Cash flow in TX

[ballgum]

I'm located in Dallas TX. I'm trying to get started in creating cash flow for myself and am interested in finding out the different avenues I have for this in the TX area.

From my understanding flipping is hard in my area because land/housing prices, correct? Also, this doesn't generate cash flow. I'm currently looking at renting for monthly income. This is obviously one way for cash flow, however the management side of things w/renting property seems time consuming (especially if you have several rental properties). Are there other ways for getting cash flow (in TX)?

If I do decide to go the rental property route, are there tricks to make management easier? For example, I read posts on here about people having 50+ rental properties. How do you manage all of these properties at the same time (constant repairs, constantly finding/replacing tenants, etc...)? Obviously, someone like me w/only a few properties starting isn't going to have this issue, BUT I'm just trying to determine the best cash flow method for me starting out in REI.

I will eventually branch out nationally, however right now it seems best and logical to stick with the regions I know best.

Thanks for any input anyone can offer.

Bilal

[TMCG]

ballgum,

before you branch out nationally, or even think about growth in the future - just buy some properties at a signficant discount and have a plan for when you do this - i.e. fix/sell, flip, rent, etc.

it's great to plan ahead but i think once you've done your homework, learned your market and understand the basic principles of real estate and investing - you should start by focusing on making money by actually investing in a property, then another, then another one, etc.

figuring out how you're going to manage your time in the future when you don't really know what to expect (and no book can tell you that), is like loading the gun and starring at it hoping it will fire itself. it won't and it makes the loaded gun irrelevant - like all the planning in the world - it doesn't mean anything unless action follows.

[ballgum]

First let me say thank you very much for your reply! Any input helps...

As far as "must take action" aspect which I've read in books and many posts and heard, I feel I am taking steps toward what I want. I have laid out a high level plan of where I want to be in several years - 10 years. As a matter of fact, I was out looking at a foreclosure house today that was cheap and I was thinking of renting (ok, it's not my fault this house was in some cracked out boarded up neighborhood  ) hehe.. I don't know...I've heard this all to many times. "You have to take action!" etc... To me, this isn't my problem. I have no debt, got a little saved IF I do need to put a little down payment, have good-excellent credit. I'm also taking active steps towards what I want (looking for rentals, trying to learn because I've very new to REI, etc...).

I guess my question is more geared to getting other alternatives for generating real estate cash flow OTHER than renting properties (specifically in the TX area right now). What I know right now is renting, flipping (which to my understanding isn't very hot in Dallas), financing the sell of homes I buy w/interest (this might be better for cash flow since there is no actual property management involved???), rehabs (this would be flipping correct?).

The problem I'm having is I guess understanding why someone might do rental property  for cash flow as opposed to some alternative that might not take as much time dealing with tenants, fixing stuff, maintenance, choosing the right tenants, etc...

Am I wrong in saying that it might be less time and effort in getting cash flow through other means or flipping in general?

I know I've got to start somewhere...That's why I've been looking at CHEAP low risk rentals at first. However, since I'm so new to REI, I'm sure theres many cash flow alternatives/opportunities that I just don't know about!!  I just want to find the most efficient and best cash flow systems for the Dallas/FW area of TX.

Thanks,
Bilal

[propertymanager]

however the management side of things w/renting property seems time consuming (especially if you have several rental properties)

If you're not willing to spend time working hard in whatever REI business you start, YOU WILL FAIL!  You're buying into the guru nonsense that you can make money with REI without effort.  Whatever area of REI you choose, your results will be directly related to the time and effort you put in.  One popular guru says "the less I do, the more I make".  That is the biggest bunch of b.s. I've ever heard.  The least you can do is nothing.  Try doing nothing and see how the riches pour in!!!

If you're looking for real estate riches witout a lot of work,  I suggest quitting now! 

What I know right now is renting, flipping (which to my understanding isn't very hot in Dallas),

What's "hot" is irrelevant.  Those that succeed are not concerned about today's fad.  Successful investors are focused on doing something that is consistent and sustainable.

Mike

[ballgum]

Perhaps I'm wording my posts wrong... I understand hard work involved. Everything we do requires hard work... Don't confuse my post. As my previous post said, I have been actively seeking rental homes in my area (meaning, I'm giving it a try). I work very hard at everything I do.

Can I get some cash flow methods that perhaps some people may know about and use (in TX), that work (other than renting). I want to know my options because I'm sure there's methods I don't know about.

Bilal

[fadi]

Another option you have is to do owner financing. Buy sub2 and sell on a wrap around mortgage. Your tenant buyer is buying the house not renting it, so they should be taking care of all the repairs and maintenance. Your cashflow will come from the difference between the interest rate they are paying you and that on the original mortgage. For example, you buy sub2 @ 7% and sell owner financing @ 10%. You get down payment and 3% interest on the bank's money.

