Mr. Texas Real Estate team has evolved through the years, all thanks to people like today’s guests. We have two rock stars from the team, Linda and Cindy, and they walk us through the light amidst the chaos in the real estate market. They tell us about the interloop and what’s going on downtown in those areas as far as real estate development. They also share how they interact with some folks who are taking it forward and preparing themselves to buy new properties. They also touch on their projections of the marketplace, especially on the retail side. Finally, Robert Orfino also talks about the three levels of rehabs.
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Buyer Events with Guests Cindy and Linda and Co-Host Robert Orfino
We’ve got a lot of stuff going on that we’re excited about. We’ve got some great deals in the hopper. This is what we do. This is the Mr. Texas Real Estate team. We did it more than to just have a logo and for Jason to carry around a badge. We actually do real estate. We’re very proud to be a part of the Keller Williams Platinum team. We work very hard to deliver deals to you, the buyers. This is a fantastic market. If you have not bought your first home, your rental property, whether it’s a single-family, a duplex, three or four units or even more, we strongly suggest you get involved with us and let’s make that happen over the next 30, 60, 90 days because this market is slipping away.
We explained it to Rick. It’s not that there’s going to be a crash that’s going to throw this market in a tizzy. It’s that the market will simply climb out of the price range that you need to buy at. We’re buying it under $100,000 a unit and that will simply disappear. We’re buying single-family still at $80,000, $90,000 that can rent for $1,200, $1,400. Those products will be gone. We have two rockstars in from the Mr. Texas Real Estate team, Linda and Cindy. As massive and as strong as an organization the Mr. Texas Real Estate team looks from the outside, it’s pretty chaotic still. I appreciate you guys hanging with us through the chaos. You guys went out there and found some good deals. Give us a little preview. Don’t give us addresses, but just give us a little preview. What’s the hottest one? What’s going to be the number one deal? I think you found that.
We’re still working on it. It’s currently two units, but with a little bit of creativity, we can turn it into three, possibly four units. That’s why the DSCR is so good. It’s a matter of getting the price where we want it.
What do you think the total rents would be on those four units?
For four units, $1,500, $800 and $650.
That’s three. What if we did four?
With four, we would be splitting up that $1500. That would still be that number.
We can do $1500, $800 and $650. It’s almost $3,000 a month. We’re going to be all in close to $200,000. That’s a good deal in a very strong appreciating market. That’s a very good find.
We’re working on it. Hopefully, we can bring this on the bus tour.
We keep finding deals like this. There’s a rhythm to the madness if you will. There seems to be a little bit of a scheme that we’re doing and we’re finding some of these deals and we’re pretty happy about them. We also have some off-market deals coming in, so I know Charles is going to bring some. He’s our wholesale liaison. We have our flips. Cindy, talk a little bit about the inside of the loop. I’m still figuring things out. I think I’ve mastered everything north of the 10 and everything south of the 10 is still unknown to me. There’s one area that’s got a whole bunch of Chinese restaurants. They’re all over the place. I love going in and I’ll eat anything. I love it all. There are all these little areas south of the 10 that I don’t know about, and we’re talking about EaDo, which is south of the 10. Tell us about the interloop and what’s going on downtown in those areas as far as real estate development.
There’s a lot going on and it’s high dollar real estate down there. Also in EaDo, about seven years ago it was starting to take off and for that area, the residential side has grown quick. What they need to do in my eyes is to bring more businesses, restaurants, more of a destination location to get more people out there. It’s a young crowd over there. It’s a little bit more affordable than midtown and downtown. It’s just a couple of minutes’ drive to enter town.
Is that a hipster area? I love hipster areas.
It is. They pay more.Staying close to where buyers live allows you to self-manage one or two properties a year. Click To Tweet
They don’t even think you can negotiate on a price. They look at the retail price and they’ll pay for it. Someone made this analogy to me. It’s The Heights several years ago.
It is somewhat.
I know what The Heights is and I’m almost like, “I get it.” The Heights is obviously much more mature. It has $600 million, $700 million properties. Is there an opportunity for EaDo to someday grow to $500,000, $1 million-properties?
It’s already there. $1 million, not quite. The townhouses down there are growing up at $400,000, $500,000, $600,000. It’s climbing fast.
That is a great number. Obviously, if we have a property in that area and in the rising economy, we saw houses there, we’re buying some of these. The ones we’re doing now, the nine we have, I think we’re under $1,000 a square foot at the acquisition. Are we going to see $200 a square foot on the exit there? For a 1,200 square foot house, can we get $240,000 for it?
