A couple nights ago, I was watching one of my favorite shows – Investment Property. I always enjoy seeing the renovations combined with putting new landlords into business.
That is the classic way. Look for a duplex or other property in your area, perhaps that one you drive by every day. Get it at a discount. Invest a little sweat equity so you can find quality tenants, and then hope it will grow in value down the road.
To top if off, my duplex was brand new and didn’t require ripping out smoke filled carpet and tar covered wall paper. If I had the same money as those investors, I’d buy three of these duplexes and be pocketing $3000/month. Sadly, I only had enough to buy two duplexes.
Why invest in Texas? For one thing, Texas has shown bigger job growth in the past couple years than all other states combined. People are flocking there. Those people need a place to sleep. New construction is on the rise and the sheer volume is keeping the prices in check. Many people are ready to rent. By picking top quality units, I have attracted top quality tenants. And my property manager is ensuring there are proper background checks.
Finding experts to help guide you
On the TV show, they have Scott McGillivray. He is a contractor and income investment expert. That is the expert the people on the show use. He seems to know what he is talking about. Frankly, I would like to trade notes with him. I wonder if he is constrained by the nature of the show. If I was his client, there wouldn’t be so much TV-worthy material. I didn’t have any renovations to deal with. I wonder if he helps people that don’t invest in their own market.
It can be tricky to navigate a new market not in your backyard. That’s when I pick up the phone and call my expert, Jeff Brown. He is someone who does this type of research on a daily basis, nationwide. He looks for quality, affordability, and does rent analyses on multiple markets. If you call him, ask him how many of the past one hundred deals were investment ones. His answer will be “One hundred.” That is the mark of someone who isn’t doing investment real estate as a hobby. The man has been doing it since the 1970s.
I also talked to my father-in-law. He has owned rental properties for twenty years. He says he has usually done pretty good if he can make 1% of the purchase price each month. That’s know as the 1% Rule, and these people on the TV show were missing it by a long shot. For that much capital, they should be getting $7500/month. So instead of earning a cap rate of 12%, they instead are making about 4%.