Texas-Sized Real Estate Investor Deals

I went really deep last year into the Houston area and it was for specific reasons. The market work, they perform, I get great cash flow on the properties, there’s going to be appreciation in there as well. All of those things come together when you’re looking to invest, and you want to find the right market for you.

What’s key are you work with a professional who knows the market because I’ve been through this before and a lot of your listeners have been through it. You go into a market, you work with someone who doesn’t understand the market, you buy what you think is a great property and that’s going to turn a good return for you, and it turns out that can’t keep a tenant in the property, your property manager’s stealing from you, and all you do is lose money month after month after month. If you look back on it, it’s probably because you weren’t working with the right individual.

In this episode, we’re going to be speaking with Jason Reynolds, he’s a Texas broker and realtor out of the Dallas-Fort Worth metroplex. He specifically works with a company called Visions Realty & Investments, Inc. That company specializes in working with real estate investors. Jason, how are you doing today?

Jason: Doing great, Clint. Thanks for having me on, excited to visit about Texas real estate.

Clint: That’s awesome because every one of our events that we have in Texas is always filled to capacity, and we get a lot of people that come from outside of Texas, which amazes me. They come to our Asset Protection events there because they’re also looking for properties. That’s your expertise, so why don’t you tell everyone who’s listening to a little bit about yourself and how you got started in this area.

Jason: It actually started in the family, since my great grandfather was a broker in Corpus Christi, Texas. It started in the 50s until the 90s. He had multiple offices across the state, and then that’s what really intrigued me to get involved in real estate. I went to Texas A&M, got a degree in Political Science, actually worked in politics [00:8:50].

I thought that I didn’t want to be, at all, but had a great run, then moved to Fort Worth, Texas and had an opportunity to get into the real estate business. It’s been 5½ years that I’ve been in the real estate business, personally been licensed, and once you’re an agent for 4 years, you can get your broker’s license. I did that as soon as I could once I turned over at 4 years and been with Visions Realty & Investments for about 4½ years now.

As you said, there are very limited brokers (I would say) across the state, and also across the United States, that really focus on investment properties and understand how to look at them, find them, work with the client, and analyze it. I had a chance through Steve Fithian, who’s the current broker of our office and founded the company in 1988. He took me out to lunch one time after doing the deal together. He offered to train me and then asked me to run the company. It’s been a blast ever since. He’s taught me what he knows, and we just continued to grow from there, so that’s a little background.

Clint: What’s interesting is why is it that a lot of agents do not work with investors? Or know this that’s this market?

Jason: I’ll probably give you the blunt answer to that. They don’t have the bandwidth or understanding. Usually, what people deal with is realtors that don’t even call them back. So, if an agent isn’t even good at calling them back, returning an email, or a phone call, then obviously they’re not going to understand what a cap rate is (usually).

For a lot of agents, it’s very complicated. It takes a lot of knowledge, time, and expertise in being in it, to really learn how it works in understanding the language. There’s a lot of realtors out there that may say, “Of course I work with investors,” because it’s a sale.

Unfortunately, I’ve come across a lot of clients that come to us once they’ve already bought something, and it’s not performing well, it’s actually performing negatively because the agent that pretended to understand it showed them the wrong numbers. So, we try our best to help them in those situations, but I really think there are not many agents willing to put in the time to really learn that side of the business.

Clint: So, they’re trying to take an owner-occupied property and make it a renter-occupied property, and that’s just never going to work from a number standpoint.

Jason: Right. Or they’re just hungry. They’re just hungry for a deal, and they’re going to pretend to know how to analyze it when they don’t.

Clint: Okay. Let’s assume that I am in Minneapolis, and I want to find an agent to work with me on finding investment-grade residential real estate. What are some of the things that the listeners who are in that situation would want to vet the agent, to figure out whether they have the chops, and they know what they’re doing?

Jason: If you’re talking specifically Dallas-Fort Worth, then call our company. We would love to help you. But if you’re just looking anywhere, for me what I want to do, say I want to invest in a different town, in a different state, honestly, I’d probably call the local board of realtors, and I would ask them if they can let me know who’s some of their top sales agents are in that area. They should be able to pull that data through their MLS or some type of system.

Once you get two or three names, most likely that person has a team. I would reach out to them and try to get a hold of that lead agent or someone high up on the team and let them know you’re looking to invest in real estate. Then, do your due diligence from that point. At that point hopefully, they would know somebody who specializes in it, or they would have somebody on their team that does.

I would try to get three or four names, and from that point, schedule phone calls, do your due diligence online, see if they do a podcast, see if they write blogs, see what their website looks like. Once you whittle it down to a couple, you’re going to be investing money in this area, which usually is the largest asset a lot of people have. I recommend flying there or driving wherever it’s at, and meeting one-on-one with those agents, to actually see the teams, see how they operate, ask for a tour.

