Fremont, CA · Member since 2016 · 4 posts · 1 vote
Hello everyone,
I am a newbie investor based in the SF Bay Area and my wife and I are looking to buy a SFR home in either North Texas or Denver as a rental investment in the next 1-3 months. Our budget is around $400,000 and the goal is to have rental occupancy. Having graduated from and lived in the DFW area for over 5 years, I am quite familiar with the suburbs there. But the lure of the mountains and a growing influx of tech workers from the bay area makes Denver attractive as well. Also, short to mid-term impact of Covid-19 (due to new possibilities of remote work) is also on our minds. Of course Denver may be a bit pricier as well.
Considering our main goal of renter occupancy, is one market better than the other?
You can certainly get into the DFW market for a lower price point than you could in Denver. And I always tell people that they should buy first where they live. Get some hands-on experience and then expand out-of-state.
Now ... I have to say, Denver's pretty great. And if you have any interest in having a place in a city that's nice, then maybe you consider it here. And one other thought. We now have two cities in the metro area that either are allowing or are considering allowing Airbnb investment properties. (I'm talking about Arvada, which passed a law to allow STR investments in August and Littleton, which is about to vote on a law that would allow you to buy a short-term rental for investment.) Both of those cities have their own charming little downtown with bars and restaurants and shops and are both within 20 minutes of downtown Denver.
Soooo ... you could buy an STR, make some decent cash flow on it, watch it appreciate in this crazy market and also have a place to stay if you want to vacation in the Denver area. Just a thought.
@Siddharth Mankikar I can't speak to DFW, but you are correct that many tech workers from the Bay Area are making their way to Denver/Boulder. I have a Software Development background, so I've seen the tech scene grow immensely over the past 7 years. While we don't have all the big tech companies, we do have; Amazon, Google, Uber, Apple, Slack, and a small Facebook Office. In addition to software, aerospace has a huge presence in Colorado.
With all this being said, buying a home sub 400k is certainly possible in metro Denver, and if in good condition and priced right, you should not have any trouble renting it out.
@Siddharth Mankikar all I can say about dallas is we continue to have hundreds of people move to Dallas daily. I know someone will have the exact statistic.
Corporate or satalite headquarters are stationed on all sides of the metroplex. So the great thing is we don’t rely on one industry for our rental pool.
Advantages yes, disadvantages yes. Property taxes ( I don’t know Denver’s), but for as long as you live here no state income tax ( as you know).
Lastly we are no longer a 1% town (.8-.9% is a good deal right now )
Hope the positives help sway you to the great state of texas!
I would look at a duplex or 4plex in that price range. IMO they are infinitely better than SFR for new investors. I would also look outside of DFW in Waco/Belton/Killeen. You can get good cash flow with moderate appreciation in those areas.
Just going to be straight up honest with you. Texas is probably a better market unless you are looking for some other play in the Denver area. Texas will just give you better returns solely based on the overall cost of living and current rents.
The only downside is the high property tax but they do have zero state income tax which is nice. Better Cap rates in Texas and less competition. Return wise Texas is the way to go I'd say appreciation wise Denver may be a better play.
You can certainly get into the DFW market for a lower price point than you could in Denver. And I always tell people that they should buy first where they live. Get some hands-on experience and then expand out-of-state.
Now ... I have to say, Denver's pretty great. And if you have any interest in having a place in a city that's nice, then maybe you consider it here. And one other thought. We now have two cities in the metro area that either are allowing or are considering allowing Airbnb investment properties. (I'm talking about Arvada, which passed a law to allow STR investments in August and Littleton, which is about to vote on a law that would allow you to buy a short-term rental for investment.) Both of those cities have their own charming little downtown with bars and restaurants and shops and are both within 20 minutes of downtown Denver.
Soooo ... you could buy an STR, make some decent cash flow on it, watch it appreciate in this crazy market and also have a place to stay if you want to vacation in the Denver area. Just a thought.
Thank you for all your responses. DFW seems to have a lower entry point compared to Denver. I see Frisco, Plano, Mckinney being mentioned as good cities on many threads. I have a question. Why would people rent here rather than buy, when housing is so affordable. How can I be assured of high renter occupancy?
Housing being "affordable" is really relative to where you live. Being from California, everywhere in this country is affordable to us (except Hawai'i). As to why would people rent rather than buy, I've had all kinds of renters that, although they make enough money to afford to buy, are just going to continue to rent (poor credit, high medical bills that caused poor credit, planning to move in a few years, etc.) Plus, the city of Plano consistently makes lists of best this and best that every year, so imagine someone wanting to have their children attend Plano schools but can't afford to buy there. I usually study Zillow listings and/or contact local property management companies to find out about high renter occupancy.
I think your cap rates will be better in Texas. If you have $400,000 to invest, I would look at two homes vs one. If you think about the 1% rule, $400,000 house you would want to rent for $4000/month. That's a pretty limited market in DFW. There are homes that rent in this price range, but when you start hitting $4000/$5000/$10,000 a month for rental market here, that is a very small market.
I'll say 90pct of the renters that call me want $1500-$1750, so the smaller, cheaper, more affordable house you can buy, will give you the biggest market of renters.
I think you can back into it as well.....look at what people make, take 1/4 to 1/3 of that should be the max they pay for rent.....then take that rent and decide what you can pay for a house and make money.