Mynd Property Management has expanded its presence in Texas with the acquisition of Houston-based Empire Industries, a property management company with more than 800 single-family homes under management in the Houston and Dallas-Fort Worth markets. With the acquisition, the Oakland, Calif.-based company manages more than 9,000 units in 16 markets.The deal adds 763 residential units in the Houston area and 63 units in the Dallas-Fort Worth market to Mynd's assets under management.Empire Chief Executive Pete Neubig will become Mynd's regional director of Texas and Steve Rozenberg, its president, will serve as vice president of investor education.“We are excited to welcome Empire and its leadership team to Mynd,” Doug Brien, Mynd's CEO, said in an announcement. “Over the past two years, Mynd has joined forces with like-minded property management companies whose mission and goals align with ours, and Empire fits the bill perfectly. Our objective at Mynd is to grow our portfolio of managed properties to 100,000 and Texas will be a significant part of that growth.”Prior to the Empire acquisition, Mynd managed about 70 single-family rentals in the Houston market gained through the merger with RentVest in May. In addition to property management, Mynd offers residential rental properties for sale in 20 metro areas.Empire will retain its name until the first quarter before changing over to Mynd Property Management.
Investing in real estate can be expensive, but opportunities to save money abound. Knowledge is key and, as such, our guest today is Margo Broughton with the Houston division of Mynd Property Management. Margo is here to give us the top three things that will cost investors in Houston or any other market.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management and I am here in Houston with Margo Broughton. Margo has been a property manager for 37 years in the industry and she is in the Houston division of Mynd. Margo, thanks for being here today.Margo Broughton: Thank you. Thank you for having me.Steve Rozenberg: Today what I want to talk about is the top things that cost investors money. And I put a caveat on that to go, do they really cost them money? That's perception, right? Some of it is just part of doing business, I think—my personal opinion. So let's go with, what are the things that do cost investors money and then we can kind of expand on them. Can you give us a rundown on that?Margo Broughton: Absolutely. And you know what’s interesting, is it's different for different investors, and then when you have a brand new investor, obviously some of these things, they don't know to anticipate. I picked what I thought were the top three things.Steve Rozenberg: Sure, yeah. That's a good point. And for those watching—you may have different things that you think could be costly and maybe these are just part of your business model. Again, this is just to educate you so that you understand that there are different costs. And again, to me it's all about perception. So, what's the number one?
Margo Broughton: Well, what I chose as number one is the leasing fee because there's always going to be a leasing fee. And most owners, especially if they're new, if they're new investors, they don't know to anticipate this.Steve Rozenberg: They don't factor that into the cost.Margo Broughton: Exactly. And then it hits them and they go, "Oh my God." So in the Houston market, for example, our leasing fee industry-wide, whether you lease the house yourself, whether your management company leases the property, whether you have an outside realtor, whatever it is, you have to pay the realtors. And then in the Houston market it's a full month's rent. So you definitely need to have that budgeted in ahead of time.Steve Rozenberg: And a lot of times if you're not planning on that now you've had a vacant property, you haven't been getting cash flow. Now you’ve got it rented and you're thinking, "Okay, I'm going to get this money." And the agent or the management company says, "Well wait a second, that first is mine." So now you're not making any money until month two and maybe you didn't plan for that.Margo Broughton: Right. And what I hear sometimes, especially with newer investors is, "Well, wait a minute, I thought the management company took care of that."Steve Rozenberg: "I though that was part of my fee."Margo Broughton: "I hired you..." And of course we have to pay the realtors.Steve Rozenberg: Somebody has to do the work. What I would say is even if you wanted to do it yourself, you've got to value your time. So you've got to say, "What is my time worth?" And maybe it's not worth as much as the one month's rent and you want to do it yourself and you have the ability to market it and do the credit check and the background and all that. That's fine. But again, there is a value that has to be associated with doing that.Now, in other cities in Texas, and there are other prices that they charge. And that's just what the industry is.Margo Broughton: Yes. And the lowest I've seen out there is about 50% of a month's rent. So in the Dallas area, it usually runs about 75% of one month's rent. Houston, it's 100%. But you know what? You brought up a really good point, Steve: the vetting of the tenants. So if you don't have a professional management company doing that for you, you may miss something and that can be very serious and certainly cost you far more money down the road by not doing that really well.Steve Rozenberg: Absolutely. Without a doubt. Now, the first one is the leasing fee. What's the second one?
Margo Broughton: The next one that I picked was the make-ready expense. So in between tenants, let's say one tenant moves out before the next tenant moves in, you're always going to have to do some kind of a make-ready. Probably the most expensive piece of that is painting. So you can't really do touch up paints and make them look good. We do corner to corner.Steve Rozenberg: Okay. Can you explain what that means to the people?Margo Broughton: Absolutely. So if your one wall is marred up, you don't want to just paint over the marred area, you're going to want to go from scene to scene where it can make it look a little bit better.Steve Rozenberg: Makes sense.Margo Broughton: But if you need to do a full paint, that's a lot of square footage in most cases.Steve Rozenberg: Paint's not cheap.Margo Broughton: Paint's not cheap and the labor's not cheap. So it can be expensive. So setting aside money for in-between tenants and keep in mind, now you're going to have to lease it again-Steve Rozenberg: Yeah, so there's another expense.Margo Broughton: ... That's another leasing fee. So now you've got the make-ready costs plus the leasing fee. What I tell investors is don't step over dollars to pick up pennies. I've heard you say that many times.Steve Rozenberg: Absolutely, absolutely. Cheaper is not cheaper. You buy cheaper paint, you spend the money, you put the paint up on the wall and now it looks—it doesn't go with the rest of the house. It's a lower quality. Now you can't get the value for the rent because the house does not look good. Now you're upset because you spent money and you may have to spend more money to do it right, or appliances not matching the property is another one I've seen. And so again, yeah, I agree. I think what this leads to—it's funny because number one leads to number two sometimes. Meaning if you don't lease it to the right person and you don't do the background check, now you're going to have an eviction or maybe a make-ready, a vacancy and the vacancy is going to cost you. So if you do number one wrong, you may have to do number two.Margo Broughton: Yes. To more of an extent than-Steve Rozenberg: To a larger extent.Margo Broughton: ... you would have had to.Steve Rozenberg: Right. And if you didn't budget any money for this, now it really hurts you because now it's unexpected. Nobody likes when an unexpected cost of a vacancy, a make-ready cost, and a leasing fee all hits you when you're not making any revenue for your rental property.Margo Broughton: So you're talking what? Three months worth of rent or something like that? That hurts. That hurts.Steve Rozenberg: By trying to save some money, so it's just perspective. Now, what is the final and number three?
Margo Broughton: Okay. The final that I wrote down that I think is probably the most critical is eviction costs. Now, evictions in Texas, I will tell you, are less expensive than most places, and relatively quick. But as a very wise person once told me, "This is the sandbox we play in." Quoted by Steve Rozenberg.Steve Rozenberg: That was a wise person. That's right, yes.Margo Broughton: Quoted by Steve Rozenberg, but this is the sandbox that we play in. What I elaborate on when I'm talking to owners is, no one likes broken glass in their sandbox, but every once in a while you're going to find some broken glass in your sandbox and that is an eviction.Steve Rozenberg: And no matter how well you vet a tenant, screen them, there's nothing that says that they don't get laid off. They don't get divorced, something downsized. All these things happen and now, at the end of the day, they can't pay rent. You have to make a decision and part of your lease agreement, part of your contract, you've got to go through this eviction and many people, they don't want to do it because they're going to hope and pray. They're going to do this. They're going to do that. But at the end of the day, you're running a business. And that business states the contract is what's controlling that business. The contract says if you don't pay the rent, you have to remove them from the property. And again, there's a cost for that, right?Margo Broughton: Of course.Steve Rozenberg: There's the forcible detainer. What are some of the other costs?Margo Broughton: In Texas, our evictions are pretty quick. In fact, how we run it is, if you don't pay by the third, on the seventh, you're getting a notice to vacate, which is the first step in that process. And then we can usually, if you don't pay by the 15th, we're going to file the eviction. Within a week we'll be in court. The judge will give them seven days to be out and that's usually where it ends. So you're looking at three to four weeks just with that piece.Now if the tenant files an appeal, which doesn't happen very often, you're talking about another month and you're talking about $1,200 payment to an attorney.Steve Rozenberg: And now no cash flow coming in from your property. So now you're minus another month of cash flow. Again, it's not to paint a dark picture, but again, these are the three top things that will cost you money. And these are things that I would suggest that you put aside in a contingency that if it should happen, you are prepared financially so you're not putting yourself in a bad position.Margo Broughton: Right. One thing I would like to add to that, because I think that's really important, is if you have a professional property management company doing this for you, you're going to get the evictions done much faster and much less expensive. The other thing is I notice that owners that manage their own properties tend to give a little bit more leeway to the tenants. They let them get a little bit more delinquent and then the tenant believes that, "Well, if I did it last month, I might as well do it this month." And so then it kind of perpetuates. So definitely a professional property management company can help you with this. And then I wanted to also mention, because there are a lot of folks out there that might have an elderly tenant. “Well, I don't want to evict an elderly tenant,” but it's business.I will tell you that we just did one of those the other day, and at the same time that I was filing the writ, I was calling the Adult Protective Services to get this elderly tenant some help. So we did it-Steve Rozenberg: So it's not always a bad thing where you're putting them on the street. And again, it's a business. We don't want to make people where they don't have a roof over their head. But at the end of the day, we also have responsibility to the owners to make sure that we are doing what we said we're going to do per the agreement. And again, we are held responsible, the owners are held responsible by the banks to have mortgages. So it goes on down the line.Just to recap here, there are costs associated with owning a rental property. There are going to be expenses. Margo, the the top three are?Margo Broughton: I think, now there's more, there's a lot to choose from, but in my opinion, I thought leasing fees, make-ready costs and evictions.Steve Rozenberg: There you go. Alright well, if you want to know more, you can go to our website at mynd.co. So it's M-Y-N-D.co. Also, if you want to find us on Facebook, we have the MasterMynd Real Estate Investment Club and you can find us on Facebook as well at Mynd Property Management. Thanks for watching, we'll talk to you later.Margo Broughton: Thank you.Steve Rozenberg: Bye.Every investor has to have a budget to be successful. This means having a full understanding of what factors will determine your budget. For example, leasing fees are an almost universal in property management, as a realtor must be paid to find the tenants. While many investors may believe this is handled by the property management company, it often isn’t and is typically a percentage of one month’s rent.Likewise, factoring in your make-ready budget is a must. This is the cost to make your property move-in ready for the tenant, and is an up-front cost you will have to endure before you can begin making money on that property.Lastly, every investor or property manager should factor in eviction costs. While evictions are not the norm, nor are they desired, they are possible. Being ready to endure an eviction is key, both personally and financially; however, remembering that you are running a business and that nothing is personal can make this process far easier, as well.
