By Tom Branch, on September 1st, 2011 
With the shift from home ownership to leasing brought on by the aftermath of the mortgage crisis, more people see the long-term investment and cash flow potential of residential real estate as a good place to invest their money.
We’ve all heard the horror stories about the “tenants from hell” who fail to pay the rent and destroy the homes they’re leasing. These tenants cost the landlords an untold amount of money from lost income, expenses of eviction, and damage done to the properties.
The real question is, “How do we minimize the risk and avoid the tenants from hell?” You have to filter out the problem tenants before you sign a lease and let them take possession. The key is tenant screening.
Before I discuss the various screenings, I want to encourage anyone who is considering leasing their property to establish their lease criteria before ever advertising the property. By establishing criteria in advance and not deviating from those criteria, you can avoid most Fair Housing issues.
When processing applications, we try to verify as much of the information on the application as possible. We verify employment and income with their current and past employers. We verify rental history with their current landlord or we can see mortgage history on a credit report.
We then calculate the rent-to-income ratio. We use 30% as our standard. While some people can support higher rent-to-income ratios depending upon their total debt load, we reject any applicant exceeding 30%.
A credit report is pulled on every applicant. The data is used to calculate the total debt load against their monthly income. Our standard is 50% debt-to-income ratio (including the proposed rent). Once again, we reject any applicant exceeding 50%.
We pull a criminal background check on all applicants. We reject any applicant with a felony conviction within the past 5 years and misdemeanor convictions within the past 2 years.
Applicants are checked against the Office of Foreign Assets Control (OFAC). Applicants on the OFAC list are rejected.
Last we search for past evictions. Applicants who have been evicted within the past 5 years are rejected.
While this appears to be a high standard for applicants, we find that applicants who meet these criteria pay their rent on-time and generally take care of the property.
If you are considering leasing your property, I encourage you to give some thought to establishing leasing criteria and putting a tenant screening process in-place. While this requires some time and thought, it can save you lots of time and money in the long run.
Looking for an experienced and effective property manager in the north Dallas area? Give us a call at 214-227-6626.
By Tom Branch, on August 13th, 2011 
With real estate leasing going strong in many parts of the nation, you may be considering getting into Real Estate Investing. In this blog, I’ll describe some of the basic terminology.
All examples will be based upon a $100,000 purchase price, $1,000 a month rent, $300 a month operating expenses, and a $450 a month mortgage.
Gross Rent Multiplier
GRM is used to describe a ratio between the cost of a property and the anticipated rental rate. It calculated by dividing the purchase price of the property by the monthly rent. In our example, we would use $100,000 / 1,000 to arrive at a GRM of 10. The higher the number is the better.
Net Operating Income
Net Operating Income is the total cost of the property excluding any mortgage. It’s calculated by adding up all the operating expenses including taxes, insurance, management fees, leasing fees, maintenance, and HOA dues. The total monthly costs are $300 and the monthly rent is $1,000. We would use $1,000 – $300 to arrive at a Net Operating Income of $700. Use $700 * 12 to arrive at an Annual Net Operating Income of $8,400
Capitalization Rate
The Capitalization rate is a ratio between the Net Operating Income and either the original or current market value of a property. We would use $8,400 / $100,000 to arrive at an annual Capitalization Rate of 8.4 percent.
Cash Flow
Cash Flow is the movement of cash in and out of the property. Positive cash flow is usually the goal. It is calculated by subtracting the Net Operating Income and any existing debt from the Gross Income. We would use $1000 – ($300 + $450) to arrive at a monthly Cash Flow of $250.
Occupancy Rate
Occupancy Rate is the ratio between the amount of time a property is rented and the amount of time is vacant. If there is no actual data, I usually use 90 percent as a starting point for analyzing a property.
Knowing the basic terminology and how to calculate them is essential to evaluating any real estate investment purchase.
Looking to purchase investment properties in the North Dallas area? Contact us! We have the experience and knowledge to find good investment properties, lease them to suitable tenants, and provide on-going property management if needed.
By Tom Branch, on August 5th, 2011 
August 5, 2011 – RE/MAX Dallas Suburbs swept the Dallas Council Second Quarter Awards at an Awards Ceremony held earlier today.
Awards included:
Top Commissions Paid
Top Listing Units
Top Listing Volume
Top Sold Units
Top Sold Volume
RE/MAX Dallas Suburbs is a company built on the promise of exceptional customer service. Whether you are selling your home or searching for that special place to call your own, you deserve to work with someone who has your best interests in mind.