Possibly. These new constructions are going anywhere between $175,000 to $200,000. You have to sit on it for a couple of years, but the growth is there.
That’s what we do for single-family rentals. We’re hoping that we can cashflow. For us, the criteria that we’ve talked about is $200 to $300 a month cashflow per door, about 20% equity at the time of purchase and a 20% cash on cash return. Those are the criteria for the properties that we like to bring to our folks, to our buyers, to the Portfolio Builders Club and to the bus tour. Those are good deals. If we buy a house and we have to wait three years and we’re already in it for 20% equity just on the acquisition cost and we put another 25% down or the acquisition cost, then we’re sitting at about 35% equity in them in the house. If we wait three years to grow that out to about 50% equity, then that’s a great investment deal.
Those are areas like Katy now which are becoming a little tough to get the rental numbers because they’re appreciating so much. That’s a fantastic strategy. There’s nothing wrong with cashflowing for two and a half years, three years selling the house and making $80,000, then taking that $80,000 and reinvesting it somewhere else. We work all those strategies and our team is an expert in this marketplace. They do invest themselves. They’ve done a lot of retail work, so we’re happy to have this team formation and moving forward. The last event was good. It’s the real deal. It’s not crappy chicken wings and old stale beer. It’s really good. We recommend that everyone comes out. It’s at Seasons 52. What was your favorite part of it? Was it the wine? What did you like best?
Food-wise? The lamb.
I liked the shrimp and it was too early for me to drink wine.
We’re all going to be there. We’ll have our team there and we’re going to talk to you. We are getting new buyers coming to you. They’re sometimes a little hesitant, but they want to get moving. Having an event like this is pretty important for them to get to see the numbers and see the deal sheets. Do we have deal sheets for all of them? Did we do the calculations?
Most of them.
It’s the Portfolio Builders Club. It’s at Seasons 52. Go online and hit the link. It’s $50 to see those deals, to eat lunch with us, to get some booze. White wine is early for sure. Make sure to get to Eventbrite. I can remember buying my first house and being terrified and it happened so fast. If I had realized that it could go that fast and it was so easy to get qualified, I probably would’ve bought my first house ten years earlier. You guys work with new investors, you work with folks that maybe they have one and maybe they’ve had a bad experience. Maybe they’d been taking lessons for six years of classes and they’re ready to move on it. Tell us some of the interactions that you guys are having with the folks that are taking that step forward and ready to start buying.
We’re talking to investors at various levels. Some of them are picking up one or two homes a year or became a landlord because they moved into a new home. We’re running across those buyers and obviously the comfort level is different. They want to be close to where they live so they can self-manage at one or two a year. That’s still manageable. We also come across other people who are more experienced. Maybe they’ve done some wholesale and they’re wanting deals that are 70% minus repairs and like, “I’m sorry, I’m not going to find that for you, at least not on the MLS.” That’s even hard as far as wholesale deals.
There was a wholesale deal that came up that everyone knew about. The seller was smart. He put a little bidding war and we put our maximum number in and we saw it wasn’t low enough. I said, “We’re going to walk from it. We’re not going to do flips at 80%. It’s not going to work. How about you Cindy? There are people you are talking to. What are some of the questions that they’re having or maybe some of the uneasy feelings that they might be having that we help them overcome?
I think a lot of the time the rehab cost is something that they’re fearful of not knowing how much it’s going to cost once they get in there. A lot of these properties, once they pick it up, they want to get the rent raised. They’re going to have to put some money into it and they’re going to have to put some work into it. On the construction side, it’s the money to get it up to where it needs to be.
I’ll do the seven-minute rehab estimate. I’ll do that exercise. If you come, I’m going to show you how to do a rehab estimate in seven minutes. Does that work?
It works. It’s good information.
There was a lot of calculators out there and everyone’s got a big spreadsheet, but there’s going to be a time in this market where we’re going to have fifteen minutes to make decisions on deals. I’m going to show you how half that time we’re going to be figuring out your rehab costs, and the other half of the time I’m going to show you how to figure out if it’s a deal or not. When you’re talking to these new people, tell me about the financing. Do they have the financing lined up or is that something that they’re curious about or have they gotten pre-approvals? Where are they at with the financing when they come to you?