Emergencies are often the most stressful aspect of owning a rental property. Today we are speaking with Margo Broughton with the Houston division of Mynd about what investors or property managers should expect in an emergency and how to determine if an emergency is occurring, overall.Steve Rozenberg: Hi everyone. This is Steve Rozenberg with Mynd Property Management and I'm here with Margo Broughton from the Houston division of Mynd Property Management, and Margo has been a property manager for 37 years.Margo Broughton: A very long time.Steve Rozenberg: Very long time. What we want to talk about today is, Margo, if I'm an investor and I hear the word emergency, how do I identify, number one, what I need to do in an emergency? What is an emergency? Just kind of give me some understanding from a property manager's perspective of giving me some educational tips.Fire, Flood and BloodMargo Broughton: Sure, absolutely. Well, one thing is a little bit reassuring for you as a property owner, there are very few things that are considered emergencies, especially in the state of Texas, there's almost nothing that's considered an emergency.Steve Rozenberg: I think it's important for people to understand is knowing the definition of what is an emergency.Margo Broughton: Absolutely, absolutely. The overall understanding is fire, flood, and blood.Steve Rozenberg: Okay, fire, flood, and blood.Margo Broughton: Those are probably the biggest emergencies you're ever going to have. Now, what tenants think are an emergency, and what a property owner thinks are an emergency are two entirely different things. Typically, property managers or management companies will have a set of guidelines that they use. For example, you might say, “well, an AC being out is an emergency if the temperature is over X amount,” then you might consider that an emergency. And basically then you want to get out there within 24-48 hours to get something fixed. But again, it's not a code that it's an emergency, but certainly in the middle of summer in Texas, a tenant will think that an AC being out is an emergency.
Steve Rozenberg: Right, and then obviously there are laws, Texas property code, that will dictate what the law actually states. That's the end all-be all when it comes to emergency, un-emergency.Margo Broughton: Absolutely. I took a quote actually out of the Texas property code here. According to the Texas property code, a reasonable time to make repairs is all it says, so it's very ambiguous. It's kind of, you have to sort of read between the lines. But what it says in our Texas property code is that there is a presumption that seven days is a reasonable time to address something, and that's not even to fix it. That's to go out, check it out, maybe get a contractor, have it dispatched, that sort of thing. You want to have it addressed within seven days according to Texas property.
Steve Rozenberg: Okay. Now, let's talk about safety and habitability of a property, because that's important. It may not be considered quote, unquote an “emergency,” but it could be making the house unsafe or uninhabitable.Margo Broughton: Absolutely. One of the things that I like to talk about when we're talking about emergencies, is if you are doing periodic inspections or assessments of your properties, that's going to help, hopefully bringing down the number of emergencies that you have. So you can look at it ahead of time and kind of take a proactive stance. That's going to help. Now if a property becomes uninhabitable, let's say as we experienced in Houston, as you know, during hurricane Harvey, properties became uninhabitable because of that storm. If that's the case, you can't hold a tenant to the lease during that time. In situations like that you would have to let them out of the lease and give their security deposit back.Steve Rozenberg: Right. And just so people understand, uninhabitable: sewage, rat infestation, those kinds of things, right?Margo Broughton: Yeah, rats, sewage, bedbugs—all of those things will affect the health and safety of an ordinary tenant. And that's kind of the key. Those are good points that you just brought up, that those things will affect the health and safety of people.
Steve Rozenberg: Let me ask you this, and obviously in the lease agreement it normally states that you have to give prior notification to getting into a property if you're going to repair it, but there are certain times where you don't have to give that.Margo Broughton: That's right. That's right.Steve Rozenberg: What are those times?Margo Broughton: Most of the time what we see in property management and where it happens a lot is water. If you've got standing water, falling water, rising water, all of those things obviously can seriously affect the house, not only damage everything in there: electrical, sheet rock, all of it.Steve Rozenberg: Water is dangerous.Margo Broughton: Water is bad. You want to get in there as fast as you can. And as long as you can get in there and just even knock on the door and say, “hey, I'm here to fix that,” most tenants are going to be happy to see you.Steve Rozenberg: Right. If there's a storm going on and the roof blows off, you're not going to make an appointment with the tenant. That's an emergency situation. You're going to go there and fix it, and you're going to get it taken care of or send someone.
Steven Rozenberg: I think there is something that's interesting that, as a landlord, most people do not know, that is if there's a tenant that owes money and they have a problem with the property, and this is a Texas law—can you explain what that is for the people?Margo Broughton: Absolutely. Landlords are happy to know this, that if the tenant owes money for rent, they haven't paid their rent, they call in a work order, you don't have to fix that work order until that rent is paid in full. That is stated also in Texas property code.Steve Rozenberg: Right. Obviously you don't want to make your property worse by proving a point. You've got flooding water, you don't say, “you owe me money, I'm not going to fix it,” but it's something to note that if the tenant owes you money and they start saying this needs to be fixed, and this needs to be fixed, and they start making a litany of lists that are going down, you can say, “wait a second, by law, I do not have to fix anything, because you owe money.”Margo Broughton: Right. And you also don't have to fix anything if they caused the damage. If themselves, or their friends, or their visitors caused damage, it is not up to the landlord to fix those things. And if the landlord does fix them, that certainly can be charged back to the tenant.
Steve Rozenberg: What if they caused the emergency?Margo Broughton: Again, so this happens where a tenant might call the police, I just had one of these the other day, the police come bust down the door because they're having some kind of domestic dispute. Now the house is not secure. Is that an emergency? Sure. That's probably an emergency. So of course we're going to go out and take care of it because of liability reasons, but we're going to charge that back to the tenant.Steve Rozenberg: It's going to go back to the tenant, yeah. So, I think what people need to hear and know is that yes, there are emergencies, but again, there's rules and maybe caveats with those emergencies. Like you said, not everything is an emergency, and most things are not emergencies unless the house is flooding, it's on fire or there's blood, as you said. But again, it's just something to understand that, when you are a landlord here in Texas, there are laws that protect the landlord and that protect the tenant, as well. There's things that you need to know and understand, so Texas property code is obviously good for you to know and understand. Margo, if they want to maybe find us, and they want to know a little bit more about Mynd, obviously they can go to a website, mynd.co. M-Y-N-D.co. And again, they can look us up online. Margo, thank you very much. I appreciate it.Margo Broughton: Absolutely. Absolutely.Steve Rozenberg: We'll talk to you guys later. Bye. Bye.Margo Broughton: Bye.It might be reassuring to know that, as an investor or property manager, very few things are considered an emergency. While a tenant may have a different perspective on this statement, typically an emergency, from a property management perspective, involves one of three things—fire, flood or blood.Likewise, while not often considered an immediate emergency, certain situations, such as a broken heater or air conditioner, can become an emergency, depending on the time of year. As such, it is always best to keep up with regular maintenance, have a dependable team of vendors, and know what rules and regulations are spelled out in codes and ordinances that dictate resolving such a scenario.