All of our clients would just reach out and I tell them, “Call me, email me, and before you invest, fly here, and I’ll spend a day or two with you, drive you around the metroplex, show you what we sell, give you the highlights, and introduce you to our team.” I would just expect that from somebody that would be looking. They’re vetting me, and I like it when people do that.

Clint: When you’re working with a realtor, and they tell you, “Yes, I work with investors,” great. When you say that you have to either be all in with investors versus homeowners, is there a happy medium if you’re dealing with someone? I don’t know if that would be a question I would ask or should you ask?

Jason: I’m sure there are great agents or brokers out there that do half-and-half. My intention is not to discredit anybody, but I would say that our company prides itself and 90%–95% of our business is with investors. Most of our occupant transactions, we refer out because we like to be able to say we’re an investment brokerage, our primary business is dealing with investors, that’s what we are doing every day, and that’s what we focus on.

I think that it’s really in the person and the company. I would say if it’s an agent, it’s primarily doing on our occupant transactions, then they’re probably not selling a lot in that field. You’re familiar with real estate, Clint, so issues pop-up that you never expect or are unique to investment transactions. I would want somebody who’s in that trench every day so that when an issue pops up, they’re aware of it, they’re familiar with it. I would recommend somebody who works primarily investments, but there are cases out there.

Clint: Well, you’re talking about issues, so with investment property, when you’re looking to buy, if you’re going to use financing, I assume that given the fact that you work with a lot of investors, you probably also have some lenders as well, that are on your team, that you can refer people to, that’s going to help those loans closed. Fair enough?

Jason: Right, exactly. That is fair. In Texas, the correct way of doing it is referring to at least three providers. That’s what I always do. If somebody asks for a lender that I worked within the past. I have three lenders that I would recommend.

Now, keep in mind I have multiple lists, depending on what product my client is working to invest in. If they still have room and if they have […] Fannie Mae investor loans, then I have a list of three lenders that work great for that. But if they’re buying (say) a large portfolio of homes, and we want to go more of a unique route with a local bank that might give them better terms in different ways, or maybe they’d max out their tab. Then we have creative ways of solving those problems.

When you have a 1031 mortgage boot and you’re trying to just figure out how to move that boot over, you have to get creative. If you’re looking out for your client, you want to maximize their desire to have a successful exchange, so we’re always trying to find ways to do that.

Clint: Yeah, because one of the issues that I think comes up a lot for people as they start to acquire more properties, obviously, their tax return is going to look a little different, and you run in the issues many times with lenders or actually their underwriters because they don’t understand the investor.

If I came and I submitted my 1040, it’s a residential loan, and they see that I have a bunch of LLCs on there. Maybe it’s one or two LLCs, but they own other LLCs. They find out about it. Then start asking for EINs and tax returns, and things that don’t necessarily apply because they don’t understand what I’m doing. How do you get around that with the people you work for? Because that can be so frustrating.

Jason: It really can be and ultimately I feel like that’s why people hire successful real estate agents or brokers because we’re problem solvers. We’re always trying to figure out how to make it work.

But with those Fannie Mae loans, unfortunately, there’s this red line in a lot of places that we can’t cross. If it doesn’t work, it doesn’t work. That’s when we go to a lot of our local lenders who look at loans based on common sense, as opposed to Fannie Mae guidelines, and that’s what we would do in those cases. They can tell the assets that that person manages or has on their books. They’re able to take much more into account, especially the product type and where it’s at. There are so many other factors that weigh in as opposed to when this one thing crossed the line, or we can’t do it.

Clint: One of the things, too, that I would imagine if you’re bringing your investors that you work with to specific lenders, they’re all cutting on their loans, and they’re paying them down as they should be, I’d imagine that when you develop this rapport with these lenders, or they know that you’re bringing in good product, good people, to put together a loan, and that helps move that process along.

Jason: Correct. You build a reputation with any career, really. If you bring deals over time, you’re known as a deal maker, that you’re reputable, and you associate yourself with those types of clients, you’re right, there’s trust that’s built there, and they’re willing to make a deal work, especially if they trust you and you’ve been doing business with them for a long period of time.

I’ve been in the business 5½ years. Luckily, I just happened to join Steve, who’s been in the business since the 80s, really started in California. Being able to associate with somebody who’s been known as a deal maker and has an incredible reputation has been extremely valuable to me.

Clint: Just to finalize this point, working with a realtor or broker who has those financing connections that speak directly to the investment that you’re making, I think that’s invaluable. Any investor that’s looking to invest out of state, like they’re going to go to Dallas and work with you, or they’re working on a different market, they need to be asking those questions of that realtor and say, “Do you have these types of connections in your book that you can associate with back to me, so I can close on these properties?”