Most people already have financing. Either they’re preapproved or they have a hard money lender that they’ve worked with previously. If not, we also have someone that we work with and we want everyone to be a pre-approved. If you’re not, we have someone for you.
It’s a stronger offer.
How about you, Cindy? Do we have anyone who’s straight cash at this point?
We’ve got to find that. They’re out there. We’ve got to find three or four to do straight cash.
There was one, but he’s a unicorn. We can’t find one anymore.Those who can move fast are going to start getting better deals as we shift from a very good market to a good market. Click To Tweet
He is out there. In this world, obviously those that can move fast are going to start getting better deals as we shift from a very good market to a good market. Meaning we’re going from a four out of five to a three and that’s going to happen over the next eighteen months. This is why I’m so excited about getting people into this industry right now. The next 90 days are critical for you to go out there and get a rental property. It’s absolutely critical. We provide two great events here every month, the Portfolio Builders Club and The Bus Tour. What we don’t actually get under contract will go on The Bus Tour. The Bus Tours are fun, right?
Yes. We sing songs.
Sometimes we have off-market deals, sometimes the construction estimates are way off. It’s the life of our investor. We get to see deals and we’re going to get to see some stuff. You can definitely drive by the two flip properties that we have. It’s right off the 45. If you guys want to come down, I’ll be in Texas city building beds and stuff.
We can bring the crew to help you.
I know you want to see the Airbnb, so you can come by. They should all be ready. The same thing with you guys who want to take a peak at some of these Airbnbs. We’ll open stuff up and we’re going to do the ones in The Heights next. We’ll have another bed building party. Charles says he’s got a good rental in Texas city that he saw the numbers. We lost the one in League City. We didn’t get that one, but make sure we follow up on that. If the EMD doesn’t come in, I’ll run the baton in five minutes. We’re always out there looking for these deals.
We’re going to introduce you to a guy named Casey Eberhart next. One of his famous quotes is, “The person who deals with the most crud usually makes the most money.” Some of these properties we’re bringing you need work. That’s why we talk about the estimate. You can’t be afraid to put some effort into these. The turnkey rental, tenant all rehabbed up is 6% cash on cash. That’s what that market looks like. You can buy them from Marshall Reddick, you can buy them from Memphis Invest. The stuff we’re doing is 20% cash on cash because you got to put a little love in it.
We’re here with Linda and Cindy from our team. They are your buyers reps. If you guys want to start buying properties, if you’re new, if you have one or two and you want to start building out this portfolio like Jason and I do it, you’re going to text us at (281) 401-9008. You’re going to reach out to them and they’ll reach back out to you. They’ll sit down. Cindy, someone said they had to reschedule something, but she and her husband are looking forward to talking to you. We go through it. We tell you the reality of it. There is no selling the dream. We’re not selling any nonsense. We’re telling them straight up what needs to happen and don’t be quitting your day job.
We go down to the hunting ground. We found this little area that we love and we’re trying to work with a local bank. Because we’re entrepreneurs and we have seven different businesses, that freaks everyone out. We found a local bank that will give us great terms and rates, but they’re not friendly to K-1 folks. They’re not friendly to us. They’re like, “We can’t count any of this income.” We’re like, “That’s going to be a problem.” We should all be telling these folks, “You work at Exxon. Don’t be quitting your job yet. Let’s leverage that job.” That’s important.
We’re going to tease them on the three levels of rehab. Cindy, you’re on the newer side. You’ve been doing real estate forever, in retail. Now we’re taking to these dirty, filthy houses with not just the big roaches, but the little roaches. Into these houses, before someone has put all the love into it and made it this beautiful masterpiece. We’re in Curtis’s world where he’s running through all these crappy houses all over The Heights and he’s going to put $800,000 in construction in it. Here’s what we need to understand as investors. It’s these three critical things and we need to learn very fast. It’s the difference between a light rehab, a moderate rehab and an extensive rehab.
Here’s how I describe it. A moderate rehab is going to be blow and go. What I mean by that is we’re going to paint it. We’ll do carpets in the bedrooms, we’ll leave the old tile, we’ll leave the kitchen cabinets. We might put a new countertop on. If we go around and change out all the doorknobs so they match, there’s not brass, bronze and stainless steel. We match all the doorknobs, do a little curb appeal, cut some trees back. We can get in and out of that property very quickly and get a tenant in and that’s a light rehab, like toilet seats and things like that, maybe some faucets.