Making a property move-in ready can seem pretty daunting, especially if the previous lease ended with an eviction. We are on-location, today, visiting a property with Pete Neubig, Regional Director for Texas with Mynd Property Management. Pete is going to walk us through what a property manager or investor can expect when making a property ready for new tenants, particularly after an eviction.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management. I'm here in Houston, Texas. And I'm here with my good friend Pete who is the Regional Director of Texas for Mynd Property Management. We are here today, Pete, in a property that is vacant, but this is isn't a normal vacancy, this was an eviction.
Pete Neubig: Correct. Eviction, you have a little bit more work. In this house here, we're sitting in the living room. We're in a house on Crescent Cove here in Houston. We're in the living room and the first couple things here is obviously this wall will need to be repainted. These holes will need to be patched up. Right? Along with the whole thing, this whole deal. The blinds look good. You just have to replace the wands on the blinds.Steve Rozenberg: From an investor's perspective, this is not that bad right now. The floor is not bad, right? It's not that damaged.Pete Neubig: The floor's in good shape. Your ceiling's in good shape. In this one here all you have to do, it's a full paint, it's patching some holes.Steve Rozenberg: Patch and paint.Pete Neubig: Full paint, and most likely replacing the blinds. It's easier to replace blinds than to fix them.Steve Rozenberg: Let's take a walk through we'll go look at some more stuff in the house.
Pete Neubig: All right, we're in the kitchen now. Steve, notice in the kitchen we have tile here. Which again, as an investor in the kitchen, wet areas, we like tile.Steve Rozenberg: High traffic, you don't have to replace it.Pete Neubig: You can also do vinyl here but we like tile better. Now notice in this case, tile's in really good shape. The kitchen, when you first look at it, it’s like, "Oh my goodness, it's in really bad shape." But if you notice, the cabinets are in really good shape, the granite is in good shape, the appliances are here. Which is good, especially on eviction, which is really good. Here you need a thorough clean, replace the blinds, and really that's it in this.Steve Rozenberg: Yeah, it's not bad. Once you clean the windows and clean it up it would look like a whole different place.
Steve Rozenberg: All right, so now we're in the utility closet. You see we've got washer and dryers here. Pete, what's your take on having washer and dryers in this rental?Pete Neubig: A couple of things, Steve. One is, I like providing washer and dryers. Now here's the thing though, it doesn't increase the rent—Steve Rozenberg: You're not going to get more money.Pete Neubig: —but it allows you to get it rented quicker. What we do in our leases here in Houston and Texas region, is we omit these. We'll give them to you. If they work, great, if not we don't fix or replace. What we will do is we will remove.Steve Rozenberg: Would you remove these like right now, for the make-ready? Would you remove these out of the property?Pete Neubig: We would test them, if they work we would keep them. We would tell our owner, "If you want to, you can replace when something happens,” but per the lease and legally, you don't have to.
Steve Rozenberg: All right so now we're at the stairs. We're going to go up to the second floor. Obviously, if you're looking at the carpet on the stairs, it's going to have to be replaced, right?Pete Neubig: Yeah, it looks in pretty bad shape. It's dirty. Again, if we could, I would spend a little bit more money and I would put laminate or some kind of hardwood and just build the stairs. If we can't, also know Steve, that when you do carpeting, it's a little bit more expensive to do stairs.Steve Rozenberg: Again, you're probably going to have to replace it more often than if you just spent a little bit more money and put the laminate in and then you're done with it.Pete Neubig: I'm a big fan of capital improvements, spending money upfront if you have it.Steve Rozenberg: Then you don't have to worry about it.Pete Neubig: Then you don't have to worry about it as much.Steve Rozenberg: All right, let's go upstairs.So now we're in the master bedroom. We're upstairs. It doesn't look bad. Again, on the surface it may look bad but, in reality as we know, this is basically a replacing of carpet, and fixing the holes in the walls, just like we saw before. What else?Pete Neubig: One thing about the house that I don't like, it's that the carpet is dark, which means that it makes the room smaller. We like tan carpets. I do like carpet in the bedrooms. I do see a lot of people moving towards planking, even laminate, even in the bedroom.Steve Rozenberg: And then just a rug.Pete Neubig: Now this carpet here, there's a couple of stains in there, but if we can get them out, we keep the carpet.Steve Rozenberg: This is actually clean. Yeah, this may be cleanable.Pete Neubig: It might be cleanable. The walls, just like the living room, have to be painted. With this house, the big cost of this house is going to be painting. The blinds are going to need to be replaced. If this was my house, I would have a fan light. A ceiling fan just, even though they get more damaged, they bring in the client.Steve Rozenberg: Yeah, exactly. It just looks more inviting if you have the ceiling fan in the bedrooms. It's not very expensive to have, as well.Pete Neubig: Now if this wasn't an eviction, most likely this would be cleaned, there would be a couple of touch-ups on the wall that would have been needed to be done, and maybe a paint in one wall.Steve Rozenberg: But because it's an eviction, they're going to leave it.So now we are in the master bathroom. What are your thoughts, Pete?Pete Neubig: A couple things here, Steve, obviously you want to make sure you have light bulbs. If this is rusted out, it looks like that's the color so it looks in pretty good shape. Again, the main thing with this bathroom here, is it just needs to be cleaned.Steve Rozenberg: Yeah, it's actually not bad, or in bad condition.Pete Neubig: What I like about this bathroom too, it's got a tub. Families like tubs because that's how they bathe the children. So again, I don't even think you need to repaint this, maybe wall, but not the whole thing here.Steve Rozenberg: Yeah, it's not that bad actually.Pete Neubig: No, not bad at all, especially for an eviction. If this wasn't an eviction it'd probably look very similar, to be honest with you, in this room.
Steve Rozenberg: Yeah. Now we're going to go take a look at the other bathroom because that has a little different look to it.Pete Neubig: We're in the secondary bathroom. As you can see here, evidently the tenant who lived here, thought they were a plumber. It looks like they were trying to fix something and obviously this is not the way it's supposed to look. In this case here, obviously we need to put in the tile, we need to put in new commode in, new toilet in. The bathtub is in good shape. The paint is in decent shape. If you're going to do all this new work, you're probably going to repaint. This is a lot of work in this bathroom, for sure.Steve Rozenberg: Okay everyone, so we just saw what our property looks like after a tenant is evicted. I think you and I both agree that actually was not that bad of a property, considering it was an eviction.Pete Neubig: For an eviction, that property was not terrible. Obviously we had the issue with the one bathroom, but other than that, it's a really deep clean and some paint.Steve Rozenberg: Yeah, so not too much, not too bad, it could be turned very quickly. In a couple days, it can be back on the market ready to lease and get new money again.Hopefully this helped you. If you want to know more, obviously you can go to our website, mynd.co. M-Y-N-D.co, or go to our Facebook group, MasterMynd Real Estate Investment Club and you can get more information there and talk with people like Pete and myself about your properties and your challenges. Talk to you later, bye.Paint is the first step when making any home move-in ready. And from moving furniture and hanging pictures, it is also often the post obvious repair that needs to be made. Blinds are also a fairly obvious repair, though replacing blinds is often cheaper than getting broken ones fixed.Owners can often save money in the long run by investing in the house, from the beginning. By replacing vinyl or carpet with tile or hardwood flooring, an investor can insulate themselves from having to replace a carpet or vinyl tiles, should they be damaged by a tenant. They are often easier to clean, as well, which can save time as making a property move-in ready requires cleaning the property thoroughly. It can save money, as well, as a prepared investor with a solid team of professional vendors can have a property back on the market following the end of a lease within a few days.
Cities often grow organically. This is doubly true for Houston. With such lax zoning laws and recent infrastructure developments within the city, Houston is growing in a very particular direction. Today we are speaking with Pete Neubig, Regional Director for Mynd Property Management in Texas, about how Houston is growing and what factors are ultimately determining this growth.Steve Rozenberg: Hey everyone, this is Steve with Mynd Property Management. I am here in Houston, Texas with my good friend Pete Neubig, who is the Regional Director for Mynd Property Management for Texas.So Pete, let's talk a little bit about Houston. You and I both know Houston and the fact that we know it's growing, but it kind of is growing in a certain direction, right? And that affects rental prices and prices of properties, right?
