All Forum Posts by: Frank Barletta

Wishing you the best, Serenity. 

Just keep in mind that the people here are human, make mistakes, and do things "their way," and you should always do your own diligence on whatever questions you ask.

A friend recently asked me to compare two Houston zip codes, 77008 and 77063, from an investment perspective.

Now, I'm a big fan of Texas, but the first thing I said to him was that the weather is HORRENDOUS. Anything similar to a NYC subway station at 100 degrees or in the tornado zone makes me question the requestor.

But this is a good question. Why would someone consider 77008 (Greater Heights)?

While opinions may vary, I rely on data to help drive real estate decisions and planning.

Key Considerations

• Educational Attainment: 77008 boasts higher numbers of residents with bachelor's (12,241) and master's degrees (5,739) compared to 77063.
• Demographics: 77063 has a higher percentage of foreign-born residents (41.02%) which typically indicates a strong rental market and with 76.86% renter-occupied versus 32.60% in 77008.
• Economic Factors: Median income in 77008 is $140,609 with a low unemployment rate of 3.37%, whereas 77063 shows lower median income ($51,899), higher unemployment (9.99%), and more families below the poverty level (16.51%), which may indicate economic diversity but also potential rental payment risks​​.
• Age Distribution: 77008 has more middle-aged residents (35-54) [8970 compared to 6,115] and a slightly higher proportion of young adults (25-34) compared to 77063 but both are popular with younger adults suggesting strong rental markets equally exist.
• Housing Market: 77008 features a higher percentage of family households (52.39%) and married-couple families (44.77%), suggesting stability and potential for property appreciation.
• Digital Advertising Demand: Houston Heights apartments (77008): 50,000 average monthly searches. In addition, targeted searches for "apartments 77008" and "greater heights apartments" have lower competition which provides a great opportunity for organic and lower cost of acquisition.
• Household Composition: 77008 shows balanced demand for both family-oriented housing and non-family units, promoting investments in single-family homes and high-quality apartments. 77063 indicates higher demand for rental units and smaller homes, focusing on apartments and affordable housing options.

Despite higher entry costs and a lower percentage of renter-occupied units, 77008 appears to offer better prospects for appreciation and lower vacancy rates, making it a more suitable choice for investment.


Greater Heights Overview
The Greater Heights area (77008), often referred to as "The Heights," is renowned for its prime location offering a blend of amenities, top-rated schools, and abundant job opportunities. Situated in Houston's vibrant inner loop, it ranks among the city's most coveted and rapidly expanding neighborhoods.

Job Growth: Houston is expected to add approximately 57,600 jobs in 2024, continuing its trend of robust employment growth. The education and health services sector alone added 23,800 jobs in the past year, reflecting a significant expansion in these industries, particularly in healthcare and social assistance​.

Proximity to Major Employment Centers: Greater Heights offers convenient access to key employment hubs such as downtown Houston and the Galleria area, which are major attractors for residents due to the short commute and abundant job opportunities​.

Education: Nearby institutions like University of Houston and Rice University contribute to the area's appeal.

Infrastructure Projects: Ongoing developments like the East Blocks Redevelopment and BioHub II at Generation Park enhance local amenities and attractiveness.


Investment Insights

Greater Heights Rental Market Trends:

Single-Family House Rentals:

• Median Rent: $1,350 for 1 bedroom, $2,695 for 2 bedrooms, $3,250 for 3 bedrooms, and $6,100 for 4+ bedrooms​​.
• Stability in rent prices with modest YoY increases: 2 bedroom rents increased by $195, and 3 bedroom rents by $250​​.

Median Sold Price YoY Comparison

Apartment Rentals:

• 1 bedroom apartments saw a YoY increase of $305, 2 bedroom apartments by $667, indicating strong demand for these unit types​​.

Available Rentals:

• High availability of both house and apartment rentals, indicating a robust market that can support new rental investments​​.

Sales Market Trends:

Median Sale Prices:

• Significant appreciation in home values, particularly in 1-bedroom homes, which saw a 190.7% increase from $215K to $625K​​.
• Other bedroom counts also showed positive appreciation, e.g., 2 bedrooms (5.3%), 3 bedrooms (6.5%), 4 bedrooms (17.4%)​​.

Market Activity:

• Increased number of homes for sale and sold, suggesting a dynamic and active real estate market. The average sale time decreased by 23.3%, indicating a quick turnover which is beneficial for investors looking for liquidity​​.

Property Analysis:

Rental income potential: $2,500 - $2,900 per unit, totaling $5,000 - $5,800 per month.

Rental Strategy: With the high demand for rentals in the area, this property could generate a steady rental income. Consider targeting young professionals and small families who are looking for modern living spaces close to their workplaces and urban amenities.

