items are roofs, exteriors, and foundations. Theses are areas to watch for.

Wow, BP Community, you all really responded. I investigated your ideas on the web. I'm going to start tomorrow. I am going to look at a turnkey duplex in the near Northside near the Metro Rail, exactly what Brandi Dunbar suggested. I already know the yield is too low based on the MLS price, but it has been sitting. . . I'll check out the neighborhood and see the vibe that Brandi and Daniel are talking about. Concept here is to take a look at duplexes and triplexes, trying to avoid competing with owner-occupiers. Plus I just love the Mexican food east of 45 and I need an excuse to get over there.

Thanks for the comments.

Vijaianand Thirunageswaram, I would have the kept the rental, but I was moving and decided the margin was too skinny to move it to a property manager. The market value rose from $165 to $187 during my ownership, but rent was flat, shrinking the yield. I had already done the smart value add to move the rent up and there was no way to move it higher. Hopefully will find something here in Houston with a better margin, but it is tough, tough, tough out there.

Bigger Pockets Community,

I got lots of great advice on my first post yesterday so now I feel I owe the community information in return. My post is a post mortem on my first deal, a condo in the DFW area, and is intended for baby RE investors, like I was. I'm posting here in Houston because that's where I live and where I want to meet people, but the DFW market is a lot like the Houston market (similar tax rates, yields, and median prices). Enjoy!

My story is from the perspective of somebody who can pay cash, but only has time on weekends, since I am a dad with a demanding full time job. I am not a Realtor or contractor.

First all the failures. I tried to buy an REO rental townhome in Houston in the depths of housing recession in 2011/2 when I lived here once previously. It failed to close because the HOA had terrible finances and the bank wouldn't loan as a result. Didn't have cash back then. HOA docs didn't arrive until a few days before close. What could I do? I got my escrow money back but lost the due diligence money. Lesson 1: Cash solves a lot of problems.

But did I quit? No. I moved to DFW and tried again in late 2015. I found a great agent who did flips and rentals. My method for finding an agent was to drive a neighborhood I liked and see who was a flipping the same property I liked and call the agent doing the flip. 

Put in an offer on a perfect rental that needed only modest work, but got outbid by an owner-occupier. Lesson 2: If it is attractive to owner-occupiers, they will outbid you. 

I tried driving for dollars but nobody ever wrote me back (zero response). Lesson 3: Leave that to the wholesalers/marketing pros. Can't compete with the Ugly House billboard. 

Had my agent bid on a house that needed $50k in repairs on Hubzu that was for cash only investors, trying to avoid competing with owner-occupiers. Got outbid by a full time pro, for sure. Lesson 4: Hard to compete on flips with agents and contractors. They have cost advantage.

After mastering the county title records site, I went to my local county foreclosure auction armed with cashier's checks and placed a bid at my second auction. At the first I just watched. At the second auction I got outbid by a New York hedge fund. Lesson 5: Hard to compete with hedge funds (although they tend to stick to big counties I'm told). 

But did I give up? No. 

I ended up going to look at an FSBO on Zillow without my Realtor since it was FSBO. Inside 10 seconds, I knew it was the deal for me. I had spent hours on Craigslist (best place in this part of DFW) looking at rents and knew it would rent for $1600 if I fixed it up. This was zoned to Coppell schools, among the best in the Metro, and the landlord who owned it let it fall into a little disrepair when the market supported a nicer property. He was ready to move on to bigger things, too. I went home the same evening and wrote a cash offer, with normal inspections. Within a few days and after inspections we agreed on $146,500. Cash close was super easy (Lesson 1: Cash solves a lot of problems). I got my great Realtor to advise me on what repairs and improvements to make and did about $6,400 in repairs and improvements. Total investment now about $153k. My Realtor did an open house and it rented immediately for $1595 to a schoolteacher (Yea! I love teachers!). Realtor handled all the paperwork and background check. Tenant paid me electronically using one of the major online services. Called me maybe twice in two years (it was a two year lease) so I could self manage. After expenses, which included a special HOA assessment and a month's rent to my agent, 24 payments of $1595 ($38k) left ~$12k in rental profit. This wasn't great because of the special assessment, but that was temporary, and I knew the fixed up property could sell for more, too. Tenant left, and, again, with my Realtor and trusted contractor, made $5k in repairs and improvements to make it sale ready, taking total investment to about $158k. Sold for $187k before it hit MLS because Coppell schools are top and close to airport. After closing costs, netted about $171k, or about $13k in profit. All told, in 24 months, made about $25k (half rental income, half capital gain) on $158k invested (about 16% return over 2 years). For a pro, this is too small and you can't live on it. For me, just trying to diversify from the stock market, I was thrilled to make stock market type returns (8-ish per year) with less risk than stocks. And I learned a lot and would have made much more going forward as the special assessment was ending. For me, it was a base hit, and meet my goals.

My biggest take-a-way is that if you have a good tenant, a modest profit feels great, the easiest money you ever made. If I had a problem tenant, the hassle for this modest profit would never have been worth the time and effort. The most important thing is a good tenant. 

Hope you enjoyed the story. And now I want a double, of course.    

Houston RE professional community,

I just moved from Dallas to Houston. When I left Dallas I sold my first investment property, a solid base hit. I made a fair profit, left the property better off than I found it, and had a great tenant. I had good relationships with my Realtor, insurance broker, and contractor. A great experience for everybody on the team -- really very personally satisfying and loved the team experience. But now I'm hungry for a repeat -- I want to acquire a reasonable rental or duplex/triplex, make it nice, and rent it to a decent tenant. But I'm totally floored by the price to rent ratio I'm seeing within a 15 minute drive of my 77009 zip code (Woodland Heights / Near Northside). I'm punching numbers into my spreadsheet and getting 5% "yields". I can't accept a 5% yield -- I'd just assume pay off my own mortgage than invest in a 5% yield rental. Interest rates are rising but yields are not!? Crazy. Long story short, what is the right niche for a cash-paying, real-estate-is-my-hobby-not-my-job, investor too lazy to budge more than 15 minutes from the north side of the Inner Loop? Rentals in the Near Northside? Condos in the Heights? A duplex or triplex (to avoid competing with owner-occupiers) in Washington Heights or Sawyer? Vacant land in Independence Heights? Want to pick one niche, pick a farm area, and network in that niche and farm area. Happy to hear your thoughts and just network (will need a good team again).