In the North Dallas area homes can and do cash flow often when bargins, wholesale buys, and rehabs are selected carefully.

Some new home can rent for the mortgage payment. With 20% down you are definately in a good position. Some CA investors have bought multiples from a single builder.

$120k home = $1400 rent

I've known two investors in rentals out here, one big (30+ units) and one small (half a dozen) that have sold here and bought in Texas. They're doing commercial stuff out there. Good cap rates and solid future I'm told.

I'm really pleased that others have now joined in on this thread. Thanks very much!

Real Dealer, that's a very strong case you make for your investment. It reminds me of what the smart money did back when I worked in the stock market. Risk arbitrage. Playing deals, and when no deals were around, they bought value stocks. Always took a freebie IPO that was a favor for being good customers. This was late 90s to early 2000s.

I think it's important to note that your last post was both highly instructive and also pure jibberish for the common guy on the street. The concepts behind it aren't all that complicated. But they require a familiarity with the jargon of the business. The way you make your money is understandable to a novice like me who takes the time to learn what you're talking about. It's a great bet. But it's no longer so simple as you put forth in that earlier post.

And how would you compare that situation with a similar one, maybe a bit more upfront, or a bit more later? I suspect math would come into it.

Your approach may be a layup. Right now. Competitive markets have a way of catching up to inefficiencies. If it's so good, low risk at every angle and solid returns, money will find it.

And then you'll be stuck comparing that approach to a similar contract with different terms, and deciding against that and a pure appreciation play, and also a cash flow shot. How will you decide where to put your capital? After you've compared it to returns in other investments? With good solid analytics, and a healthy respect for the speculative aspect of it all.

This is good stuff here. I thank all of you, especially Real Dealer, for sharing.

Mac

When it comes to money:
More is better than less, sooner is better than later, and more sooner is best.

This simple little rhyme manages to explain the very complex concept of the time value of money, in a way that you can use practically in your day to day life. How many people do you know who can grasp the reason why $100 is worth more now than it will be a year from now? And yet this rhyme says it so simply "sooner is better than later".

But I do see your point about understanding the jargon and the concepts. If I didn't understand the time value of money, would I truly appreciate the simplicity of the above rhyme? Probably not.

Regarding the investment play I mentioned. The risk is low in all but the most important area, personal risk. Finding these deals takes more persistance and determination than the majority of people have. I've seen plenty of competition come and go over the years.

It's not a true "CAP rate" without taking expenses in mind, but I'll stick with your percentage idea just to keep things simple. Here I would say we average about 8%. Some more expensive new construction ($500K and up) will be closer to 6%. You can find some run down duplexes and small apartment buildings for up to about 12%- but you really have to consider upkeep expenses and management headaches with those. GRM (gross rent multiplier) is what you're really looking for I think.

Carla, I didn't use Cap Rate because the basic info provided in MLS out here doesn't give enough data to calculate it. An experienced investor or Realtor in this field would know the Cap rates. I come across them some, especially on commercial stuff in Loopnet. But as a novice, I'm stuck with simpler and less informative gross figures.

I used Gross Rent Multiplier here, but not the term, because I think a multiplier is a harder concept (slightly) than a "gross yield" of sorts. Same numbers, just one the inverse of the other (if I remember my math terms right, which I probably don't).

Cap Rates as I understand them are a little better, and very commonly used, since they take all but interest expenses into account. You couldn't include interest expenses because one loan to another is apples to oranges. And I think they leave out tax savings for the same reason.

I'm not telling you anything you don't know, obviously, just practicing with the concepts.

I've been looking at Internal Rate of Return on a lot of this stuff, to get closer to the concept RealDealer gave us in his fine saying about sooner and more is better (to paraphrase).

Right now, I'm just learning the concepts of course.

Your GRM or 1/GRM is indeed instructive. Your rents are a lot higher than ours for any given price.

Mac

Alfred,

Also, try taking a look at some 4-plexes in your area. In our local market, buying a 4-plex with 20% down and the right loan, makes the majority of the properties in our area bring in a positive number.

Not the greatest cashflow on the planet, but our focus is on property appreciation, which is HUGE in our market.

Hey guys/gals,

I'm from Portland, Oregon. Same deal, Homes are selling for outragous prices, and the rent doesn't seem to be keeping up. I am originaly from Seaside, Oregon, where it is even worse. You can spend 500k for a piece of junk anywhere else. I am definetely worried about how I am going to keep a posotive cash flow in this area.

Hey I am in the same boat (see my posting). As long as interest rates stay low and old George W doesn't make more mistakes. We should be OK.

Remember Hurricane season is coming and that starts the energy prices and next is... you guesed it^^^^^up go interest rates.

Henry