Property Analysis:

Exterior and Structure:

• Materials: The exterior is clad in modern siding, likely a composite material or Hardie board, known for durability and low maintenance. Regular inspections for any signs of wear, cracks, or water damage are advisable to maintain the facade's integrity.
• Parking and Access: The covered parking area is a significant advantage for tenants, but ensures the area is well-lit and secure to prevent any potential safety issues.

Interior Features:

• Layout: The open floor plan with large windows ensures ample natural light, which is appealing to tenants. However, it’s crucial to ensure that the HVAC system is adequate for the space to avoid high energy costs.
• Flooring: The hardwood flooring adds a high-end touch but will require regular maintenance to prevent scratches and wear. Consider a yearly refinishing or a protective sealant.

Utilities and Amenities:

• Laundry: The presence of in-unit laundry is a major plus for tenants. Ensure the plumbing and electrical connections are regularly checked for any leaks or faults.
• Lighting and Fixtures: Modern light fixtures and ceiling fans add aesthetic value and comfort. Ensure that all electrical fittings are up to code and replace any outdated wiring as necessary.

Outdoor Space:

• Patio/Deck: The small deck area provides a nice outdoor space. Regular maintenance of the wood (staining and sealing) will prevent weather-related damage and prolong its life.
• Fencing: The wooden fence offers privacy and security. Inspect for any rot or damage periodically, and replace or repair sections as needed to maintain its condition.

Potential Upgrades / Considerations:

Security:

• Enhance security with robust locks, a video doorbell, and exterior lighting. A secure building will appeal more to potential tenants and provide peace of mind.

Energy Efficiency:

• Ensure the property is energy-efficient with proper insulation, energy-efficient windows, and appliances. This can lower utility costs for tenants and increase the property’s attractiveness. Exploration of solar panels with 1,651 hours of usable sunlight per year and attractive state and federal grants available.

Water Drainage:

• Check the grading around the property to ensure proper water runoff. The covered parking area and patios should have adequate drainage to prevent water accumulation and potential damage.

Investment Forecast

Purchase Price: $849,900
Total NOI over 10 years: $308,782.13
Year 10 Value: $1,256,336 (based on a conservative 4% appreciation rate)
Annualized return: 6.30%

Conclusion

While this property is poised for appreciation, sustaining it over several years for substantial returns would require substantial financial resources due to high debt servicing costs and negative annual Cash on Cash (CoC) returns. However, purchasing the property outright in cash would yield different outcomes. For cash buyers, this deal presents a more viable opportunity.

If you can overcome the gross weather, look deeper in this market. There are gems to be found.

A friend recently asked me to compare two Houston zip codes, 77008 and 77063, from an investment perspective.

Now, I'm a big fan of Texas but the first thing I said to him was the weather is HORRENDOUS. Anything similar to a NYC subway station at 100 degrees or in the tornado zone makes me question the requestor.

But this is a good question. Why would someone consider 77008 (Greater Heights)?

While opinions may vary, I rely on data to help drive real estate decisions and planning.

Key Considerations

• Educational Attainment: 77008 boasts higher numbers of residents with bachelor's (12,241) and master's degrees (5,739) compared to 77063.
• Demographics: 77063 has a higher percentage of foreign-born residents (41.02%) which typically indicates a strong rental market and with 76.86% renter-occupied versus 32.60% in 77008.
• Economic Factors: Median income in 77008 is $140,609 with a low unemployment rate of 3.37%, whereas 77063 shows lower median income ($51,899), higher unemployment (9.99%), and more families below the poverty level (16.51%), which may indicate economic diversity but also potential rental payment risks​​.
• Age Distribution: 77008 has more middle-aged residents (35-54) [8970 compared to 6,115] and a slightly higher proportion of young adults (25-34) compared to 77063 but both are popular with younger adults suggesting strong rental markets equally exist.
• Housing Market: 77008 features a higher percentage of family households (52.39%) and married-couple families (44.77%), suggesting stability and potential for property appreciation.
• Digital Advertising Demand: Houston Heights apartments (77008): 50,000 average monthly searches. In addition, targeted searches for "apartments 77008" and "greater heights apartments" have lower competition which provides a great opportunity for organic and lower cost of acquisition.
• Household Composition: 77008 shows balanced demand for both family-oriented housing and non-family units, promoting investments in single-family homes and high-quality apartments. 77063 indicates higher demand for rental units and smaller homes, focusing on apartments and affordable housing options.

Despite higher entry costs and a lower percentage of renter-occupied units, 77008 appears to offer better prospects for appreciation and lower vacancy rates, making it a more suitable choice for investment.


Greater Heights Overview
The Greater Heights area (77008), often referred to as "The Heights," is renowned for its prime location offering a blend of amenities, top-rated schools, and abundant job opportunities. Situated in Houston's vibrant inner loop, it ranks among the city's most coveted and rapidly expanding neighborhoods.