Jason: And not being afraid to do that and not being afraid to ask, “How do you analyze your properties?” “Show me your analysis report to see how you break it down, so I can compare it.” “Introduce me to some of your lenders,” or, “How many investor deals did you do last year?” There are so many questions that can be asked by somebody.

If you were going to get knee surgery, are you going to ask your surgeon a few questions before you go on the operating table? Probably. I would expect the same. If you’re spending even $150,000 on a house, why would you not do your due diligence, and ask the hard questions upfront? So that way you have a better understanding.

Clint: Can you give referrals? Not referrals, but if I asked you, can you provide me seven investor clients that you’ve worked with, so I can vet you, are you allowed to do that?

Jason: Yeah. I have a list of actually less than seven—three or four—that I have vetted, and they’re ready to go to talk to, but no, there are no rules against me. If I had a client requested 7, then I’m just going to call 4 more people that I worked with over the last 5½ years and ask them if I can go and share their information. There are no rules against that.

Clint: Got it. So when you go into another market outside of your local area, you get your property, that’s only part of this. Now that you own the investment, you got to make money out of it. You’re not there to manage it. So, how does the management piece come into play? Do you find the property management teams? Should you expect your realtor to do that for you? Or you have to do it on your own as the investor?

Jason: If you’re the investor and you’re making the decision, then the buck stops with you. My recommendation is, get recommendations, but always vet who is recommended. With us, it works out particularly great because Steve started the company in 1988, then moved to Texas in 1990, and that’s when Visions Realty & Investments really grew. He built it off of foreclosure sales, but once he helps clients build a big enough portfolio, he saw the need for property management. That’s where Frontline Property Management came into play, which is a sister company to Visions Realty & Investments.

We have a separate office but I could walk out on a door right now and be in Frontline Property Management. It works out very nice in a sense that it’s really a turnkey solution on our side when we have a client that reaches out about investing, then obviously I’m going to introduce them to our team and show them what we do.

Whenever there’s somebody new, I have no qualms what they ask for. What about this company? Whoever works best for them, that’s great. But usually, when they see our team, our process, how smooth it is, and then how happy our clients are, then they choose to go with us because they’re out of state, and it makes it more hands-off because the whole idea is to pass the cash flow from most investors. So, our goal is to help facilitate as much as possible and it works great by being right next to each other.

Clint: Bringing in-house, definitely I can see the benefit to the investor because you’re going to want to make sure that, that sides taking care of because you’re telling someone you’re going to get a six cap on this property, and if they’re pulling a two because it’s poorly managed, they’re not buying any more real estate from you.

Jason: Right, so that’s where our skin is in the game. I feel like that’s a great thing, too, when clients vet us, like us, and like both companies. At the same time, I’m referring them over to Frontline, in our office here. And I tell them if my clients are unhappy, I want them to let me know, so if there’s ever a hiccup anywhere, great. I can go next door and work through it to find a solution. But again, our skin is in the game and theirs is as well. That’s why we work so well together.

Clint: So right now, what I’ve been seeing and it’s something that I’ve been exploring as well through my own investing, the difference between you going new built versus existing for an investment property. Do you get any comments (one way or the other) on that, or are you seeing that investors are coming to you and you’re on more the new built route, just because prices have come up so much on existing properties in the last three years that when you weigh the difference in price between a new property that you’re going to turn into a rental versus existing property, that CapEx that you’re going to have started digging into your cap rate?

Jason: That’s a great question. If I had a new client that came, how I would address that, is it really depends on my client’s goals. That’s what we always start with. What’s their stage? Where’s their long-term plan? With new builds in this area, typically you reduce your cap rate (based on my experience) a couple of points, so maybe 2%, 1½%–2% as opposed to a preowned property.

I like both, but if my clients are wanting a little bit higher cap rate, I don’t really sell anything I wouldn’t personally purchase. That kind of bubble the […] in 1980 or newer, three bed, two baths (or higher), in a good school district. What I like about that is, by that time, the house is 10 years or older, we have a good pulse from what the neighborhood is like and what the future that neighborhood is going to be.

But again, if you balance it, a new build, you’re going to have a low maintenance cost, probably over the next 10–20 years. It all kind of balances to some extent, but with some new neighborhoods, are there a lot of investors purchasing in that neighborhood? Is it going to be a heavy investor? Does that impact the neighborhood long-term, so are you okay with that risk? Are you okay not knowing in 5–10 years, is this going to be an area that an owner-occupant would want to move in to?

