We were talking about yield play and value play when it comes to buying single family rental homes in the Dallas, Fort Worth, Denton area. We were talking about buying HUDs and foreclosures.
I must digress to tell you about tax foreclosures. They are different from mortgage foreclosures. In the state of Texas you get a Tax Lien Certificate if you secure a property at a tax foreclosure. The delinquent owner has a period of time where they can pay the tax plus the penalty plus your interest and rectify the lien. You do not get possession right away. So when I say foreclosure in these blogs, I am talking about a mortgage foreclosure, not a Tax Lien Certificate. Now, let’s get back to our discussion…
I will talk about what kinds of homes are best (typical) to invest in, in a following post. Now, I mentioned earlier that I don’t like either play, yield or value. I like to find the ones that have the relative ease of fix-up and operation like an yield play for the price of a value play. The truth is I find these all the time. This is what you need to know:
- Things that look bad may not be that bad.
- Things that look good could be a disaster.
Unfortunately – or fortunately for those who decide to invest in real estate correctly – there’s no “Real Estate Investment School”. You need to take the initiative to come to places like this and meet mentors who are willing and positively thrilled to teach you. As long as there isn’t broad knowledge of how to evaluate a property to buy, there will be great deals and there will be disaster deals as well.
So here’s the secret: Find the property that looks bad but IS not bad.
Things That Don’t Bother Me and Things That Do
So how do you go about doing that? What’s not bad and what should I steer clear of? Well, it depends on your level of comfort in buying and operating single family rental homes. If you are a new investor and working with your mentor for the first time, I would stay, stick to the paint-carpet houses. These can look (and smell and feel) really bad but they are really easy and cheap to fix. It’s a controlled fix. I will write an article on how to rehab a house to get it ready to rent. We are still in the buying stage, so I don’t want to delve too much into that – except to say, you don’t over do things. Keep it simple, functional, updated and clean.
A house that looks bad; overgrown landscaping, missing lighting, bad paint job, dirty walls, filthy carpet, a missing appliance or two, broken window glass – does not bother me. To tell you what DOES bother me, I’ll tell you about this one house. It was owned by Fannie Mae. I walked in and could not believe it was a foreclosure. Great neighborhood, updated counters and appliances, satin nickel fixtures and fans, nice custom paint, tile floors, upgraded carpet – you name it, it had it. There was just one tiny problem. One wall in the house was sinking! Of course, when I say “tiny”, I’m being sarcastic. They must have had the kind of issue that I don’t take for granted. Under-slab plumbing issue that is not easy to access and fix. They had beautiful tile floors though!
In the next article, we are going to talk about the buying process. How to look for and buy a foreclosure. See you then.