Job Growth: Houston is expected to add approximately 57,600 jobs in 2024, continuing its trend of robust employment growth. The education and health services sector alone added 23,800 jobs in the past year, reflecting a significant expansion in these industries, particularly in healthcare and social assistance​.

Proximity to Major Employment Centers: Greater Heights offers convenient access to key employment hubs such as downtown Houston and the Galleria area, which are major attractors for residents due to the short commute and abundant job opportunities​.

Education: Nearby institutions like University of Houston and Rice University contribute to the area's appeal.

Infrastructure Projects: Ongoing developments like the East Blocks Redevelopment and BioHub II at Generation Park enhance local amenities and attractiveness.


Investment Insights

Greater Heights Rental Market Trends:

Single-Family House Rentals:

• Median Rent: $1,350 for 1 bedroom, $2,695 for 2 bedrooms, $3,250 for 3 bedrooms, and $6,100 for 4+ bedrooms​​.
• Stability in rent prices with modest YoY increases: 2 bedroom rents increased by $195, and 3 bedroom rents by $250​​.

Median Sold Price YoY Comparison

Apartment Rentals:

• 1 bedroom apartments saw a YoY increase of $305, 2 bedroom apartments by $667, indicating strong demand for these unit types​​.

Available Rentals:

• High availability of both house and apartment rentals, indicating a robust market that can support new rental investments​​.

Sales Market Trends:

Median Sale Prices:

• Significant appreciation in home values, particularly in 1-bedroom homes, which saw a 190.7% increase from $215K to $625K​​.
• Other bedroom counts also showed positive appreciation, e.g., 2 bedrooms (5.3%), 3 bedrooms (6.5%), 4 bedrooms (17.4%)​​.

Market Activity:

• Increased number of homes for sale and sold, suggesting a dynamic and active real estate market. The average sale time decreased by 23.3%, indicating a quick turnover which is beneficial for investors looking for liquidity​​.

Property Analysis:

Rental income potential: $2,500 - $2,900 per unit, totaling $5,000 - $5,800 per month.

Rental Strategy: With the high demand for rentals in the area, this property could generate a steady rental income. Consider targeting young professionals and small families who are looking for modern living spaces close to their workplaces and urban amenities.

Property Analysis:

Exterior and Structure:

• Materials: The exterior is clad in modern siding, likely a composite material or Hardie board, known for durability and low maintenance. Regular inspections for any signs of wear, cracks, or water damage are advisable to maintain the facade's integrity.
• Parking and Access: The covered parking area is a significant advantage for tenants, but ensures the area is well-lit and secure to prevent any potential safety issues.

Interior Features:

• Layout: The open floor plan with large windows ensures ample natural light, which is appealing to tenants. However, it’s crucial to ensure that the HVAC system is adequate for the space to avoid high energy costs.
• Flooring: The hardwood flooring adds a high-end touch but will require regular maintenance to prevent scratches and wear. Consider a yearly refinishing or a protective sealant.

Utilities and Amenities:

• Laundry: The presence of in-unit laundry is a major plus for tenants. Ensure the plumbing and electrical connections are regularly checked for any leaks or faults.
• Lighting and Fixtures: Modern light fixtures and ceiling fans add aesthetic value and comfort. Ensure that all electrical fittings are up to code and replace any outdated wiring as necessary.

Outdoor Space:

• Patio/Deck: The small deck area provides a nice outdoor space. Regular maintenance of the wood (staining and sealing) will prevent weather-related damage and prolong its life.
• Fencing: The wooden fence offers privacy and security. Inspect for any rot or damage periodically, and replace or repair sections as needed to maintain its condition.

Security:

• Enhance security with robust locks, a video doorbell, and exterior lighting. A secure building will appeal more to potential tenants and provide peace of mind.

Energy Efficiency:

• Ensure the property is energy-efficient with proper insulation, energy-efficient windows, and appliances. This can lower utility costs for tenants and increase the property’s attractiveness. Exploration of solar panels with 1,651 hours of usable sunlight per year and attractive state and federal grants available.

Water Drainage:

• Check the grading around the property to ensure proper water runoff. The covered parking area and patios should have adequate drainage to prevent water accumulation and potential damage.

Investment Forecast

Purchase Price: $849,900
Total NOI over 10 years: $308,782.13
Year 10 Value: $1,256,336 (based on a conservative 4% appreciation rate)
Annualized return: 6.30%

Conclusion

While this property is poised for appreciation, sustaining it over several years for substantial returns would require substantial financial resources due to high debt servicing costs and negative annual Cash on Cash (CoC) returns. However, purchasing the property outright in cash would yield different outcomes. For cash buyers, this deal presents a more viable opportunity.

If you can overcome the gross weather, look deeper in this market. There are gems to be found.

