All Forum Posts by: Tyler Hodgson

Hi Bryson, first off, major kudos for getting into real estate investing at 24 and already having two properties under your belt in DFW! Your underwriter experience is a huge advantage since you’re already familiar with the lending side, and get to have a hand in transactions every day. I have been an originator for over 8 years and it has helped me with my personal investing significantly!

Hey Mike,

You're in a great position to start expanding, and your goal of owning 4-6 properties in the next few years is definitely achievable. Here are a few thoughts of mine, based on your situation: 

DFW Market: Overall, the DFW area remains one of the strongest real estate markets in the country. Even with some of the uncertainty in the broader economy, there are still pockets around the DFW metroplex that offer great opportunities for rental properties. While Denton is a solid market with steady demand from students, don't hesitate to explore other areas within DFW for potential deals.

Financing Options:

1. Conventional Mortgage: Since you have a good credit score and zero debt, you're well-positioned to keep going with traditional mortgages. As long as you're able to qualify for conventional loans, this will likely be your best option. The rates and terms are usually more favorable than DSCR loans, so I'd lean toward conventional financing while you can still qualify.
2. BRRRR Method: The BRRRR strategy can be powerful, but it might slow you down a bit due to the current cash-out refinance seasoning periods, which can be as long as 12 months. If you're looking to scale quickly, this could become a limiting factor. However, if you can find properties where you can add significant value, this method could still work well in the long run—it's just something to be mindful of in your overall plan.

With $160k in available cash, you're in a great position to start purchasing your next property or two. You don't need to tap into your current property's equity and that property sounds like it will be a nice cash flow cow once that ADU is completed!

Hey @Deborah Wodell, what a great thread this is, with lots of valuable insights from everyone!

When it comes to deciding between refinancing and selling, it really boils down to evaluating opportunity costs and understanding the potential long-term returns of each option. Here's how I break it down:

1. Analyzing the Current Property:
   • First, consider the equity built up in the current property. If it's substantial, and the market conditions are strong, holding onto it might continue to provide good returns. Check if the property’s current value has appreciated significantly. If yes, refinancing could unlock some of that value while allowing you to retain the property. This could be especially useful if you have high-cost debts to clear or other investment opportunities to fund.
2. Cash-out Refinance:
   • If current rates are favorable, or at least not excessively higher than your existing rate, and the cost of refinancing is justified by the equity taken out, this could be a smart play. It allows you to leverage your investment while still enjoying potential appreciation. The cash obtained can be used to diversify your investments or reinvest in renovations that increase rental yields and property value.
3. Selling the Property:
   • This option might make sense if the local market is peaking or if you anticipate a downturn. By selling at the top of the market, you maximize your returns and can reinvest the capital into more lucrative opportunities. Consider the tax implications, such as capital gains. Sometimes, using strategies like a 1031 exchange can defer these taxes while transitioning into another investment.
4. Highest Long-term Returns:
   • Generally, if the property is in a high-growth area, holding might offer better long-term returns through appreciation and rental increases. If the market is volatile or has peaked, selling and reinvesting in a more stable or emerging market could safeguard and enhance your returns.

In your case, if your current property has high equity and market conditions are favorable, refinancing might allow you to tap into that equity for other investments while still benefiting from potential appreciation. However, if the market has peaked, selling could lock in profits and provide capital to reinvest in more promising opportunities.

Ultimately, it's about aligning these decisions with your broader financial goals and market conditions. Analyzing the numbers closely and considering future market potential will guide you to the right decision. What’s your current market like, and what are you leaning towards?

Hi Sabuj,

Congratulations on your recent sale and your decision to invest in Texas! A 1031 exchange into a landlord-friendly state like Texas can be a strategic move, especially with your focus on appreciation.

1. Two Ten Communities Duplex in Buda:

• Duplexes can provide both appreciation and rental income diversification, which can lead to more consistent cash flow. Research the specific market in Buda and the historical appreciation rates for similar properties. Buda has been experiencing growth due to its proximity to Austin, which could benefit future property values.

2. Lennar Homes: Plum Creek (Kyle) vs. Whisper (San Marcos):

a) Plum Creek, Kyle:

• The corner lot and large backyard are attractive for families, and the high school district rating can positively impact property values and rental demand. Smaller square footage compared to Whisper as a 4 bedroom, which might limit potential rental income.

b) Whisper, San Marcos:

• Larger home with an extra study room, which is a valuable feature for potential tenants looking for office space. San Marcos is known for its college town vibe, potentially offering a broader rental market and the size of this one could be a good student rental. The higher price and only moderate school district rating could impact long-term appreciation compared to Plum Creek.

1031 Exchange: As Dustin mentioned, you can diversify by acquiring multiple properties under a single 1031 exchange. There could be a strategic way to tackle a couple of these options at the same time.

Scott, You may be leaning towards selling them because of property tax increase and major repairs. Have you disputed your property tax values with the County Appraisal Districts?

Given the low LTVs and the significant appreciation your properties have experienced over the years, a cash-out refinance could be a viable strategy for you.

Here are a few reasons why this approach might make sense:

1. Leverage Your Equity: By refinancing, you can tap into the equity that has built up in your properties without having to sell your properties and incur capital gains taxes. I know you mentioned potentially 1031 exchanges, but keep in mind that only defers the capital gains taxes. 

2. Benefit from Continued Appreciation: Real estate in Austin and San Antonio has shown robust appreciation over the years. By retaining ownership, you can continue to benefit from future property value increases.

3. Reinvest in Higher-Yield Opportunities: The cash from the refinance can be redeployed into other investments. Whether you're considering diversifying into multi-family units or investing in markets with lower property taxes, this capital can open up new opportunities. The combined cash flow and appreciation from these new investments could potentially surpass what you're currently earning, even if the immediate cash flow isn't as strong.

Your plan to house hack in Texas, sounds solid given the few details you've shared. Your liquid assets of $60k and solid income as a nurse should position you well.

For me, proximity to work is crucial. Sherman and Denison have hospitals, but also look into nearby cities like McKinney, Prosper and Frisco, which have growing healthcare facilities. It’s worth ensuring that your potential commute is manageable.

Something else you may consider is mid-term rentals. Mid-term rentals to traveling nurses or other healthcare professionals could be a lucrative niche for your househacking strategy. 

Texas has a lot to offer, and it sounds like you’re on the right track!

Hi Kaushik,

Congrats on your upcoming move to Dallas! You won't miss the Chicago winters!

I recommend talking to a CPA who can look into the details of your case and provide tailored advice. They'll help you navigate any potential exceptions and explore other tax-saving strategies that might be available to you. At the surface level, it does appear that you would have to pay capital gains tax on the profit. However, @Bruce Lynn provided a great reminder to remember all of the expenses that could be included in your cost basis; again, a CPA advising you specifically would be the the best bet.

 Great stat comparing DFW to Killeen market for fourplexes on the market! I'm curious how do the numbers compare for duplexes? 

@Jeff Nash can help you out!

HI @Gabriel Bezner I'm a mortgage broker and fellow investor here in DFW. I've been in the industry since 2015, it's been an amazing journey. I have met (and learned from) a lot of people here on BiggerPockets!