Which Tx city to invest in STR? Dallas, Galveston, Corpus?

Question

I have saved up $20k for a 10% deposit on a STR for my husband and I. The idea is to have some place we can spend several - six weekends out of the year there and STR it the rest of year to at least breakeven month to month and eventually have passive income or sell.  We started looking at West end of Galveston (Pointe West) for the "full service" resort feel that we liked personally, then we discovered that the condo fees were just as much as the mortgage... Then we realized we are about to have 2 of our kids and a grandkid living in and near Dallas. One in Rowlett and one in between Highland Park and Oaklawn.  Since we will be visiting a LOT, we thought it might make sense to by STR near there....but I really don't know what tourist attractions are in/near Dallas that would create a reasonable occupancy rate to justify the cost... Then we discovered we will have a daughter and her friend going to college in Corpus fall of '21 and they need a rental to stay in, so we are back to coastal options. Corpus might the be a "rent to daughter and friend during school sessions and STR during summer months". I have a good spreadsheet going to calculate costs and incomes, but I just don't have a great pulse on 1) Dallas area for STR 2) Corpus area for LTR with a summer STR  3) Is there a glaring winner or looser amongst these?  Also, we are both in construction and aren't afraid of work on a place but really just don't have much time to do so with full time jobs, owning another company and part time college on my part...  We really hope for this to be the first of many real estate investments.  Appreciate any insight on any of these areas!

Emily Jones · Answer

Thank you @Timothy Church and @Lucia Rushton . Our personal home "mortgage guy" did say we could purchase as a second home and only need the 10% down (plus closing costs).  I understand there are terms to that which involve us staying there a certain percent of the year or something.  Which is fine since we do plan on using it some for ourselves.  I don't know the details of those requirements though.

@Timothy Church what is meant by "non-warrantable"? We have looked at condos in Galveston; Pointe West specifically since we really love the area for ourselves, but it might be just out of our price range with the condo fees being about as much as the mortgage would be. But those particular condo fees also include wind and flood insurance plus a bunch of other stuff that we would need to pay on our own otherwise..  Do to that and the condo association taking care of exterior maintenance and it being a coastal property, I kinda feel better with a condo actually..

Timothy Church · Answer

@Emily Jones & @Lucia Rushton

While you definitely have to take into account closing costs, you are able to purchase a vacation rental as a second home loan at 10%. Now at that price point (at least in Galveston), you'd be looking at a condo complex that is non-warrantable aka a condotel. I do have a lender that is able to do 15% down on non-warrantable condos but that is the lowest you'd be able to get the downpayment. As Emily mentioned, always remember to include closing costs. That way you are able to look at properties at the appropriate price point.

Best of luck!

Christina Johnson · Answer

The Gulf will never be moved or shut down. The Galveston STR market only continues to get better. I have managed for 12 years. We do very well on the island. We also are close to major airports which is key. Many choose us for that sole reason versus Padre and Corpus. We also have UTMB and the convention center. Houston guests always head down to fill in our last minute openings since Houston is just an hour or so away.

Tracey Cazalas · Answer

Hi Emily~I am a Realtor here in Corpus Christi where I was born and raised.  I live on the island where most/best options for STR are.  I also lived in Dallas for 18 years.  If nothing else, I would be happy to talk to you about your options and things to think about.  Corpus, right now, is affordable but won't be for long.  I can talk to you about the upcoming growth and changes happening here.  I am familiar with TAMUCC, it's location and areas you might be happy with your daughter living in being she is a college student and about to go out on her own.  Feel free to email me at tcazalasatgmaildotcom

Carter Anderson · Answer

@Emily Jones the STR in Corpus Christi, where they are allowed here, do really well if you can get it at the right price!

Peter Eberhardt · Answer

No problem fire away, my inbox is open

Antonio M. · Answer

@Peter Eberhardt

I too live in LA and am considering looking to look for out of state properties in Columbus. Could I message you to learn more about the reason why you didn’t go out of state? I feel like I’m about to be in the same boat as you prior your new insight.

Timothy Church · Answer

@Emily Jones Non-warrantable typically means that they are condos that Fannie Mae will not purchase the loan and so they can't sell well on the secondary market. Every bank can have its own definition of what is non-warrantable but most follow the Fannie Mae guidelines. Typically reasons that a complex would be deemed non-warrantable is if over 50% of the units are used as rentals instead of being owner-occupied, if it is run like a hotel with on-site rental management, or if it doesn't keep the minimum amount of HOA fees in reserve.

Properties with these issues are a bit harder to get financing as you typically have to find a lender who holds their loans in house versus reselling them. If you don't know if a complex meets the standards, just ask the HOA. They will know!

Lucia Rushton · Answer

@Emily Jones no matter which market, make sure you include closing costs into your cash savings. As this will not be your primary residence you will need to put down 20% plus have 2-3% of the purchase price for cash at close ( at least in Texas) . I just want to make sure your numbers work for the location you decide to invest in.

Clark Smith · Answer

@Emily Jones I'll second the market for Corpus. There is a ton of growth projected here as well as the other cities in Texas right now. If you are looking for a short term rental here, you might look closer at surrounding areas for more of a beach/vacation destination (Port Aransas and Rockport to name a few).

Feel free to reach out with any specific questions!

Which Tx city to invest in STR? Dallas, Galveston, Corpus?

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