Pete Neubig: Yeah. So back in the 50's and 60's when the city was really being developed, downtown Houston was the center point of Houston. But what's happened in the last few decades, especially in the last 20 years, is that you're starting to see that the city of Houston, the midpoint or the center is now being moved almost northwest. And there's many factors. So, the big one is that a lot of the oil companies have moved out of downtown and out of those buildings and they moved into what's called the oil corridor or the-Steve Rozenberg: Energy corridor.Pete Neubig: Energy corridor. Thank you. It's called the energy corridor, which is literally west and a little bit north of town. So what's happened is, because they employee so many people and then there's so many businesses that feed off of those businesses, secondary businesses, a lot of businesses are being developed there. So now what happened was that now housing is being developed there and now they just finished Route 99. Right? And so by 99 connecting, now people can get to that area of town even more efficiently.Steve Rozenberg: Right. And so just so you understand, Houston is made up of, basically the freeway system is made up of loops, concentric circles. So there's an inner loop, which is the 610, then it goes out, the outer loop is Beltway 8 and then the newest is 99.And what Pete's talking about is, the energy corridor goes from downtown Houston westbound to Katy. Now what's happening is this energy corridor basically loops around the whole Northwest of Houston and that is where we're seeing a lot of growth surging because it's now available to get to.Pete Neubig: Correct. And because there was a lot of available land, builders, instead of buying one plot, they can buy tracks of land and can build communities out there.And that's exactly what's happening. So you're seeing Katy has exploded, Cypress has exploded and now they're actually going past Katy and Cypress. Places that used to be called the country are now called suburbs.Steve Rozenberg: Yeah. Because now they're accessible and you're seeing that people are able to get lower prices. You're seeing families want to move out there. Because Houston is such a transient city, you're seeing a lot of people come in, they want to rent because maybe they're relocating with their company, so they're looking for rentals in these outer areas, which now are accessible and the prices are lower for now. It will go up, obviously.Pete Neubig: And because everything's moving west, to get through downtown is a traffic nightmare. So if you lived on the East side, it's tough to go work for one of these oil companies to get through on the West side. So what's happening is the East side is dwindling a little bit and the land is going, actually appreciation's going up, but because there was so much land available that the price per land was actually pretty low, even on the West side.Steve Rozenberg: Exactly. And one of the things you want to know about Houston is, on the East side it is restricted because of the river, the Gulf and Lake Houston. So it's physically limited on the East side. That's why so much growth is going West and now it's going Northwest. So if you're looking to buy a property and you want to know what areas are good, if you took it in a pie-type quadrant, you're looking at Northwest of Houston as really the places where you're getting great prices, you're getting great rentals, you're getting new properties. And again, there's just better school districts. Everything's new so you're getting a much better price point as of right now. Though like I said, that will change over time. But right now that's what you're getting.Pete Neubig: But interesting enough, you and I like East side of town. We like the East side of town because it's blue collar and because there's a lot of gas and petroleum refineries there. But different subject for a different time. But that's ultimately why Houston is actually moving Northwest—the mid point of Houston.Steve Rozenberg: So there you have it. If you want to know more, you can go to our website at mynd.co. So it's M-Y-N-D.co. Also you can go to our Facebook group, the MasterMynd Real Estate Investment Club. There you got people like myself, Pete, other investors there. If you want to know more about Houston or any city, you can go in there, you can comment, like, engage and have conversations. So thanks everyone for watching, we'll talk to you later.Houston is growing, and it’s growing northwest. This is for a number of reasons, each of which can help any investor determine where the best neighborhoods are to invest in going forward. For one, many oil companies have moved out of the downtown Houston area for cheaper locations in the suburbs—particularly in the Energy Corridor, a business district located in the north and west of Houston. Likewise, the completion of State Highway 99, or the Grand Parkway, has made the northwestern suburbs a far more desirable location for young families and professionals moving to or within the Houston area.While there are many reasons why Houston is growing the way it is, these factors are not blanket facts. Some neighborhoods in other locations around Houston, such as the Third Ward to the south of the city center, are experiencing growth and investment as well; however, knowing how a city will grow and expand into the future can help any investor make the best decision when choosing a property to buy.
Making a property move-in ready often requires more than cleaning up. Today we are on-location at a property in Houston with Pete Neubig, Regional Director of Texas with Mynd Property Management, to discuss what needs to be done to make this property move-in ready, and what investors and property managers should look out for when making their own property ready for new tenants.Steve Rozenberg: Hi everyone. This is Steve with Mynd Property Management and I am here in Houston, Texas, with my good friend, Pete Neubig, who is the Regional Director of Texas for Mynd. Pete, so tell us a little bit about this property that we're at now.Pete Neubig: Sure. So, we're in a house in Katy. One of the things that we like, as investors in Katy, is that they have a really good school district, which brings really good renters or tenants to the property. So, in this house here, we're standing in the living room.What we like about this house is, notice here we have laminate flooring. And then we have the tile from the kitchen area, the dining room and kitchenette area. And we like the fireplace, it's real nice.
Pete Neubig: Now, with this house here, the owner probably lived in this house. I don't know for sure, but most likely, because you could tell the coloring on the walls. Now, even though the coloring is kind of bluish, which we're not—Steve Rozenberg: We wouldn't pick that.Pete Neubig: As investors, we would use the color beige. It's still a soft enough color, and it was a really good paint. And it's in good shape.Steve Rozenberg: And the nice thing about these houses, especially here in Texas, is the kitchen area is open, so it makes the house look much bigger because the kitchen is open.Pete Neubig: Along with the high ceilings, as well.Steve Rozenberg: Yeah, the high ceilings, as well. 80% of your time is spent in the kitchen. So again, this is good. The kitchen looks great. I mean, the stainless steel appliances. The cabinets look good. This house is ready to go.Pete Neubig: This house is going to run a little bit higher than a normal house that we have. This house is going to rent about $2,000. And so that's why, with a house for $2,000, you will get new paint. You want to have a nice floor and you want to have the higher-end, nicer appliances.Steve Rozenberg: Yeah. So we'll take a look around the rest of the house and we'll show you some more stuff.Okay. So now we are in the master bedroom. Good size. You can tell, like you said earlier that there's distinct colors here, right? Blue paint, but it still looks nice.Pete Neubig: The paint's a little too dark for me. But because you have the high ceiling, and you have a lot of windows, it doesn't make the room too small.Steve Rozenberg: It doesn't make it dark.Pete Neubig: Now the thing I like about this house, and this is not something I would normally do. Normally, I would do carpet in bedrooms. But, look at how beautiful this floor looks. And so it actually brings like a real modern look to it. And so, when people come to see this to rent this, the flooring doesn't matter at this point. You can put an area rug here. Paint is in really good shape here. The crown molding, and you notice the two tone paint which makes it look real nice. And then of course the small things like you have new switch plate covers.
Steve Rozenberg: Yeah. It's the little details like the switch plate covers that make a huge difference.Okay. So, now we are in the master bathroom. This is a typical master bathroom for a house. And like you said, someone obviously probably was a person that lived in this property before they turned it into a rental, just the way it was taken care of.Pete Neubig: The main thing you can tell here, Steve, with this whole house is how clean it is. So, there's two things that really sell properties to renters. Number one is paint. Does it have that new paint smell, or at least, does it look like brand new paint? Which this house has the brand new paint look. And two, is it clean? This house is incredibly clean.Steve Rozenberg: Yeah, very nice. And you know, again it looks open and everything, let's take a look at the master closet. Now, this is a little bit bigger than the average master closet. So, just to give you an idea. But look, this is pretty big. This could be a bedroom in some cities, right?Pete Neubig: I know my first place I lived in, I rented a room that was smaller than this whole room. But yeah, this is an incredible master closet.Steve Rozenberg: And they did a great job with the shelving and everything.Pete Neubig: And the nice thing is, again, you have got this type of flooring throughout the house. So, there's no carpet in this house. So, mainly when somebody does move out two years later, it's minimal. And if they dump this chip, you just pull this whole thing up.Steve Rozenberg: That one piece.Pete Neubig: Correct.Steve Rozenberg: This right here is another bedroom, and this is what's considered a Jack and Jill closet. But here's another bedroom that, again, looks nice. This could have been a nursery or something.Pete Neubig: If you look here, you can see there's a couple of holes that were here for nails. They were able to paint over. Because it's so small, you can barely see. You can see if you look for. But if you're a tenant looking at this—Steve Rozenberg: You're not going to go to that. It's not going to be a problem.Pete Neubig: And it's not like I'm not paying rent to this house because of this right here. So, we don't like doing a touch up in most cases. But there are some cases where it does work very well, especially on this type of paint.Steve Rozenberg: And then again, the flooring doesn't? It's shiny. It looks good. It's open. You've got the white half, and then it goes to the dark paints. If it was all dark, it may look a little darker. This just happened to be the way it is with the halfway, and that looks pretty good.Pete Neubig: And it's like little things like this, a little blemish. But, when the house is super clean, when the house is super light, the paint is great in most everywhere in the house, and you got great flooring and it smells good in the house, that's when these little things get—Steve Rozenberg: You get higher rent. And even something like this—if you look at the blinds, these are nicer, upgraded blinds. They're a little more expensive, but it just adds a nicer touch. And if you want more money for your rental property, these are the things you have to do—these finishing touches that make the difference.Pete Neubig: Correct, and these two inch blind, they'll last longer than your little vinyl blinds that tend to break pretty quickly.
