In volatile market, investors choose to buy, then rent

By NANCY SARNOFF Copyright 2009 Houston Chronicle
April 4, 2009, 6:05PM

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Karen Davis and her boyfriend, Danny Diaz-Granados, just closed on their sixth investment property: a three-bedroom foreclosure in Richmond. They paid $78,000 for the 1,700-square-foot home, which was built in 1981 and is appraised for $140,000.

They plan to spend $15,000 fixing it up before they put it on the rental market. “Essentially we’ll be all in on the property for $100,000, but if we wanted to sell it immediately we could make 40 grand,” said Davis, a 29-year-old former waitress and student.

The couple started buying single-family homes last year after joining a real estate investor and mentor group that Davis now works for full time. They own four other houses in Spring and one in Katy. Their strategy is to buy properties for between 60 and 70 cents on the dollar, spend 10 percent to 15 percent fixing them up, and then rent them out.

“There are so many people who can’t afford to buy,” she said. “It’s very easy to rent.”

They are getting the cash to fix up the house through a rehab-to-permanent loan, which is like a short-term construction loan that’s refinanced once the renovations are completed.

After paying the monthly mortgage, Davis and Diaz-Granados, a 33-year-old oil landman, expect to net about $300 a month from rental income. That’s on top of the $1,200 they already earn on their other properties. Eventually, they’d like to own apartments. “The ultimate goal is to have enough passive income to replace my income and eventually his,” Davis said.
nancy.sarnoff@chron.com