The Key to Mahesh’s Cash Flow Success (Hint: The numbers don’t lie)
Mahesh is a numbers guy. As a part-time investor, he has no time to waste on Houston rental properties that are not worth his time or money. Cash flow is his main goal while he actively builds a rental portfolio. This means that he has to be very diligent about his buying criteria when purchasing a property. Mahesh aims for $300- $400 in cash flow after closing costs, fees, and rehab costs.
To reach his cash flow goals, he looks for properties in particular neighborhoods within a determined price range. Once he finds a property, Mahesh prefers to use a private money lender to finance the deal. This minimizes fees and the time is takes to close on a deal.
Mahesh uses MyHouseDeals.com to search for properties and stay informed through real estate investing training sessions. He is on track to build his rental portfolio by one or two properties a year, and eventually become a full-time investor.
We recently sat with Mahesh to learn more about the deal he found on MyHouseDeals, why he wanted to become a real estate investor, and his long-term investing goals.
Listen to our conversation with Mahesh during which he talked about this recent deal, plus…
- Exactly what to look for in a rental property
- Why you should consider using a property management company
- How to vet private money lenders
NOTE: Since Mahesh is a Premium Elite member, he received a FULL refund of his up-front membership fee for simply doing a deal! Find out more about our Premium Elite membership here.
Read the full story here…
Tell Us About Yourself…
How did you get started in real estate investing?
Last year, my partners and I were talking about buying some rental properties as an investment in Houston. We started looking for rental properties and all the prices were high and didn’t not make any cash flow at all. We are looking around and saw MyHouseDeals.com and then we started looking at all the deals that are posted in MyHouseDeals.com and it pretty much started from there.
What is your long-term strategy with rental properties?
For the long-term, I’m planning to do one property or maybe two properties a year to build my rental portfolio.
What is your motivation to invest in rental properties?
It is mostly for the cash flow. If there is a property that I think has a potential for appreciation I will definitely go for it.
How do you build up your real estate investment education?
I looked into some of the online seminars from MyHouseDeals, I go to websites like BiggerPockets, and YouTube has a lot of educational videos.
What do you search for to find good YouTube videos?
The videos are about what to look for when you’re looking for rental properties. What are the pros and cons of owning your rental property? Those are things I try to search and find what is the best way to do income variance in terms of the valuation of the property also.
I always go by the numbers. I firmly believe that the numbers don’t lie. We come across all the deeds, but not all are good for us. It might be good for somebody else, but I have the criteria for types of properties I’m looking for when I’m buying a rental property. I need to have at least $300 or $400 dollars in cash flow after all these expenses. We have a set of criteria and then make sure it works. Then we go forward, otherwise we pass on the deal.
How do you determine your monthly cash flow?
There are a lot of factors to look for when you buy a rental property. The first thing is the price range. For example, we cannot buy a $300,000 dollar home and expect some cash flow out of it. I try to stay in the less then $175,000 price range. Somewhere between a $125,000 to $175,000 price range where I can easily rent it out for maybe $1,600 or $1,700 dollars. By doing that we can get some cash flow. While looking at a property, I always look for a comparable property in the same neighborhood. If there are any other properties recently rented out or currently active for rent, by looking at HAR.com. We need to take into account all the closing costs and other costs from the buying process.
Once you buy the property there are a lot of other factors like your insurance, your maintenance, and you have to calculate all the capital expenditures. The most important thing is the property management. You need to account for at least 8% of your rent. Of course, we can’t count too much on appreciation or rent increases year after year, but the things like maintenance and other stuff, those things we need to account for. After all these expenditures, if you can still see a decent cash flow, then go for it.
Do you use a property management company?
I don’t manage the properties myself. I prefer property management companies because I don’t want to pick up a call in the middle of the night saying that, “My toilet is broken,” or something like that. I always prefer property management companies. I don’t want to spend any of my time maintaining a property or taking care of that property.
How long have you been in real estate investing?
I’ve been focusing on real estate investment over the last year. One of my properties was recently bought from MyHouseDeals. It’s from another wholesaler who purchased it there. When I bought it I thought of selling it, but I’m going to keep it as a rental now.
Has your life changed since you started real estate investing?
It changed in the way that my weekends are not normal weekends. On Saturdays I spend my time looking at the properties on HAR.com and MyHouseDeals.
Tell Us About This Deal…
Why did you choose this particular property on MyHouseDeals?
It was 3 bedroom, 2 bath. It was in a good price range and I bought it somewhere around mid-80s. The ARV was around $145,000. Then we are expecting the repairs to be around $20,000-$25,000. One of the things I learned from this project is, the expenditure was way above what we thought initially. It ended up being much higher because we had several surprises in the house. We’re trying to make sure that we fix all of the things that we find because if I’m going to hold it as a rental property then I need to make sure that there is going to be no maintenance.
What would you do to help prevent that kind of surprise in the future?
I will make sure to do my due diligence to make sure that the repair’s properly estimated.
How did you pull comps on this property?
For the comps, I reached out to some realtor friends. I use Redfin to do an initial analysis so that’s where I get the property prices.
What did you use for financing?
I used private lenders to finance this property. The process was really great. I believe I closed on the deal in about two weeks.
How did you find your lenders?
I found these lenders through friends who are interested in doing private money lending.
Do you have any advice for anyone trying to find private money lenders?
I would go with known people. I keep hearing there are a lot of scammers out there because it’s a huge money transaction, so it is better to go with known resources for lending. Also, especially with private lending, you need to have them on the lien of the property and you need to make sure that everything goes well and the numbers are right. Those are the things that you need to keep in mind when you’re going for private lending or hard money lending.
Did you negotiate with the wholesaler on the price for this Houston rental property?
I did not negotiate. Actually I paid a little bit more than the wholesaler asked for because there was a lot of people who were interested. It was like a bidding war over two or three days. Even though there were other people who wanted to pay more than what I did, but he decided to sell it to me.
Do you have any advice for new investors?
Make sure you educate yourself on the buying process, how to look for properties, how to calculate your numbers, and then try to stay within your numbers. There is no place for emotion here so you don’t get attached to any properties. Make sure you know your exit strategy when you are go into a property. You need to be really clear on your exit strategies. Aside from education, connect with other investors. You need to be constantly looking for properties and whenever you see a good one you can go ahead and purchase that one.