Steve Rozenberg: Yep, so we're going to go walk a little bit more. We're going to show you the backyard, and show you what is out there.Okay, so now we're in the backyard. This is a beautiful backyard. It's got a covered backyard porch, which is very nice. Pete, talk about the backyard—kind of the grass and the structure and what's important to know about back here.Pete Neubig: Yeah. So, one thing, the nice thing is they do have a little concrete here and it's covered, so you can spend time out here, which is a seller. But, notice here how the landscaping is kept up real nice.But more importantly, notice the fence. So, a lot of times, we have clients that they don't want to fix a fence. There's broken pickets. But most of our residents, about 80% of our residents have a dog or some kind of pet. And so it's important that you have the yard and the fence kept up real well.Steve Rozenberg: And it's important that you do this before the property is rented because once someone's here with an animal, and then the animal gets out because the fence is not fixed correctly, now it's a bigger problem.Pete Neubig: Well and also, aesthetically, it's pleasing. The fence looks good, the landscaping looks good, people come in, and you want to sell the property, right? And so to rent it, is to have good landscaping and, just like you do to paint, you want to have good landscaping, you want to have the fence kept up.Steve Rozenberg: The extras are good here. So, let's take a look at the garage. This is a standard garage for a Texas property. This is called the detached garage. And so this is what a detached garage looks like. Very well taken care of.Pete Neubig: Well, this is what a detached garage should look like. One thing you notice with the garage is that there are no things in the garage. So, there's nothing in the garage, right?Steve Rozenberg: Which is important when you're trying to rent a property, that you don't have just stuff and put all of your trash in the garage while you're trying to rent it.Pete Neubig: Especially if you haven't lived there in the past. And then notice, it's not finished. And it's okay if it's not finished. Here in Houston anyway, having a finished garage is not really necessary.Steve Rozenberg: It only has to be finished if it's attached. If it's detached. It does not have to be. If it's attached, meaning it's part of the house, then it's got to be finished.Pete Neubig: Then you want it to be finished. Correct. And of course it has the electronic garage door opener, which is necessary. Especially on a house that's renting for $2,000, you want to make sure that you have that as a feature.Steve Rozenberg: Absolutely. Hey everyone. So, this was a house that was made to be rent ready. It's a beautiful house. What does this rent for, about roughly Pete?Pete Neubig: So, this house is around $2,000. It's in Katy, which is a little suburb. It's about 30 minutes West of downtown Houston. It's close to two major highways, 99 and I-10. And it's in a great school district. So, and it's on a col-de-sac. Near parks. It's an amazing house.Steve Rozenberg: Again, this is a great area. It's a great house. But again, this shows you what a house looks like, from what a make-ready could be, to what is done after and when the property is ready. So again, this is a standard house in Houston, Texas. If you want to know more about Houston and learn about it, go to our website. It's mynd.co, M-Y-N-D.co. Or you can go to our Facebook group, MasterMynd Real Estate Investment Club on Facebook. We'll talk to everyone later. Bye.When making a property move-in ready, it’s the little details that matter. This can mean replacing switch plate covers, or changing out old blinds. Likewise, new tenants look for a property to feel new and clean. This obviously means making sure the house, itself, is clean, but also means touching up the paint or repainting completely.It also means keeping up with landscaping and, equally important, maintaining the fence. As many tenants have pets, having a well-maintained fence is a clear draw. It also makes the home more attractive, overall. Keeping the interior and exterior of the property maintained, as well as thoroughly cleaning a property before showing it are necessary to get tenants in quickly and keeping them happy, overall.
Many markets around the country are reaping the rewards of this booming economy. The same can be said for Houston, Texas, where many neighborhoods are attracting young families and professionals to their homes. Our guest today is Shannon Geer, with the Houston division of Mynd. Shannon is here to explain what investors should look for when determining which neighborhoods are benefitting from this boom, and how to determine whether the property they are looking to buy will benefit, as well.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management and I am joined here today with Shannon. Shannon is part of the Houston division of Mynd Property Management. And today we're going to talk about Houston, and whether or not it is a strong market, and what the determining factors to help us understand, any city, how to know is it a strong market or a bad market. So Shannon, thanks for being here today.Shannon Geer: You're very welcome. Hi everybody.Steve Rozenberg: So let's talk a little bit about, obviously you and I both are in Houston, we're from Houston. So we are obviously seeing what's going on. But for people that are watching that don't know, what would you say are some good indicators to know as to whether or not Houston or any city, is a solid, strong market to own rental properties in?
Shannon Geer: Certainly. So a couple of things that come to mind immediately. What are the rental days on market? That's a huge one. As an investor, you want to be able to make money off of your rental property. So if the days on market are 60, 90, 120 days, obviously that's going to cost you more at the outset than it's going to make you. So that would be a good strong indicator, first.Steve Rozenberg: And so just for people that don't know, days on market is when you have a vacant property and it's up for lease, now you have to get it leased, and it's going to be vacant for so many days. That's called days on market. So, you may have a property that you may be budgeting for 30 days of it being vacant, but maybe because of the time of year, for example, in the winter time, properties are going to sit longer than in the summertime. So if you were thinking 30 days and you bought the property and put it on the market November 1, it may be vacant until February 1, and now you're looking at a much longer days on market because it's slower. And because of that, your numbers would be off and you may not have the right amount budgeted. So, days on market is very, very important.Shannon Geer: In all facets of this process.
Steve Rozenberg: Absolutely. Now, before you get two days on market, it's even finding a deal.Shannon Geer: The property. Exactly.Steve Rozenberg: Right? The inventory of what's on the market.Shannon Geer: Exactly. The amount of inventory is very important. It's crucial to understand how much property is available.Steve Rozenberg: Yeah. Because, it could be a great deal, but if nobody can get the deal, it doesn't matter. Because normally what happens is, if there's one property in a neighborhood and all of these investors are fighting for it, normally what happens is it drives the price up. When the price gets driven up, that good deal now no longer is that good of a deal. So it's something you need to think about when you're looking at a strong market, is what is the inventory? And then secondary is, what is the days on market?Shannon Geer: Exactly. And a lot of times with that inventory as well, you're not only competing against other investors, you're competing against homeowner buyers.Steve Rozenberg: People that want to live in the house. Absolutely.Shannon Geer: So, you really do need to have a decent amount of inventory.
Steve Rozenberg: Absolutely. What would be next on the list for people?Shannon Geer: The amount of jobs in the area. And so, one of the things that has stood out to me, one of the statistics I recently saw from the greater Houston economic partnership, is that the Houston market has added over 65,000 new jobs on average the last three years.Steve Rozenberg: And that's well above the national average, obviously.Shannon Geer: Yes. Well above the national average. And that doesn't mean that we had jobs leave and they're just—Steve Rozenberg: This is on top of jobs that are already here.Shannon Geer: Yes, this is on top of what we already have here.
Steve Rozenberg: Right. So a good economy, obviously, is always going to be good for a market because for every two jobs that are created, one house is created, statistically. So, what that tells you is if you see more jobs being created than are leaving, that is a good sign because most of these jobs that are being created could be from other companies that are coming into the area. So for example, there have been a lot of companies in the last couple of years who have moved their corporations to Texas—move their headquarters here. And normally when that happens, you're going to get residents that are going to come, maybe they will eventually buy, but what they're going to do is they're probably going to rent first to figure out the area. And that makes it a strong market because you have an inflow and you're not just regenerating the jobs that are currently existing.Shannon Geer: Exactly. And when we have those big corporations move their headquarters here, we get what are called the transient tenants.Steve Rozenberg: A lot of transients. Absolutely.Shannon Geer: And those are tenants that are coming in, maybe they're coming in from out-of-state, out-of-country, and they're not necessarily going to make their permanent residence here, but they're going to be here for three to five years. They're going to rent more than likely instead of buy. And those are the great tenants also.Steve Rozenberg: Absolutely. And a lot of times when people hear the word transient, they may think it's a lower level rental. That's not the case. When you talk about Houston because of oil and because of the medical industry and the exporting port, there's a lot of drivers in the Houston economy that make it a strong market. Because of that, you have a lot of upper-level jobs. So you have a lot of CEO level, executive level positions coming into the city. And as you said, they may be here for three years, five years. And if they're out-of-country they are not able to buy a house or they can't buy a house because they're only going to be here for short time, which is great when you have a rental property.So all of these things, again, are good economic indicators and the data doesn't lie. The data is going to tell you the story. And this is for any city that you look at. But again, this is Houston, because we know Houston. We know it's a solid market. And Shannon clearly states why Houston is such a solid market and why it is growing so rapidly, and why it's great for owning rental properties.Shannon Geer: It is. So when you're ready, let us know.Steve Rozenberg: Yep, let us know. Well, thank you everyone for watching. I am Steve. This is Shannon. If you want to find us online, you can go to mynd.co. So it's M-Y-N-D.co. Or you can find us on Facebook at the MasterMynd Real Estate Investment Club where there's other fellow investors there. You can join and you can engage in comment and have discussions with people like me and Shannon in the group to talk about investment properties. We'll talk to everyone later. Bye.Shannon Geer: Bye.Finding a property to purchase can seem difficult to the uninitiated investor; however, there are indicators that every investor can look for which reveal the desirability and potential profitability of a property.For example, the number of available properties in an area can be the first deterrent or attractor from or to a market or neighborhood. If there are only a few properties being fought over by a number of investors, the prices will inevitably go up. And while that property may be in a great location with enormous potential, losing money at the outset is often a bad idea.Likewise, the available number of jobs is a clear indication of whether there will be tenants available to rent. As the number of available jobs increase, so, too, do the available number of tenants. And while these are not the only indicators, looking at the numbers is always a good strategy when determining which property to buy and where.