If your exit strategy is rent it out then when it’s vacant 10 years from now, do a make-ready and turn it to an owner-occupant, get a higher rate. From investors looking at numbers, the owner-occupant is emotional. But if it’s still 80% investor, I know how I feel if I drive to a neighborhood and if I want to live in it, if it’s primarily tenant-occupied properties. It just depends. It may have an HOA. It may be managed extremely well, and everything may be kept up perfectly. There are so many moving parts to it, but we just depend on that particular investor for me.

Clint: When you’re looking at properties, from your end, how easy is it for you to determine whether or not the homes in a particular community that you’re looking to invest in are owner-occupied versus investor or renter properties?

Jason: There’s a great feature in our MLS where I can actually pull a property profile and it will—for that zip code—pull data showing you all the tax records who have a matching mailing address to the property address, which is typically assigned and that’s an owner-occupied home, versus the property address, and then a separate mailing address, which typically means that’s an investor-owned property. I’m able to pull that data for a particular property in that neighborhood, and it goes further into demographics as well. I’m able to see this is a rough percentage of tenant-occupied versus owner-occupant in the neighborhood.

Clint: For an investor coming into a new market, I would think I’d want to be in an area where there’s much more owner-occupied because the properties are going to look better around me, and that will be able to help me attract and keep a tenant in my property.

Jason: Right, exactly.

Clint: That’s interesting. So, what if waiting’s going to go on in the Dallas market over the next 1–2 years?

Jason: All signs are pointing towards great, and the Dallas-Fort Worth is an extremely diverse economy. Companies are still moving here, people are still moving here, so I really feel that, based on the numbers I see right now, it’s going to be great this summer, and as long as our economy continues to grow and Dallas-Fort Worth attracts the companies as it is, I think it’s going to be great.

We’re not reliant. Houston is a great area, but again, they have their flooding that they occasionally deal with and it’s very reliant on the oil industry. Here, you have so many different industries. Facebook put a data center just North of Fort Worth aligns the airport. You have so many different Dallas-Fort Worth International Airport, so many great things happening here that I see the market continuing to do great and it mainly stays consistent. No large debts because I would expect that even in a recession, because of how diverse our economy is, I will be able to weather that storm better than a lot of other areas.

Clint: So the last time we had a slowdown in 2008–2009, how much of a hit did that market take?

Jason: We did get hit. I wasn’t a real estate agent or broker back then, I was in college. But in just talking with my associates, we did get hit and a lot of people bought some great properties then.

However, from what I’ve heard on the property management side, even when the market goes down, typically your demand for rental properties goes up. People may be losing their houses, but they still need somewhere to live. There was a dip, but a lot of my clients, it’s very interesting that they bought in that time period, maybe if cashed out into larger properties. It’s amazing the appreciation that has happened in just 10 years. Sometimes double the value, but they purchase the properties. But from mentors, Steve, and other folks that I spoke to, it was tough, it was hard, but it wasn’t devastating (if that makes sense).

Clint: Well, if you buy right, you’re not having a loan that’s coming due a year, and they have to go back in and ask you to put in more capital, the equity within guidelines. I experienced my own real estate when rents went up, when people started looking for new housing, it was great. I was making more money in 2010 on a lot of my rentals than I am today because there’s just more supply or people are buying their own homes.

Jason: With investments in general, new investors, when they’re buying or maybe they are just starting, I always tell them, “Listen, if you’re going to hold for 15–20 years, just know you’re going to go through some recession and that your value may dip below what it currently is. But if your goal is to hold long-term, then it’s clear that real estate is tried and true as long as you do it smart. So just be prepared, and don’t invest all your money when you don’t have repairs or reserves.” We coach people through that to help make sure they’re starting correctly and also aware of what’s the reality of investing in real estate over the next 15–20 years.

Clint: Exactly, and the other thing about that is that I hear everyone always doesn’t want appreciation. Appreciation’s something that I call the icing on the cake. It’s the cash flow. That’s why we’re investing in these properties.

If you want to turn around and hope the […] run up by 20% or whatnot, that’s more of a flipper mentality, that you’re going to pull that out right away and sell it. But if you invest in long-term, it doesn’t matter what the value does, as long as it keeps producing cash in your mailbox every month, you should be happy.

Jason: Exactly.

Clint: If they want to get in contact with you, what should someone do?

Jason: They can google us, Visions Realty & Investments. They can call me on my cell phone, (817) 269-0988. I am one of those unique realtors that actually returns phone calls. So if you do call, I will call you back.

Clint: Great. So I’ll put some information on the show notes as well, so people can reach out to you. If you want to go down and invest in Dallas, Texas, Jason is an expert in that market. Helping investors find the right properties for them to add to their portfolio. Any parting words?

Jason: I appreciate the time, anybody’s welcome, and I really appreciate you having me on the podcast, Clint.

Clint: Great, Jason. Thank you very much and I look forward to talking to you soon.

Jason: Sounds great.

Clint: All right, bye.

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