Basically we’re talking about little honeydew list jobs from Home Depot. Everything you could run to Home Depot and buy the materials and get it done. A moderate rehab, which everyone needs to understand, a moderate rehab is now we’re going to be replacing vanities. We might be replacing the full kitchen. We’re doing kitchens and baths. We might be taking that plastic liner out of the shower, putting a new one in or going ahead and putting tile in there. That’s moderate. You’re going to have a tile guy, you’re going to have a cabinet guy. You’re definitely going to have a granite or quartz guy. That’s a moderate rehab.
Does that include appliances?
Yes, absolutely. We’re upgrading appliances all the time. The difference between white and stainless steel front is minimal. We recommend all our buyers to go ahead and spend the extra $50. It’s $344 for the white dishwasher. It’s $389 for the stainless steel dishwasher. Do it and they’re both Whirlpools. The extensive rehab is your flood houses. These are gut houses and it’s usually studs. There’s usually electrical work and there’s all that other stuff that comes in. You need to understand very quickly, is this a light rehab, a moderate rehab or an extensive rehab? Linda, do you remember the prices for a light rehab?
It’s about $10 per square foot.
It’s $10 to $12 a square foot. If it’s a C plus, then it’s going to be about $10. If you’re in a B area, then it’s going to be about $12. How about on the moderate?
Moderate, it’s probably $20 to $25.
It’s at $25 a square foot area. On the extensive one, open walls, what are we at?
$40 to $50 or possibly higher.
On a light rehab, you’re going to be between $10 and $12 a square foot. On a moderate rehab, you’re going to be about $25 and on an extensive rehab, $45 to $50. If you use those numbers, you’re always going to be roughly within 10% if you’re dealing with contractors that work with investors. That’s something that we work with all our buyers in. We have a little video, we can share that video with everyone who comes to our team and says, “I want to buy.” It’s going to be, “Watch Robert, he’s going to go through this whole thing and don’t worry midway through it, he’s going to freak out about a roach on the wall, but he’s going to give you all the information that you need.” We recorded the webinar with a roach on the wall.
There are seven other little caveats that which we’ll go over at the Portfolio Builders Club and maybe on the Bus Tour. Knowing those numbers very quick are going to get you ballpark numbers so you can make a decision whether you should buy the house or not. We want you making decisions in about fifteen minutes, not fifteen days. Talking to the new folks, what’s their biggest hangup? Is it the unknown? Is it fear? Is it money? Is it not having a team?
They’re looking for unicorn properties.
Is that it? They’re looking for the B plus property.
They’re looking for the B plus property that’s down the street from their house and they’re going to pop by and check on it, but for a really low price.
We’re looking for a fully refurbished townhouse for $60,000. It’s the expectation. Sometimes we have little unrealistic expectations. We’re not asking you to rent your house with the lace doilies, the piano and all the pictures of the kids and up there. We’re asking you to rent a house in a neighborhood that is getting top dollar per square foot, that has a high DSCR. We’ve got to spend a little time talking about that because if that’s a big issue, we should be talking about that really quickly, especially with the unicorn who wanted this perfect house that’s not happening. What are some parting words of wisdom? You guys are excited. We’ve got some good deals. What do you feel about the marketplace? Do you guys still feel good? Are you guys looking at a lot of deals?
Yes, there are still opportunities there. Anson and I, we buy from wholesalers quite a bit. He made out seven, eight offers. Everybody wants a high price and we’re playing that game and they’re slowly coming back to us. There are still deals out there, but as you said, that’s going to change in the next eighteen months or so.
Cindy, what are you feeling about the marketplace on retail side?
It’s the same. I think you’ve got to funnel through a lot before you find that one or two.
It’s imperative that you have agents like yourselves that can do a lot of the leg work. You guys do it. The time when you can sit back with a beer in your hand on Saturday night and cruise Zillow is almost over. You’re going to need your professional agents like Linda and Cindy to work with you guys. If you want to get on our buyer’s list and you want to start working with Linda and Cindy, and they do a fantastic job, go ahead and give us a text at (281) 401-9008. We’ll go over a little estimating, we’re going to show you the deal analyzer and how we work it. Ladies, thank you very much for coming in. For the audience, this has been a great time and we appreciate your support. We’re having a fantastic time. We do appreciate all your support. I’m looking forward to another great show. We’ll have some other great, exciting guest on. Any other questions you have, just go ahead and hit us at (281) 401-9008. Thanks a lot.