You could also wholesale one deal a month for example for monthly expenses and cash needs.

These mean you are very active and know how to find deals.

[ballgum]

Thanks for the reply. I've heard of sub2 around the forums here but didn't quite understand it. I will research these other options now. That sounds good! A few questions about doing my own financing though. Is it harder to find people who want to buy through this kind of financing? Do i set it up through my mortgage guy? Also, I assume to make sure they are going to pay I do similar things to rent (background check, credit check, etc...)? What happens if the place goes into foreclosure?

Sorry for the barrage of questions! Thanks again for everyone's help...

Bilal

[christopher w]

Ball,

I am located in Dallas as well. There are several local real estate clubs that you might think about joining to help shorten your learning curve.

[ballgum]

I was looking at those. Are all of them pay clubs? It seems that most of the ones I saw were about $20/per club meeting. Plus it's hard for me to join (weekday meetings anyway) due to weekly travel.

Bilal

[fadi]

They usually have yearly membership around $150/year give or take. You should be in a club if you want to be an investor, but yes attending would help

If you travel every week, then investing will be a challenge since you are hardly around.

[ballgum]

What's the best club to join in Dallas?

I'm working on changing my job....When I originally took the job, I actually thought it would give me more time while being on the road to read and study up on real estate. I also thought I could get some perspective on real estate in other regions and states, however so far it's taking alot more time than a normal job and I'm not home much...

[Bluemoon06]

Perhaps I'm wording my posts wrong... I understand hard work involved. Everything we do requires hard work... Don't confuse my post. As my previous post said, I have

I don't think you are wording your posts wrong.  Sometimes we forget that everybody is not starting from where we are.  I am in Houston (not quite Dallas) but what I do is buy houses that are foreclosures.  I rehab them with a 90% loan to value loan which includes fix up costs.  I then “sell” them using an owner finance technique.  This allows me to get money up front (like a down payment usually $3k to $5k) and then I get more per month than a straight rental (about $300/month) and if they convert on the end I get $20k to $40k.  You also do no repairs because they are “buying” the house so they do the repairs. 

[ballgum]

Thanks for the reply!! I was actually talking to my realtor/mortgage broker about this today. Can you clarify a few points about this type of deal for me?

- What do you mean when you say "if they convert"?
- He was telling me this is somewhat risky since I'm actually carrying the loan, so if the buyer I'm financing forecloses or something happens, I have to cover (seems like I would be relying on the buyer's ability to make their payments on time). Is this correct?
- He also said it's hard to find buyers for this type of financing. I'm guessing this is where the advertising on our part comes into play. How and where do you find buyers for these types of loans? Do you look for people who can't qualify for standard loans?
- In general, what are the risks involved (long term, short term, w/the property, w/the buyer, etc...) when doing this kind of deal w/this kind of financing?
- Since this is a long term deal, who actually 'owns' the property? I was told me, since I've got the loan on it. What happens if during the 15-30 years either myself or the buyer decides to sell the house?

Sorry to sound completely ignorant on the subject...  I just want to understand more about these types of deals and the risks involved. This seems like a great way to go, if there is minimal risk involved.

Bilal

[propertymanager]

Bluemoon06,

What percentage of your lease options have actually "converted"?  I have done lease options and have a bunch of friends who have done both lease-options and land contracts (contract for deed) and the people who actually exercise their option (convert) are very low.  Moreover, when I and my friends have gotten the houses back, they are often in disrepair because the tenant either couldn't afford to do the maintenance or did it themselves and did a terrible job.   In fact, I talked to a landlord today who has done quite a few lease options and has NEVER had one "convert".  In my experience, lease options and land contracts are great in theory, but not so great in reality.

What has been your experience?

Mike

[Bluemoon06]

Bluemoon06,

What percentage of your lease options have actually "converted"?  I have done lease options and have a bunch of friends who have done both lease-options and land contracts (contract for deed) and the people who actually exercise their option (convert) are very low.  Moreover, when I and my friends have gotten the houses back, they are often in disrepair because the tenant either couldn't afford to do the maintenance or did it themselves and did a terrible job.   In fact, I talked to a landlord today who has done quite a few lease options and has NEVER had one "convert".  In my experience, lease options and land contracts are great in theory, but not so great in reality.

What has been your experience?

Mike

You are right propertymanager.  About half actually convert.  I have a mortgage company that will allow them to convert by a refinance.  All they look for is a credit score of high 500’s and 12 months of on time payment (which I provide)  The other half that I get back I use the money that I got up front for the fixup.  I sell it again when I get it back.