Thread: Starting out, first steps

Originally Posted by MegaMx

Hey guys,

I'm looking at investing in US real estate, preferably along the west coast so i can fly in and out easily. Before I go any further, I am street and financially smart and not a unreasonable fool with unreasonable expectations.

Current Budget: $250,000-$500,000
Goal: 5-10% ROI annually minimum over three years average

Current thoughts: Buy a handful of properties (one at a time of course, not straight diving in) from different locations (even states) and then over time compare performance and satisfaction and then reinvesting more money in markets I like or see higher potential in. I would do this by putting down 20-25% and then renting out for positive cashflow and hanging onto the property until prices bounce back.

Where I'm lacking is knowledge about the US markets (where to invest). I've heard good things about Houston from various sources so that will be a stop for sure but what resources are available to me to do research on areas? Once I choose areas I will find Agents with experience in investments such as this (most likely from forums such as this if allowed) who have been successful at what they do and who can basically "sell me" on the idea on investing in that neighborhood or that specific property(ies) using statistics, trends and other knowledge that may be hard to find online.

Any suggestions, advice and comments would be greatly appriciated. I found dqnews to be a good starting spot but where do I read from here?

Thanks!

If you are looking for a stable steady ROI of 5-10% then houston is an excellent place to put your money. If you are a speculator looking for your return to come from appreciation then houston is probably not the right place for you. Houston's appreciation rate is usually right around the inflation rate. When ever oil is booming so is houston and you will see appreciation rates hit 6-7% when things are stable. In the past houston has not had a very diverse economy and so times like the 90's oil bust hurt the region very bad. During the 90's houston saw negative real rates of appreciation. This boom and bust nature has left houston with a 3.94% appreciation rate over the last 30 years.

Where houston shines is in rental market returns. You will have no problem finding properties with a 8% or greater NOI. Some will even exceed 10%. One thing you should note about houston is that the 1% rule does not work well here you need to use a 1.3% rule to assure cash flow. This is because taxes and insurance rates are high in the houston area. Home owners insurance runs about .8% of the property value per year and property taxes run between 2.5% all the way up to 4% depending on where in the city you purchase.

Right now houston is experiencing a large number of foreclosures and so there are many excellent buying opportunities. To this point the houston market has not taken a year over year loss during this credit market termoil. In the first quarter this year houston added 3.9% job growth all the while the U.S. had overall job losses. Rental rates have been rising steadily over the last two years eclipsing 6% in 2008 and we still have 6 months to go. Median home sale price to median household income multiplier is 3.5.

I expect that following the stablization of the credit markets houston will go through a 5 year period of above average appreciation rates. I believe this to be true because of the already high rental rates versus property values. The strong houston job growth and my future expectation of above the norm inflation rates. In conclusion houston is about 19% undervalued according to historical numbers. Feel free to ask any questions you have and let me know if I can be of any help.

At this point, I am not aware of any markets in the US that have good prospects for appreciation in the next year or two, however, if you have a 5-10 year horizon and want to cashflow in the interim, then I have heard that places like Houston, Dallas, Cincinatti, Buffalo, Detroit all offer good cashflow prospects.

However, I'd probably put Texas at the top of the list because there continues to be immigration from Mexico which means population growth which means growing demand for housing.

I was looking into population growth recently and ran across this article which I thought I would share about texas population growth.

http://money.cnn.com/2008/03/26/real...tion/index.htm