All Forum Posts by: Robert Steele

I think there are a few more shades of grey than 3. But to answer your question I'll do any of them but prefer them closer to 1. The faster I can be in and out and the less capital I have on the line the bigger. Even if the profit margin is smaller I'd rather hit many singles than hit a single home run.

@Greg H. I'm not surprised that it is BS. I've found other clauses in several HOA CC&R's that fly in the face of both state and federal laws. Unfortunately most people don't know any better and let the HOA bully them.

My HOA gave me grief for putting a political sign in my yard during an election season. Their by-laws said no signs. Unfortunately for them, they had to pay for a lawyer when I showed them that state law prohibited them from stopping me.

They also had a by-law against TV antenna's but federal law trumped that.

Thankfully the vetting process is illegal here now in Texas.

@Rando McAnon One of my HOA's says in there leasing policy by-laws that they can evict your tenant. I'm not sure how that flies legally. Perhaps there is a limited power of attorney buried in there somewhere when you agree to the by-laws.

Well it's been almost a year since I originally posted this thread. So how have we done here in DFW? Metrics say that the price appreciation has slowed. But I'm more interested in anecdotal evidence.

Some areas like Richardson still seem relatively hot. Other areas like Frisco seem to have cooled.

I've been seeing a lot of price reductions in the sale of SFH. I've seen houses sitting on the market longer. I've seen rents dropping. I am starting to believe that the party is over. Whether this translates into a slump I don't know.

Thoughts?

No mention of policies that do not pay in full or at all if the property is vacant for more than X days? Seems to me that is a pretty big pitfall for the rehabber.

@Cameron Marmon I cannot really say definitively whether you should hold or sell but I can give you some points to consider.

The first rental is the toughest because if you have a vacancy  then 100% of your portfolio is vacant. If you have a bad tenant then 100% of your tenants are bad. It seems to level out at about 4. So I understand your angst. But you have to just stick it out.

Given a roughly 5% cap rate for a class A/B property in DFW you should net $1,350 after fixed non mortgage costs like taxes, insurance, HOA. Based on my own $300K+ rentals I think $2,000 to $2,200 is very doable.

I know some people consider appreciation just the icing on the cake but you need to also consider appreciation as a part of your overall return on investment. Some times in the market you get wads of cash flow and no appreciation and other times it is the opposite, like now. You need to combine the two. Think of it like stocks. Some pay dividends and some growth.

If you have a well paying career job and you are relatively far away from retirement then you don't need to worry about cash flow today. I know a lot of investors consider cash flow the holy grail and won't consider holding a property that doesn't cash flow but you don't need the cash flow today, you need it in the future. Concentrate on good properties in great neighborhoods. Particularly newer homes. That way, a couple of decades from now when you retire you will have fine properties that have not only appreciated a lot more because of the neighborhood demand but more importantly cash flow handsomely and that are only 20 years old (as apposed to 50 and costing you a lot of maintenance that you cannot afford). For more on this school of thought you should check out @Erion Shehaj Investing Architect blog.

I wouldn't worry so much about tenants trashing your fine house. Those class of tenants usually take good care of the property. But I would worry about how it will make you feel. Renting out your old home is kind of like having your ex girlfriend around along with the new guy she is sleeping with.

You should definitely consider taking advantage of the tax break on selling your old home. I'm not 100% sure but I believe you can still be taxed on this sale indirectly by the AMT.

Managing higher end rentals yourself is easier than lower end. I would not take the equity out and buy three $125K properties. The cash flow numbers for these class C/D properties always look great on paper but they never pan out. They won't appreciate as fast. They will incur more wear and tear. They will have more vacancies.

I look forward to hearing about your final decision and the reasoning behind it.

@Cameron Marmon Why did you rent it out to begin with? Is this your only rental? Do you need the equity? Do you need the cash flow?

@Account Closed You beat me to the punch!

Yep it's more of the same. Although not quite as bad as last year.

In Collin county my appraised values rose around 7%. In Dallas county around 15%. Last year my Dallas properties appraised 20% higher. Ouch.

I have a Tax Agent fight them every year but it doesn't help.

I wouldn't mind so much because of appreciation and all ya'know but I'm in the business for cash flow and I haven't been able to raise my rents in a meaningful way in the past two years so the taxes are just eating me alive. In fact I just re-leased a property in Frisco for 10% less!

I don't understand what the local cities and counties are doing with this windfall? What do they need it for? It's not like they are building new roads, which would be nice given the increase in traffic. No, they should lower the damn tax rate. But they won't other than by some token amount. Then when the next bust hits they will cry poor and raise the tax rates.

Bloody governments.

@Richard D. How exactly does the title company "research the laws" to determine if a property is a not a homestead?

I understand how it is possible and in some circumstance easy to prove a positive but it is much harder to prove a negative. 

How do you prove that the previous owner did not live in the property? Find a homestead exemption being claimed by them somewhere else perhaps? Have them sign an affidavit?

I do not know of a single title company that will write title insurance on a residential tax sale until it has been seasoned for two years. If you do then please share.

Perhaps the @Arnie Abramson the tax sale guru could weigh in on this?

@Account Closed Can you explain how you convinced the title company issuing the policy that the property was not a homestead?