All Forum Posts by: Rusha Jayasuriya

@Vijaianand Thirunageswaram Given how you describe the property, then my answer would change to yes.  You're right in that the cash flow gets pooled into an account for the maintenance but the property must still have a decent cash flow.  My base line is $250 and if I mentally put $25 in capex/maintenance (even though it just stays as savings in my bank account) then this property hits my minimum cash flow requirements. 

Houston just isn't the kind of market where you can make a straight equity play in the suburbs.  Cash flow is so important.  The house values historically don't increase so much. Also the cash flow is what allows you to build your portfolio.  

I would probably say no but I'd have to see the property to figure out condition, given that you only put $500 in rehab, but I noticed that you didn't set anything aside for capex or long-term maintenance. I suspect the capex/ongoing maintenance costs will hurt long-run and the condition of the property would be the defining factor. The deal hits at my 1% rule (rental income is at least 1% of purchase price and 1365/120k > 1%). The cash flow, however, isn't great once you add the taxes/insurance (estimating at $375), capex ($150), vacancy ($50), and management fees ($100) to loan amount (about $500?), it all adds up and doesn't meet my cash flow desires (minimum $250 and ideal range is $350-400). But it's close! I imagine capex will be high because this is probably an older home in MoCity given the purchase price. Also, you didn't mention whether ins. includes flood insurance, which would be extra as well as HOA fees.

Yes, I use the BP calculators for this. I factor in mortgage, taxes, insurance (including flood insurance if applicable),HOA, vacancies, repairs, CapEx, and Management fees.

I understand the numbers can be tight. In many areas, the rental rates haven't increased to reflect the increase in house prices so it's hard to hit that 1% ratio and get cash flow. What numbers or percentages are you using for the last three things listed? On one recent deal, we picked up a property that doesn't have HOA fees so that's money that went straight to cash flow and it's strategy to use.

Here are some of the rules I've used: 

- Run accurate comps (solds and rentals) using most conservative comps available.  I have my realtor's license so this is a bit easier for me than those without.

- Baseline monthly rent should be minimum 1% of price (after rehab)

- Baseline cash flow of $200/mo. after all expenses.

- The area should be a place I'm comfortable to drive to in terms of distance and safety.

- Get a Seller's Disclosure that's fully filled out by the seller.  This is one of the few consumer protections property buyers have in TX so every time I've gotten an incomplete one or one that was carelessly filled out, I've pushed back.  There's a new Seller's Disclosure that will be mandatory from 9/1/19 onwards and it's more thorough with regards to flooding on the property.  

- Avoid foundation issues unless the numbers make sense.  

- No tear-downs.  

-Know your exit strategies going in.

Using these rules, I've been able to find some gems all around the city.  The real estate market has seen a bit of a slow-down this summer compared to last year so in some areas there's lots of inventory on the market and not the best for flips.  However, the rental market is holding strong so it's a good time for properties where your strategies include buy and hold.  Good luck!  

Thank you @Vijaianand Thirunageswaram!  Your insight, as usual, is on point and appreciated.  I'm so thankful for this forum and all the wonderful advice y'all continue to provide.  I've factored the estimated cost of repairs into my numbers and gave the seller my offer.  It was rejected so I'm onto finding my  next deal!  

Thank you all for the replies!  I have a trusted foundation company that I've worked with in the past so I'll have them come out, take a look, and work their bid into my numbers.

Ben, I believe the differential in price is based on the type of repair and often on the warranty the foundation company will offer.  Some companies will offer a warranty that may be assigned to future home owners.  Great for marketing a flip!  These companies will often have a third party engineer ensure that the plan is good and they'll test before and after to make sure the house was leveled according to the plan.  Also they'll run a static water test or scope the plumbing to make sure that the pipes didn't crack due to the movement of the house.  

I have a potential deal on an SFR for long-term hold however I think there might be foundation issues. The house was built in the early 70s so at that age foundation problems are likely. HCAD also has given it a building grade adjustment of C+. One of my take-aways from Vijai's wonderful and educational walk-through a couple of weeks ago was to be wary of foundation issues. For long-term buy and hold, would you take on a house that has foundation issues?

Thank you all very much for your replies!  

Hello!  I've been a long-time lurker on these forums enjoying the wonderful advice you all have been gracious to share.  I'm looking to sell one of my  properties near Orlando to pick up one or two SFRs in the Houston suburbs for ease of management and would like to do a 1031 like-kind exchange for tax deferment.  Does anyone have a recommendation for a trustworthy 1031 Qualified Intermediary with experience in the Houston area?  Thanks in advance!!!