Investor
Welcome to the Good Place Investor group!
This section is an introduction to the terms and property types we use in our group. If you like what you see and would like to join, just send the word "INVESTOR" to 817-966-7523 and you will get the instructions to join the group and get the emails.
The first thing to know is that each property that is sent to you will be personally chosen to meet your criteria, investment type, risk tolerance, and budget.
Let's start by talking about the investment types we cover, there are many ways to make money from real estate, and which way you choose to go depends on how soon you want to see a profit and how involved you wish to be. Here are some types:
BRRRR Method: as made popular by BiggerPocket
If you want to build a passive income machine, BRRRR investing is arguably the most cost-effective way to do so. You might not get the quick wins that other options (like house flipping) can offer, but as your portfolio grows, you will be able to meet an exceedingly large portion of your living costs with the rental income from your investment properties. In the long run, you could end up with a passive income machine that can last a lifetime.
The idea:
- Buy: With our help, you will look for a property to buy at a below-market price. This typically involves a property that needs a little TLC.
- Repair: You then repair, rehab, or renovate that property so you can attract tenants who will pay the monthly rent to live in the property. (we can recommend contractors, handymen, etc)
- Rent: Once the property is rented to good tenants, the property starts generating income, which thereby increases the home’s value. (we can help list it or recommend property managers that will)
- Refinance: Once you can show a lender that you are making money from this property and that you have equity in it, you should be able to do a cash-out refinance. (we can help recommend lenders)
- Repeat: Go back to Step 1 (above), buy another property and do it all over again!
The BRRRR Method is great for investors who plan to be very involved to increase their profit. It is essentially fixing up a property, renting it out to make some cash flow, and using the gained value to buy the next property. With increasing interest rates an alternative to refinancing is using a HELOC.
House Flipping:
If you’re hoping to scale your wealth as quickly as possible: House flipping will be the better bet. Provided you are able to sell the properties for a profit, each flip can catapult your net worth. When executed correctly, you can make more money with one flip than most people do in a year.
The idea:
- Search: With our help, you will search for a property at WAY below market value, this means properties that need A LOT of work and will not be approved by lenders (cash offers are recommended)
- Calculate ARV: We will give you a CMA (comparative market analysis) that will help you figure out how much the ARV (after-repair-value) is.
- Buy: Use the 70% rule to determine the maximum price you should spend on the house to turn a profit. Calculate the after-repair-value (ARV) of the property, multiply it by 0.7, then deduct your estimated renovation and selling costs. (we can help with these calculations)
- Repair: The sooner you can fix up the property, the sooner you can flip it. (we can recommend some contractors and handymen)
- Sell: We will help you list your property and attract buyers. This is where you make the profit!
This is great for investors who want to make a quick profit, are good at acting quickly, and don't get easily stressed. The level of involvement depends on whether you will rehab the property yourself or give it to a contractor you trust. It's great for people who have funds available for a cash offer and rehab (some investors use hard money loans for both but this can eat up the profits).
Rental Properties:
Rental properties aren’t one-size-fits-all and there are many ways to invest in rental properties. Here we will look at 3 types: single-family, multi-family, and turnkey.
- SFR: Single-family rentals have dominated residential investing for many years. These investment properties are known for their profitability, affordability, and demand. As a result, single-family homes are a reliable go-to investment for beginner real estate investors. The idea is you buy a property, do some light fixing and upgrading and rent it out. The rent should cover the mortgage, and maintenance and make some profit. In a few years, thanks to appreciation, the property can be sold for a great return. The best part is that with a property manager, the involvement can be kept to a minimum, great for out-of-state investors.
- MFR: Multi-family rentals are more difficult to finance (a duplex might not be bad, but a 10-unit could be 1-2 million dollars here in Dallas), having that said MFR is great in that the competition is less fierce and the cap rates and cash flow greater. Investors can generally earn more due to the extra units while lowering risk by spreading the income sources among multiple units. You can still have tenants covering the costs (or at least some of it) even if it’s not fully occupied, whereas with a single-family property, you suffer negative cash flow during all vacancies. This is a great option for investors that have some experience and can get large loans or even investors who want to live in one of the units rent-free.
- Turnkey Rental: While a turnkey could be a single-family rental, a multifamily or a vacation rental, we are separating it because it's a very specific type of investment that benefits investors who want the least involvement possible even if it means less profit. These properties are ready to cash flow, they have been renovated to a point where it’s ready to list or are already being rented out. This is great for investors who focus more on appreciation than cash flow.
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Terms:
Now that we have talked about types of investments, here are some of the terms of things we look for in all investments:
Cap Rate: The capitalization rate is the rate of return an investor can expect from their real estate properties, calculated by dividing the income by the market value. In general, we consider 6-7% a good cap rate and 8%+ a great cap rate (turnkey can be lower and would depend on other calculations)
COC ROI: Cash-on-cash return of invesment is a good gauge of how well an investment property will perform. It expresses the ratio of annual cash flow to the amount of actual cash you invested upfront. In general, we consider 8-12% a good coc roi, because it beats what you would get if you invested in long-term index funds.
Cash Flow: Cash flow is the amount of cash you have leftover each month from a rental property after paying all the operating expenses and setting aside money for any future repairs.
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Neighborhood ratings:
While we have our preferences in Dallas and might recommend some areas more than others, when it comes to our neighborhood rating we use Homeunion's Investor Location Rating, which rates the DFW and surrounding areas from A-D.
A: Neighborhoods that generally offer lower risk exposure, higher appreciation, but with lower yields. These neighborhoods are usually higher priced.
B: Neighborhoods that offer moderate risk exposure, a balance of yield and appreciation, and typically have mid-priced properties.
C: Neighborhoods with potential for higher yield but also higher risk. These are typically lower-priced properties.
D: Neighborhoods with the greatest risk, we won't be looking at any of these.
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We look forward to sending you properties that match your criteria, risk, and investment goals. Remember that as your real estate agents, there is a positive correlation between your success and our success. So, we are here to help, because you are our investment!