All Forum Posts by: Ryan Kelly

@Yuqing Xiong all properties will cash flow positive if 100% owned. The question you are asking is - “How much down payment is required to make each property reach positive cash flow?” As others have stated, that comes down to underwriting each property. Since the pandemic and inflation, it’s very challenging to find a property that will cash flow with the traditional 20-25% down payment in most markets. Rents have not kept pace with prices, interest rates, property taxes, and insurance hikes in most growing markets. It’s a challenging point in the market cycle for cash flow, so you’ll need to analyze more markets and more properties to find the best investment for you.

@Jacob Parrett Owning real estate is not cheap, so don't just focus on down payment funds. Make sure you have adequate reserves for repairs and maintenance after closing as well. You'd be surprised how quickly you can spend $5,000 to $10,000 after closing in a few months on deferred maintenance, surprises, and general remodeling. I would target saving 10% of the home value you are targeting. You can use 5% as the down payment and the other 5% as reserves. 

The rent ratios in Temple are closer to 0.69 to 0.7% of rent to purchase price, whereas the Austin metro is closer to 0.5% to 0.55%. I do have a client operating a medium-term rental in Temple with success. I have a few others who have explored the idea, but haven't switched from long term rentals yet. 

@Brady Tome the awesome part of using a VA loan is not requiring a down payment to purchase the property. The downside is it makes it much harder to achieve long-term cash flow as you start with maximum debt on the property, so your monthly payments are larger. That's not as big an issue the longer you plan to live in the property, but just know it could be hard to cash flow the property the first several years after you move out. I agree with other posters that Killeen Temple offers some better yield on deals compared with the Austin metro due to better price points. I work in both markets and happy to discuss the pros and cons. Both areas are growing well.

@Kay Ghosh I'd be happy to pull MLS rent comps for you free of charge. We work with tons of investors and no need to pay for that quick service. Feel free to shoot me a DM if interested.

@Austin The first question I'd ask is: Does the landscaping affect your ability to rent the property or achieve the rents you are targeting? If no, then I wouldn't spend much to alter the landscaping. If it's a high-traffic backyard with pets and kids, they will chew up new grass in no time. Along with native grasses, you could also look at synthetic turf backyards which are growing in popularity. More expensive than plants to install, but will cut down maintenance greatly over the next decade.

Quote from @Suvarna G.:

Thanks Joe.  Good points.  
In answer to your questions, investing to be have passive income.  Austin has been a tricky market in the last two years with predictions of decreasing (or not growing) prop value.  
I don't have a better opportunity (better return) but should one come by I want to be thinking ahead.

Austin went up in appreciation for 30+ years, and has just had a correction for 18 months. It's likely reversing course as we speak and on track to appreciate again in 2024. If you have a long-term plan, Austin's hard to beat for appreciation. If you are already cash flow positive, I predict your rents will continue to improve over time as well with the demand still coming to the market.

@Robert Johnson you may not legally be able to do that YET, as you would be converting a single family home into a duplex, which would likely go against your zoning and/or deed restrictions. However, read up on the city of Austin HOME initiative. The city counsel just passed a version of it, and now we’ll go through some legal hurdles to see if it can be implemented. It would allow much more flexibility with single family zoned properties including ADUs, tiny homes, and developing up to three units on one lot.

@Madison Sobol You’ll find a lot of duplex options in central north and central south Austin, as well as NW Austin and Round Rock. Most were built in the 1960’s through 1980’s, but you can find some newer in pockets.

@Madison Sobol Franklin Park is a fairly low income area and I’m not seeing many owners spending money to improve their properties. While it could improve over time, I don’t want to be first. I would prefer to see some clear signs of redevelopment and better retail move into the area. If you have the budget, I would focus on south Austin west of I-35. My two cents!