Investing in real estate can often feel like a steep climb. And while every investor is different, many successful investors exhibit similar strategies which are key to their success. Today we are speaking with Pete Neubig, Regional Director for Texas with Mynd Property Management, about the top three reasons he sees for success in the real estate investment market.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management and I am here with my good friend Pete Neubig, who is the Regional Director of Texas for Mynd Property Management. Pete is going to talk today about the top three things that you need to have to be a successful investor in Houston. So Pete, thanks for being here today.Pete Neubig: Yep, so Steve, good seeing you again. But also not only am I the regional director, but I'm also an investor. I've invested in properties, all sorts of properties, since 2001 in the Houston area. And let's get to it, learn some new things.
Steve Rozenberg: All right. So first of all, what is the first and number one thing that you think has got to be established when you're going to be in an investor to start this thing off right?Pete Neubig: So not only have I found this within me and you as well, but we've also found this with some of our top clients that are successful in real estate. So I've started seeing similarities between all of our top clients that are very successful in real estate. And the first thing I found was, know your why.And so what I mean by that is I'll give you an example. Alright? So I have a good investor friend of ours named Scott. And Scott, what he did was, every time he had a child, he would buy a property. And his why was, “I'm going to buy that property and when that child becomes 18-years old, I'm going to refinance that property and I'm going to pay for their education.” So that's a strong, powerful why and it's a long-term why.Now the first year you have the property, let's say that he had to evict somebody. Now, eviction in Texas takes about 30 to maybe 90 days, the worst case scenario. 30 days, best case scenario. But let's just say on average is two months. Well that's two months that you don't have rental income and if you are shortsighted, you can make a knee jerk reaction—Steve Rozenberg: Because of the mental stress of getting an eviction and dealing with all that.Pete Neubig: That is the biggest stressor on any investor. So now, not only are you not getting rent, but you have to pay that mortgage. There's no mortgage forgiveness because there was no rent. So now you're super stressed. And so now you're sitting there and you're paying this note, you have somebody that's in your property, they're not leaving. And so you can make that knee jerk reaction and say, you know what? I don't like this real estate thing. It's not for me. I'm going to get out of it. And now, because only about a year later, you actually lose money on a deal, and because now you want to get out of this property, you're a motivated seller all of a sudden, and now you're going to sell the property at a discount.Steve Rozenberg: And you just have a horrible taste about investing. And you know what's interesting about that is, the four walls and a roof didn't change. I could buy that deal, not be emotionally attached, and make it run fine. And you're going to go, “wait a second. How did he do that?” My why was stronger than yours. And I didn't let that emotion dictate and sway me.Pete Neubig: It's like when you see somebody very successful, you don't realize all the trials and tribulations they went through early on. These are just trials and tribulations you're going through. And at the end of the day, the pay dirt is 18 years later, you're going to have your principal pay down, you're going to have your appreciation and you have to be able to refinance—tax free, by the way—and pay for your college education for your child.
Pete Neubig: So that's number one. Number two is, have investment rules. So all of our top tier clients and now you and I follow this because we learned our lesson the hard way—Steve Rozenberg: We've learned our lessons, absolutely...Pete Neubig: —have investment rules. So we have a client, we had a guy named Mark. Mark owned 42 properties at one point, but it was interesting that Mark had specific investment rules. So I've taken that and I have investment rules. And so again, there's so many opportunities to buy different types of real estate.Steve Rozenberg: Especially in Houston.Pete Neubig: Especially in Houston. You go single-family, you go small multifamily, you can buy rehabs, you can buy condos, you could buy town homes. And so—Steve Rozenberg: All in the same block.Pete Neubig: Pretty much, cause there's no zoning. Right? And so what I did is, I established my investment rules and they're separate from yours. And they're separate from Mark's, and they're—Steve Rozenberg: They're ones that fit you for your goals and your why.Pete Neubig: Exactly. And so in my investment rules, I call my investment rules the pink elephant. They don't exist, right? So I have like, let's say it's about 15 rules, okay. Now you're not going to get all those 15 rules, right? Now, there's two or three that are what I call the golden rules. They're non-starters.Steve Rozenberg: Non-negotiable.Pete Neubig: Non-negotiable. So for example, for me, it has to be at least three bedrooms.And the reason why is, in Houston—and I don't know the markets—but in Houston, if you have something that's a two-bedroom or a one-bedroom, they do not rent as quickly as a three-bedroom or even a four-bedroom.Steve Rozenberg: And we know that firsthand because you and I have owned them in the past.Pete Neubig: Exactly. And I also know that because we manage 900 properties in the Houston proper area, and I noticed that all of our two-bedrooms and one-bedrooms—Steve Rozenberg: They don't rent.Pete Neubig: They don't rent, they don't rent for a long time.Steve Rozenberg: And that may not be everywhere else. But in Houston, we know that that is just something that's not going to rent.Pete Neubig: Correct. The other thing is, you have to have at least two bathrooms. That's a golden rule for me. And I'll give a story. You and I owned a property in Texas City—I don't know if you remember this—and we had it rented and they left after a year and they loved that property. They loved the location. And I remember calling them, I'm like, "Man, why are you leaving?" They were such great tenants. And the guy verbatim said, "Man, we cannot handle this one bathroom anymore. There's four of us now, or there's three of us."Steve Rozenberg: They had a child or something, I remember. They couldn’t do it.Pete Neubig: They had two kids and had three bedrooms and it was just too much. And so I wrote that golden rule that day because I've seen it over and over. It wasn't just that one particular property. And I know that one-bathrooms, again, they don't rent.So then what happens is, obviously they're longer on the market, and so, you lose money there. And then, ultimately, what do you start doing when it's on the market? You start lowering your rent. And so you lose money there. So even when you're leasing and even if they do—Steve Rozenberg: You're making less money. You made less while it was vacant and then you rented it for less. So it's becoming your why—again, going back to your why—your why starts fading as to why you're doing this because you have a property that is not—it doesn't match the Houston market.Pete Neubig: Also, when you try to resell the property, it becomes more difficult, right? Because other people—if it's not investor and it's, and it's a family, they want two bathrooms. If it's an investor, they want two bathrooms because, guess what? They want to rent it. They want to rent it out quicker. So anyway, the most successful investors that I've seen have these investment rules.Again, I'll just give you another quick one. One of my golden rules is, my single family homes have to be in an HOA. And people say, “why? HOA's are super expensive.” In Houston, they're not for single-family homes. They are for town homes.Steve Rozenberg: Town homes and condos—condominiums.Pete Neubig: Super expensive, right? But for single-family homes, they're not. Now, why do I want something in HOA? Because HOA’s, they're kind of pests, right?Steve Rozenberg: They're protecting your investment. Really.Pete Neubig: They're protecting your investment. Properties in Houston that are in an HOA, they are kept up, and so those values stay or go up. Properties that are not in HOA are not kept up and we’ve seen property values stay or go down, or not as up, not appreciate as much—Steve Rozenberg: As the ones that are protected in the HOA.