 My pleasure. I’m not offering legal advice so do your diligence. 

Cheers!

Unpopular response: Didn't he verbally tell you it'll cost $30K? 

Does this person have a business license?

Did you get a written quote and any change orders that would suggest the price is higher than it is?

What DO you have in writing here?

Here is one I've used before. For extra formality, put it on a nice document with your letterhead.

Re: Non-Binding Letter of Intent to Purchase Real Property Located at [Property Address]

Dear [Recipient's Name]:

This non-binding Letter of Intent ("LOI") is submitted by [Your Name] (the "Buyer") to [Recipient's Name] (the "Seller") with the intention of setting forth certain preliminary terms and conditions for the proposed acquisition of the real property located at [Property Address], inclusive of all improvements, appurtenances, and fixtures thereon (the "Property").

1. Purchase Price
   The Buyer hereby proposes to purchase the Property for a total consideration of $[Amount] (the "Purchase Price"), which shall be subject to adjustment based on the results of the due diligence investigations and final negotiations.
2. Earnest Money Deposit
   Contingent upon the execution of a definitive Purchase and Sale Agreement (the "PSA"), the Buyer shall deposit earnest money in the amount of $[Amount] (the "Earnest Money") into an escrow account designated by the mutual agreement of the parties. The Earnest Money shall be refundable under the terms to be specified in the PSA.
3. Due Diligence Period
   The Buyer shall be afforded a due diligence period of [Number] days commencing upon the full execution of the PSA (the "Due Diligence Period"). During the Due Diligence Period, the Buyer shall have the right to conduct, at its sole cost and expense, any and all inspections, examinations, appraisals, surveys, environmental assessments, and other evaluations deemed necessary or appropriate by the Buyer.
4. Financing Contingency
   The Buyer's obligations under the PSA shall be contingent upon obtaining financing in an amount and on terms satisfactory to the Buyer, in the Buyer's sole discretion. The Buyer agrees to use commercially reasonable efforts to secure such financing within [Number] days following the execution of the PSA.
5. Closing Date
   The closing of the transaction (the "Closing") shall occur on or before [Proposed Closing Date], or such other date as may be mutually agreed upon by the parties in writing, subject to the satisfaction of all conditions precedent set forth in the PSA.
6. Condition of Title
   The Seller shall convey to the Buyer good and marketable fee simple title to the Property by warranty deed, free and clear of all liens, encumbrances, leases, tenancies, easements, restrictions, and other exceptions to title, except as may be expressly approved by the Buyer in writing.
7. Property Documentation
   The Seller shall deliver to the Buyer, within [Number] days of the execution of the PSA, all documents and information relating to the Property in the Seller's possession or control, including but not limited to, title reports, surveys, environmental reports, leases, service contracts, permits, and warranties.
8. Non-Binding Nature
   This LOI is intended solely as an expression of the mutual intent of the parties with respect to the proposed transaction and does not constitute a binding agreement, except with respect to Section 9 below. The parties acknowledge and agree that neither party shall have any liability or obligation to the other with respect to the matters set forth herein unless and until a definitive PSA has been executed and delivered by both parties.
9. Confidentiality
   The parties agree that all information exchanged pursuant to this LOI and the negotiation of the PSA shall be kept strictly confidential and shall not be disclosed to any third party, except as may be required by law or as necessary to obtain third-party consents and approvals.

We trust that the terms outlined in this LOI are acceptable and look forward to your favorable response. Please do not hesitate to contact me at [Your Phone Number] or [Your Email Address] should you have any questions or require further clarification.

Sincerely,

[Your Name]
[Your Title, if applicable]
[Your Company, if applicable]

Hope this helps.

The biggest red flag is that the potential tenant isn't even good at potential fraud.

Do a thorough background check to make sure they're not just giving you some nonsense or friends to pretend they're employed. 

Don't be cheap with this.

@Rich Hupper

It's pretty common for car dealerships to lease the land they operate on. Triple net leases (NNN) are standard, and they cover taxes, insurance, and maintenance.

For your 1.8-acre parcel, if it's zoned for auto work and sales, you're good to get started. Also, dealerships prefer NNN leases because it gives them control over the property while freeing the owner from many responsibilities.

Crush it!

@Karim Wahba

Setting up a fund vs syndication for flipping homes comes down to scale and structure.

Syndication: Typically involves a single asset, which can be stupidly expensive in terms of cost/time for just one flip unless it's a high-value property.
Not the best route for multiple flips due to setup costs eating into profits.

Fund: This is more suitable for raising capital for multiple flips. A fund (like a 506c) that @Chris Seveney and @Evan Polaski pointed out allows you to pool resources and spread risk across several projects.
Def more attractive for investors.

Pro tip: SEC exemption might be required so make sure you know your sh it and value prop here.