The Branch Team is proud to have contributed to these awards.
By Tom Branch, on June 7th, 2011 
I received an email this morning from an agent who represented the tenant on one of my lease listings.
In his email, he noted that, “While the landlord changed the locks after the last tenant moved out, Texas Law requires the landlord to change the locks within 7 days of the new tenant moving in.”
This is common misunderstanding of the Texas Property Code.
“TPC 92.156 – REKEYING OR CHANGE OF SECURITY DEVICES. (a) A security device operated by a key, card, or combination shall be rekeyed by the landlord at the landlord’s expense not later than the seventh day after each tenant turnover date.”
“TPC 92.151 (15) – Tenant turnover date” means the date a tenant moves into a dwelling under a lease after all previous occupants have moved out.”
The period in which the landlord must rekey the locks starts when the last tenants move out and runs for 7 days after the new tenants move in. This concept is also part of the standard Texas Association of REALTORS® (TAR) Residential Lease. Paragraph 19A reads:
“Subchapter D, Chapter 92, Property Code requires the Property to be equipped with certain types of locks and security devices. Landlord has rekeyed the security devices since the last occupant vacated the Property or will rekey the security devices within 7 days after Tenant moves in. “Security device” has the meaning assigned to that term in §92.151, Property Code.”
The intent (implied in TPC 92.151 and spelled out in paragraph 19A of the TAR lease) is for the landlord to change the locks between tenants but no later than 7 days after the tenant moves in.
See all Lease and Rental Homes in North Texas
By Tom Branch, on May 31st, 2011
I did an interview with Bonnie Petrie on KRLD Radio last week. It was an interesting conversation. She wanted to talk about the shift away from flipping homes to buying homes to use as income producing investments. We’ve been talking about this shift for the past several years yet the emphasis has remained on flipping houses.
Why the shift? The primary reason is the lack of “easy” money that once fueled the flipping engine. Investors were able to purchase properties, rehab them, and then get them back on the market. Buyers were able to take advantage of the “easy” money, securing a mortgage and becoming homeowners.
The lending market softened with mortgage meltdown. Underwriting guidelines tightened on both borrowers and the properties. This left fewer buyers able to purchase and lenders began asking lots of questions about why a property that sold for $100k two months ago is now worth $150k.
The conditions that have made flipping properties much harder are what make investing in income-producing properties the thing to do now.
Investors can purchase properties at a discount, rehab them, and then lease them to produce a steady stream of income. I find investors with cash have a much easier time of it but money is available. Investors need to be prepared to put 20 to 30 percent down and carry the costs of rehabbing the property.
Investors need to carefully select properties. Not only is initial price important, but the cost of rehabbing the property has a huge impact on the long-term capitalization rate. This is where working with a seasoned real estate professional and having a solid pool of trusted contractors is critical.
Property management has lots of pitfalls, so investors need to outsource the management of their properties or become very familiar with state and local laws.
Looking to invest in real estate in the Dallas area? Contact us!
Lease and Rental Homes in the DFW Metroplex
By Tom Branch, on May 28th, 2011
 - Happy Home Buyers are Handed Their Keys
Handing over the keys is one of the best parts of working with home buyers. It’s the culmination of weeks or months of work.
Friday evening Gina handed the keys to a new home to her clients after a celebratory dinner at The Outback in Frisco, TX. Larry and Theresa purchased a nice home in Frisco’s Saddlebrook Village.
Part of Lone Star Ranch, Saddlebrook Village is located just west of Teal Parkway and north of Lebanon Road. The location offers easy access to highways, shopping, recreation, and dining in Frisco and North Dallas.
See Saddlebrook Village Homes for Sale.
See Frisco TX Homes for Sale.
By Tom Branch, on May 3rd, 2011 
4 Bedrooms | 2.1 Baths | 2-Car Garage | 2354 SF/Tax
Sold in Anna TX – Clean and well-maintained Ryland home is ready for move-in. Large kitchen with breakfast bar overlooks the living room. Master retreat down has garden tub, separate shower, and walk-in closet. Second living area up can be game room. Grassy back yard with open patio backs to greenbelt. Updates include fixtures, laminate flooring, Frieze carpet, and wood blinds. Enjoy the numerous community amenities – pool, playground, and jogging path.
Have a home to sell? Contact us and we can set up a time for a no-hassle consultation.
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