Pete Neubig: And the last one, it's a golden rule for me, Steve, is school district. Okay. So for me, I go to greatschools.org. They rate all the high schools. So I go and look at high schools, mainly. And if it's not a six or above—if it's a five I'm looking at it real closely. If it's a four or below, it's a nonstarter. And if it's a six or above, I'm in. And the reason why is the better the school district, the better the clientele, the better the renter. A better quality renter.Steve Rozenberg: In Houston, at least, if you get above a certain level in the school district that kind of erases a lot of challenges with a property that has problems and problem tenants and problem areas. It's just kind of as an all-encompassing swipe, is what you and I have seen.Pete Neubig: What I've found is when the school, the better the school district, the better the paper. What I mean by that is credit. Better credit, better quality residents dealing with less challenges of, I can't pay you, late pay, no pay, eviction, handling your property much nicer—things like that. So, you know, this one I learned the hard way. Because we—you and I—bought like 20-something properties in low—Steve Rozenberg: low school district areas.Pete Neubig: Low school district areas, where we had a hard time and those properties didn't appreciate, either.Steve Rozenberg: No HOAs.Pete Neubig: No HOAs. And so anyway, it comes full circle. So have investment rules and we can help you create your investment rules. And, as a matter of fact, if you want, I can give you mine and you can post it out there.And then the last one is, know your market. Now, this sounds like Captain Obvious, right? Know your market. But I'm surprised at how many people just want to buy something and they don't really know the market.And you could tie this in with the investment rules, but it is a little bit different. And what I mean by know your market, not only do I mean like, okay, what's the sales prices, right? That's pretty simple. But what's the trend? Have they been going up? Have they been going down? What kind of insurance is—Steve Rozenberg: You just bought a property that you didn't know the market and it affected you, right?Pete Neubig: Right. What's the days on market for sales and for leasing? Do I need to put in a refrigerator or do I not? I can't tell you how many investors outside of Texas come in and, because in their market there's no refrigerators, they say no refrigerator in this market.Steve Rozenberg: And here you have to have it.Pete Neubig: Meanwhile, in specific areas of Houston, you have to have—and sometimes not only do you have a refrigerator, but you have to have a high-end refrigerator. Do you have to have granite countertops or not?Steve Rozenberg: That's knowing the market. And, one thing that you and I know is, what was very interesting in some parts of Houston, there are some streets that are requiring flood insurance and the street right next door may not require it just because of the way the flood plain is and the way it's written. So, if you don't know that—same thing with wind insurance—you may have a property that you were expecting a certain cash flow, you find out it's mandatory in a certain part of Houston, you didn't realize that and now all of a sudden your numbers are not working for your cash flow of your property.Pete Neubig: Correct. And that puts an extra stress on you because now one of the five pillars is crumbled with cash flow.Steve Rozenberg: Yeah. So these are some things that, again, when you come to Houston or any city, but we know Houston obviously, and so this starts again with your why, most importantly. Why are you doing this? What's going to keep you your north star of heading in that direction? Then it's going to be your rules of engagement, of how you're going to buy the property, what your non-negotiables are and what niceties are. And then lastly is knowing the market and understanding why you would or wouldn't buy because of a certain area and what things would make your property stay vacant longer. What things would make your property not get rented by the best tenants and all those things. And it's area specific in Houston itself.Pete Neubig: Yeah. Cause you might have a property that hits your investment rules, but then you put it in an area that is not the—you don't know the area and it's not the right house in that area, then, all of a sudden, you obviously made a mistake.And then when you make a mistake, here's the other thing—cut your losses. If you really make a mistake, I don't say like just one eviction, no, but if you cannot get good tenants over a period of years, then you have to cut your losses.Steve Rozenberg: Yeah. So it's unemotional. So again, I would add to your list, it is a mathematical equation. If the math is not adding up over time, not a knee-jerk reaction, but if it's not adding up over time, and all of a sudden this deal is just not working, it's like owning a stock. At some point you're going to sell the stock. At some point if the house isn't working, you're going to sell the house because the numbers are not working and it's not getting you closer to your why and closer to your goals.So this is Pete and Steve. Thanks everybody watching. We appreciate it. If you want to find us online, you can go to mynd.co, M-Y-N-D.co, or you can go to our Facebook group, the MasterMynd Real Estate Investment Club. You can go there, you can join, you can engage with people like me and Pete, other investors, find out about Houston or whatever city you're looking for, and you can have conversations and figure out what is best for you and maybe help you figure out what your why is. Thanks for watching everyone. We'll talk to you later.Success in any business is often rooted in a firm understanding of why you are in that business. Oftentimes, the reason you invest can help you weather the storms you will face. Remembering that reason can insulate you from making emotional decisions and keep your mind on the success of the business or investment, overall.Secondly, having investment rules can be a great strategy for keeping your why at the forefront of your mind. And while it can be difficult, or sometimes impossible, to not break at least one of those rules, they can be a good guide for making the right decisions to protect your investment.Lastly, knowing your market is a necessity when investing. Having a clear understanding of the market in which you’re looking to invest and the prospects of potential properties is most important for investors at every level of experience.
Everyone knows that the three rules in real estate are, “location, location, location.” But many investors may be unaware that when they buy a property is sometimes as important as, and can often determine, where you ultimately buy. Our guest today is Shannon Geer, with the Houston division of Mynd Property Management. Shannon is here to explain when the right and wrong times are to jump into the market, particularly for a city like Houston, and why now is the right time to buy in certain neighborhoods or sections of the city.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management and I am here with my good friend, Shannon.Shannon Geer: Hello Steve.Steve Rozenberg: Hey Shannon.Shannon Geer: Hey everybody else.Steve Rozenberg: So we are here in Houston at the Mynd division and people want to know, when is the right time to jump into the market and buy a deal in the Houston market? Now, Shannon is an expert when it comes to real estate in the Houston area. SoShannon, what would you say to someone if they're out-of-state or even if they live in Houston? What is the right, and when is the wrong time to get involved and actually jump into this market and make something happen?
Shannon Geer: Well, I would have to start off with, it's different for every client. What's that client's goal?Steve Rozenberg: What's the goal? What's the end goal?Shannon Geer: What's their goal? What's their strategy? What plans have they set in place? And if they haven't, then start working with them on those because each goal dictates a different strategy.Steve Rozenberg: Right. So let's just say for example, somebody says, "You know what? I want a basic cookie-cutter property, a three bedroom, two bath, basic cash flow." Is that an area? Does Houston have those, and if they do, where are they in Houston?Shannon Geer: Of course we have them. We have them. You're going to want to look in the suburbs. You're going to want it to look in on the east side of Houston and the Humble area. Up on the north side in the Spring Woodlands area. Out in the west, in Katy.Shannon Geer: Down south in Pearland, Clear Lake. As long as you stay in outlying areas, you're going to find those great three-two’s. They're going to cash flow for you and give you—Steve Rozenberg: Basic positive cash flow-Shannon Geer: —basic appreciation.Steve Rozenberg: Basic appreciation. That is what would be considered a basic standard rental property. And that could be your strategy to get you to a goal.
Steve Rozenberg: Now, the next strategy could be, you know what, I want something that's going to go up in value. I just want something. I don't care about cash flow, because statistically, you're probably not going to get both. You're not going to get something that's going up in value and has strong cash flow, in general. So you're going to pick one and if that one is the appreciation, do those exist? Number one. And if they do, where are they?Shannon Geer: Yes, traditionally, Houston has said anything inside 610 is going to be your appreciation play. But I am seeing that expand outside of 610 to now be inside Beltway 8. So, for those of you that are not in Houston, Houston has rings.Steve Rozenberg: Two concentric rings. Three now actually. There's three.Shannon Geer: Oh yes, there's three now. And so the inner circle is 610, the middle circle is Beltway 8 and the outer circle is the Grand Parkway or 99. So, we've seen that those negative-geared properties and the high appreciation plays are moving outside of 610.Steve Rozenberg: Because they've already built them out.Shannon Geer: Because we're running out of property. And we're also seeing a lot of re-gentrification happening in the third ward and the fifth ward. A lot of money's being spent in those areas by local government and national government and state government. And so, we're seeing a lot of appreciation plays in those markets.Steve Rozenberg: Yeah. And you're seeing opportunities zones and those kinds of things where you're getting tax benefits for purchasing in these areas and helping out the community. So, you're seeing a lot of that. And, case in point, when you talk about the re-gentrification areas, Pete, my business partner, he bought a house and I'll never forget. This is back in 2005. He bought a house for about $77,000. It was a two-bedroom, one-bath cottage in an area that I was shocked that he told me he wanted to keep this property, and that he would build his house on one day. And I thought there's no way that this is the same area that I'm thinking. But he did. And so anyways, what he ended up doing was he kept it as a rental for about seven years. Then he ended up tearing the house down and building a house on it. In the last two years, that house is now worth about $875,000 that he bought for 77. The land alone is probably worth—Shannon Geer: I think he said 350. Whenever he tore the initial structure down and started building on his property, the land appraised at 350.Steve Rozenberg: Right. And so now in that street, in that area, that's all the houses you see. So that's a case in point that he had a goal, he had a strategy, he executed it, and that's how it happened. So, when you're looking at a city and you're looking at a market deciding if you jump in, it's not necessarily looking at what you're seeing in front of you today. Because I did not see the same vision that he saw in that. And he clearly had a better vision. He had a better strategy. And it just goes to show that the information you know of what's coming, just like the Third Ward, and the re-gentrification and the opportunities zones, these are things that could tell you that, hey, you know what? This could match your goal and it could match your strategy. It just depends on what your goals are, what your strategy is, and educating yourself to know that.Shannon Geer: Education is the key.
