Where do you start looking if you want to find rental homes or finding a real estate investing mentor? I started out by asking my financial planner for rental advice. You would be shocked at how many people you know invest in real estate. Some of them might have one rental they inherited. Others might have a few properties they hung on to from moving over the years.
My real estate investing mentor
A kind friend who owns six rental homes asked if I wanted to join her on a rental home property search. I happily agreed as I want to learn from those who have experience. We met at her office and another friend, Sara, joined us. Sara has been researching a small suburb of Dallas.
So Sarah, Amy, and I loaded up in Amy’s minivan and headed south. After about an hour’s drive, we met up with a local realtor who had been in the town for the last 20 years and whose son is the Mayor.
What we looked for in rental property
First, we discussed the local real estate climate which is very hot. Then we asked about some rental homes available; there are very few.
So far, so good.
Next, we learned what type of companies were in the area and what new employers might be coming. Sara asked a revealing question when she asked about plans for connecting public transportation to Dallas.
The realtor let us know that the city wanted to avoid a connection because they didn’t want to be later controlled by Dallas. That can make sense from a city council’s perspective, but since we knew potential renters would likely be commuting to Dallas, it was disappointing to hear.
After our city review, the realtor presented us with about eight homes that met Sara’s search requirements. One was very inexpensive at about $120K; the rest were in the $160K-$175K range. We asked about average rents and heard that about $1,400/month would be typical.
Almost all of these houses break the Rule of 1%.
The Rental Rule of 1%
The Rule of 1% says you should be able to rent a home for at least 1% of the purchase price if you want to make a profit.
The Rule of 1% isn’t perfect, but it is a helpful guide. So we quickly discussed the least expensive home and decided to drive around the town with the realtor vs. looking at the properties that were too expensive.
There are two colleges in the area, and several streets near the campuses had reasonably priced homes that were 2Bed/2Bathroom (or 3/2). The reason they were not in our search was that Sara had requested homes with a garage.
Many of the sensible rental property locations were older homes that have detached garages or carports. As we drove around, we also noted there were many duplexes near the university, another good rental option.
We spent a good amount of time in the car learning the town and seeing what was available. Having the Realtor and Zillow apps on our phones made searching the area for home prices, ownership costs, and potential rental prices very easy! I recommend having these apps on your phone, ready to go if you are scouting an area.
After seeing most of the town, we headed back home and discussed our findings.
3 things we learned
Find the right realtor
The group felt that this realtor was not a good fit. On the positive side, he was local, had good knowledge about what was happening in the towns and potential future. On the negative side he:
- owned no rental properties in town
- wasn’t familiar with the rents in the area
- did not give any guidance on modifying the home search before we arrived.
Also, when we found a few reasonably priced homes, in the $110-$130K range, he attempted to discourage us from looking at them.
One example is that we found a recently remodeled home. It was a 3/2 and was $125K. The house was just a few streets down from a local, private university. The garage was detached and could use some work.
The realtor was not excited at all; he kept mentioning the roof might need replacing. Yes, it might need replacing, but I could do that and still come out well below the $165K houses he was recommending.
The town was very cute, but Amy and I felt that it was far enough away that starting to buy rental properties there might not be the best choice. I do not want my first rental home to be so far that it takes 3–4 hours to check on it or deal with emergencies. I also don’t know any contractors in the area. For me, this town was too far for my first rental home purchase. For Sara, she is still interested and will continue to look for a deal in the area.
I really enjoyed my first search for properties in the North Texas area. I am going to take my real estate mentors to lunch soon and pick their brains on locations closer to where I live so I can narrow down my search. I’m not in a rush to make a purchase decision. I want to check out more areas, get more input from those who have successfully rented and take the time to find a substantial investment on my first rental home purchase.
So how do you find a real estate investing mentor? The quickest way is to post to your Facebook page that you’re looking for a mentor. Somebody in your circle of contacts is bound to step forward to help you.
Up next, real estate advice over lunch with two property queens. What are you doing to move forward in your journey to own rental property?