All Forum Posts by: Steven Loveless

Doing some research on a few areas in the greater Oklahoma City metro, and need to start touching base with some providers in the area. Specifically looking at the Edmond, NW OKCity, and Yukon areas.

If anyone has some referrals for excellent investor-friendly agents and property managers I would love to hear them.

Don't know if it's standard practice or not, but my mortgage broker will take 75% of the income from a signed and paying 1 yr or longer lease to count against my DTI. (This is on a fannie mae conventional)

Doesn't necessarily help if you are living in the place and need another loan before you can move. If you could find a way to get it rented long term though.

I would go talk to some mortgage broker companies and not just CU's.

I'm the exact same way with how I approach reserves & how I estimate numbers @Dan Previti - being a bit conservative may keep you from doing as many deals when you start but imo also makes that curb shorter and shorter. Also, since there are four of you your total liability is decreased, so that's a positive for the jump in and see what happens approach.

There are several markets along with Plano that match the description you are giving. Since you have boots in Plano they should be able to give you some guidelines for neighborhoods - start cruising Zillow and see what rental and list prices are like. My experience has been that most "good" properties go very near or above list. Good luck!

My $0.02 - take it with a grain of salt. I have a single B&H in a nearby town (Rockwall) that is slightly less expensive than Plano. It just barely cash flows so far (purchased Oct. 16, rented since Dec.) and that is because I manage and do most of the maintenance. I am still actively looking to acquire currently. To your direct questions:

a) Good luck with this - I've given up on trying to change people. If you don't trust them to "pitch in their fair share" I don't know that I would be mixing funds with them.

b) I can't help you much here because I just don't know. Could one of you personally get the note, and then add the others to the deed? One thing that I can remind you - you MUST HAVE RESERVES, and you will also have closing costs as well as pre-paid escrow items. If you figure $7k in closing costs + pre-paids, then keeping another $6k reserves (you must at least at all times have your insurance deductible in cash: North Texas = hail, winds, & tornadoes) then your $40k is really only $27k of down payment. I'm just going to tell you - there aren't a whole lot of $135k turnkey homes in Plano.

c) I may get jumped on here, but I haven't seen a single turnkey house in *nice* neighborhoods in DFW that will cash flow @ 80% LTV with management in place and conservative estimates for vacancy, repairs, & capex. Hell, the few wholesale rental "deals" I have seen over the past year or so don't even do it. Unless you want to move into less premium suburbs, I just don't see major cash flow occurring. If you are purely betting on continued appreciation - that is a different song & dance. Then the question just becomes how deep is your conviction that the market will continue to trend up?

I tend to think a lot of the "soft" master's programs are a waste of effort and money. If you need higher levels of technical training for a technical career it is different (sciences, engineering, medicine, etc.).

I have a question for you: if you get a somewhat more difficult, but more applicable to RE degree (finance, law, accounting, etc.) - would that degree help you more than spending the additional time it requires on RE-specific activities? You could always go get some crap easy masters (I'm not going to name any so I don't offend anyone) that takes very little effort and spend the extra time actually on RE.

If you have some personal interest that will keep you motivated, go with that - since it apparently doesn't matter what the subject matter is. If, however, you think that you might stay in your current career, I would focus on enhancing your current earning capability - sounds like that would be a JD, Criminal Justice, etc.

Forgive me if someone already mentioned this - but I didn't see it.

The major reason to invest in multiple vehicles/asset classes is diversification - but I haven't seen anyone mention the diversification of future tax risk as well. People have gone into great depth about the various tax benefits of different avenues (RE vs 401(k)/IRA vs Roth vs life insurance, etc.)

What people haven't mentioned is that these are all based on legislation, written by politicians. And if you haven't already learned that legislation changes with political whims you are in for a harsh reality.

Let me give you a hypothetical: What are the tax implications if they remove the 1031 exchange and jack capital gains back up to >40%? Or change depreciation recapture rules for real estate? All of a sudden that Roth IRA filled with notes looks really good.

Tax law isn't guaranteed - it can and will change. So if you have some money in multiple vehicles, the risk of future tax changes to a single vehicle is reduced as well, in addition to any actual asset class diversification.

@Eric Gabriel

Understood - I likewise prefer to be well capitalized as much as possible. I can't speak to general contract rates as I only have a single property right now and haven't had a GC work on it. I will tell you from a couple of deals that didn't happen that everything I got from GC's was way higher than I expected. My guess is that with as crazy as DFW is right now there is a large difference between retail and contractors who work exclusively with a small group of investors.

I will say that I have a general handyman that has ended up costing me about ~$40 per hour if I give him a full day's work. YMMV.

I bet there are some other folks on here that are more active than me can give you some good ballparks on what contractors are bidding labor at.

I'll let other comment on the investment strategy, but will comment on your areas for your personal residence.

I'm not sure how large of a home you are looking for, but Frisco/Plano and McKinney to some extent have some pretty high $/sqft. I would also add that *some* of the schools might not deserve the reputation they have for excellence. Don't just shop by ISD reputation - actually go look at the individual scores and histories when you get ready to purchase. (There are some excellent Garland schools in an otherwise questionable ISD, and some below standard schools in excellent ISDs like Richardson/Plano.)

I live in the Wylie area and it is a bit more affordable, but you don't have a main corridor (freeway) passing through town. I believe Prosper is similar to Wylie as to pricing - maybe somebody familiar with owner occupant sales in that area can chime in.

There are also some good schools to the east of town in Rockwall ISD, and lower pricing - but this is getting you out of the central-north corridor that everyone in town is pumping up. Take that as a + or - depending on your personal outlook.

@Jayson Hinkson I guess the simplest question is what do you expect the future performance of the existing asset to be vs. something you would exchange into? If cash flow is your primary concern, will selling and buying a new asset provide more cash flow? You could also analyze for equity growth, IRR, CoC, or any other particular metric that is the most important to you.

There likely is a right and wrong answer for your particular situation - you just have to do the particular math to find out what that right answer is.

You will be able to crunch the numbers better than anyone since you are the only one with the real numbers. You have three years of operating history, so my suggestion would be to take all of the history you have, plop it into excel, and see what your IRR is in several scenarios (sell now, sell in 5 yrs, sell in 30 years, etc). Keep reasonable assumptions (rent increases, appreciation, costs) and make sure that you include long term cap ex. All those things you replaced in 2013/14/16 will eventually need to be replaced again, so add that to your numbers.

If you sell it now, could you generate more cash flow transferring the equity into another property? Would you re-leverage into two properties? What are your goals?