Steve Rozenberg: Education is the key. And again, these are just some things you want to think about when you're thinking of Houston or any city. Houston we know, and we know, obviously, in the center is where you're going to get high appreciation, expand out. And if you go out into the suburbs you're going to have the standard positive cash flow, cookie-cutter-type properties.And so, if anybody wants to know more about that, you can go to our website at mynd.co. M-Y-N-D.co, or you can find us on Facebook at the MasterMynd Real Estate Investment Club. And there you can talk with people like Shannon, myself, other investors there to converse, engage, and really get into discussions about areas and markets to help you make better decisions.This is Steve and Shannon. Thank you very much. And we will talk to you guys later.Shannon Geer: Bye, everyone.Location is likely the first factor any investor looks at when determining which property to buy. And in a dynamic market, knowing when you buy is likely an investor’s greatest tool in determining where to buy. In the city of Houston, this means looking in the suburbs.As prices rise in the center of Houston, young families are moving to more affordable locations. And with the completion of the Grand Parkway, or State Highway 99, the suburbs have become a far more attractive location for renters and investors, alike. And with recent development in more established locations, such as the Third Ward, some locations closer to the city center have become more lucrative, as well.As the dynamics within the Houston market develop over time, these factors can change the desirability of any neighborhood. So knowing when a location such as the Third Ward or the areas around the Grand Parkway is beginning to boom can ultimately bring major returns for any investor in the market.
Natural disasters are a given in many parts of the country. In Houston, this means enduring annual threats from hurricanes and tornadoes. Our guest today is Margo Broughton with Mynd Property Management in Houston, Texas. Margo is here to talk about what investors, property managers and tenants, alike, can expect and should do when a natural disaster strikes.Steve Rozenberg: Hey everyone, this is Steve Rozenberg with Mynd Property Management and I'm here in Houston, Texas with Margo Broughton. Margot's got 37 years of experience as a property manager. It's a lot, huh?Margo Broughton: That's a lot.Steve Rozenberg: So with this topic, it's very important to have experience because what we're going to talk about today is when a natural disaster hits.Margo Broughton: And they do.Steve Rozenberg: And they do. How do you handle it? So, just to give people an understanding, a natural disaster normally in Houston or in Texas is either going to be a tornado or a named storm in the Gulf of Mexico, a hurricane. So Margo, let's talk a little bit about that because we just went through hurricane Harvey.Margo Broughton: We did.Steve Rozenberg: And that was a huge test of wills and of everything. Let's talk a little bit about, when the disaster hits, you can explain how we handled a lot of the things that happened. And what's some advice for investors, how they can handle after a storm comes through?
Margo Broughton: Sure, absolutely. Now we did it as a professional management company obviously. So we have a lot of boots on the ground and that sort of thing, so I'll kind of go through that. But as a property investor, the most important thing is find out if your tenant's okay.Steve Rozenberg: Absolutely. Safety is paramount.Margo Broughton: Absolutely. So, and then in the case of Harvey, as you guys know, I heard somebody on the radio just say the other day that more water dropped in Houston during Harvey than goes over Niagara Falls in a year.Steve Rozenberg: Yeah, it was an amazing amount.Margo Broughton: It was a lot of water. So there were places that we couldn't get to for a period of time. So what we did was we had a group of people that were calling the tenants to make sure that the tenants were okay, or were they still in the house? Could they access the house? That sort of thing. So as an investor, you could do that yourself. Call your tenants, make sure they're okay. That's number one.
Steve Rozenberg: Or if you can get to the property. If you live local and you can get there, that's something. But you want to make sure that the house and the tenant are both safe and secure, first and foremost.Margo Broughton: Absolutely. So we have a lot of clients that are overseas, so they depend on us to make sure that their tenants are okay and their properties are okay.Steve Rozenberg: And people watching, you may not live locally in Houston, but you own real estate in Houston. And that's something to think about is, what are the steps after that you should take or that you should know to take when that happens? Because it doesn't happen all the time, but when it does, there should be a protocol of what happens and the plan that you put in place.Margo Broughton: Well, and fortunately you know that the weathercasters have been very good about being able to know when these storms are coming, so we usually have some time to get prepared at least. So that's a good thing. So we try to notify tenants, notify our owners, especially if they're overseas, "Hey, we've got this bad storm coming and we'll keep you posted."And so as we go through the process, the storm is done, everybody just hunkers down till it's done, and then we get out there and find out is a tenant okay. And then as soon as we can, we are going to get out there and look at the houses. Because we want to see if they've taken on any water because it's paramount, especially in our climate that you get out there and get the demo done ASAP.Steve Rozenberg: Right, because when there is water and you're in Houston, where it's a humid area, mold happens fast. And once mold happens and it spreads very fast in a property, now your problems become exponentially higher.And so when you have a property that floods in a disaster or something happens, again, I cannot stress enough how quickly you have to get to the property, make sure the tenants are safe, paramount, make sure the property is secure and if there is damage, you've got to get that mold and everything out of that property as quickly as possible.
Margo Broughton: Yes. Get it dried up as soon as possible. Now what some people don't know, and I'm sorry, but this is gross, but if you've got rising water, you've got sewer. So now you not only have mold, but now you'd have this on top. And so now everything you're pulling out of that house becomes toxic material.So they won't even pick it up. The sanitation people won't even pick it up, you have to have special sanitation people pick it up, and that sort of thing. So obviously the top priority: check the tenants, get the wet stuff out of there, whether it's carpet, sheet rock, whatever. Get that out of the house. Get fans in there as fast as you can to get it dried up. Now as a professional property management company, one of the things that is an advantage for us is we have loyal contractors. So they're going to put us at the top of their list.And then that can be an issue too, because now you've got people flooding into the Houston area from all over the country who might not be really good contractors.Steve Rozenberg: And they may not know what they're doing or know... And again, you bring up a good point that you may not understand that, number one, the stuff that you're bringing out of your property could be toxic. And number two, the people you hire may not know that as well and they could make the situation worse by not getting on and getting it fixed.One thing I would advise, and I know that we did, is you may want to make some communication plans letting the tenants know that maybe you're going to do outward communication, if you have multiple properties. That you are going to maybe use social media or you're going to create a Facebook group for your tenants and that way you can push information to them because during Hurricane Harvey, when a natural disaster hit for us and it will hit again, phone lines become unusable. So now you have to use digital means to get out there. So again, you may want to let your tenants know that, "Hey, I will be pushing information to you."And again, one of the things that we did is we got a lot of the local federal information, FEMA, towing of vehicles—your vehicle may flood, you may have to get your tenants' vehicles towed—there's just a lot of things that you don't think about that now you're scrambling for it after.
Margo Broughton: Yes. And one point I want to make too before we close out is, of course, you want to report this to your insurance. But keep in mind, you don't have to do that right away. You can make a claim later on. Getting the wet stuff out of the house is the most important thing.Steve Rozenberg: Very much. And I think we've hit on this a lot, but communicate. You've got to communicate with your tenant. You have to let them know the expectations. Because if not, they're going to be trying to call you because they don't know what to do.They may have evacuated and they aren't at the property and they don't know what the property looks like. So if you just keep thinking, you're calling the tenant and the tenant's not answering, and that's all you need to do, they may not have been in the property. And sometimes when you're in an area that flooded, you can't get back into the property, into the neighborhood, so nobody's putting eyes on the property. So again, if you're out of state or you're not local or you don't know how to do this, you may want to set up some relationships prior. Get the federal government phone numbers and contact information, have that handy.And, I would suggest, have some form of outbound communications set up, pre-set up with the tenants so that you know that they know how to communicate with you, and vice versa, so that you're not trying to use phone lines and that to me was my experience.Margo Broughton: Yeah, absolutely.Steve Rozenberg: Well, Margo, thank you so much. If anybody wants to get ahold of us at MYND, you go to our website, mynd.co. So it's M-Y-N-D.co. Also, you can find us on Facebook. We have a Facebook group, the MasterMynd Real Estate Investment Club. This is Steve and Margo. Thank you for watching. We'll see you later.Margo Broughton: Thank you.Steve Rozenberg: Bye.The foremost important thing during or after any natural disaster is the safety of a property’s tenant. When a disaster does strike, every property manager should first determine the safety of their tenant. The second most important thing is to determine the safety or condition of the property. In the case of a flood, for example, clearing out the property and cleaning it thoroughly can help minimize any mold or water damage.On the other hand, making sure you have all the correct contacts and information, both from the government and from vendors, is of utmost importance. Having the best and most up-to-date information can help you make better decisions in securing your property and the health or safety of your tenant. Remember to report any damages to your insurance company, and most of all, communicate with your tenant. This will help you, then tenant and the property weather any disaster better than you would have, otherwise.