Sell SFH in SoCal to purchase 2 quads in Texas

Los Angeles County, California
Buying & Selling Real Estate
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Sell SFH in SoCal to purchase 2 quads in Texas

Pia Grace Fernando
Member since 2023 · 4 posts · 1 vote

Hi,

I need help to decide!

I currently rent out a SFH in Los Angeles, CA. Cash flows $300/month. I have an estimate of $200k equity on it. However, I have an opportunity to purchase an 8-door apartment in Killeen, TX. But it's negative cash flow $400/month. I will have the opportunity to raise rents by end of 2023.

Can someone give me insight on this? What would you do?

Thanks in advance!

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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y

There's too much cash flowing opportunity in Killeen to negative $400 every month. I invest in Killeen, have a four plex that cashflows $700

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  • Shiva Bhaskar
    Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes
    3y

    Hi Pia,

    What is your property management situation in Texas? That is important. 

    I am hesitant with this deal. Rent growth is weakening everywhere, and it's already negative cash flow - what happens if you don't hit the target rents. I'd want a real reduction in the price of Texas property, to increase cash flow, before you seriously consider this. 

    Also, So Cal is a long term appreciation market. I get the desire for higher cash flow, but you should make sure you're enjoying good cash flow first, before you sell. 

    1Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    There's too much cash flowing opportunity in Killeen to negative $400 every month. I invest in Killeen, have a four plex that cashflows $700

    1Reply
  • Patrick Pendley
    Investor · Waco, TX · Member since 2014 · 60 posts · 32 votes
    3y

    We do Property Management in Central Texas and the DFW area. I would not buy an investment property in Killeen that has negative cash flow. It is an area where a lot of our investors are buying and they are getting some cash flow positive deals.  I would not anticipate that it is a high growth or high appreciation market. It is a military area near Ft Hood, and so there are some challenges with that. I agree with the sentiment that rent prices are weakening. Having said all that I don't know any details on the particular deal, if the rents are under market then maybe it would turn cash flow positive. So don't make a decision just based on this one post. 

    0Reply
  • Taylor DaschBusiness Member
    Real Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
    3y

    Like Elliot said, if you are investing in Killeen you should be able to get significantly better cash flow. The appeal of the Killeen market is strictly cash flow, there may be some appreciation in there but I would not count on in when deciding to buy a property there. 

    [email protected]254-718-4249
    Taylor Dasch | EG Realty561 Reviews
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    1Reply
  • Chris Allen
    Temple, TX · Member since 2018 · 307 posts · 215 votes
    3y
    Quote from @Pia Grace Fernando:

    Hi,

    I need help to decide!

    I currently rent out a SFH in Los Angeles, CA. Cash flows $300/month. I have an estimate of $200k equity on it. However, I have an opportunity to purchase an 8-door apartment in Killeen, TX. But it's negative cash flow $400/month. I will have the opportunity to raise rents by end of 2023.

    Can someone give me insight on this? What would you do?

    Thanks in advance!


     Like others have said, I would not buy something in Killeen that has negative cashflow, especially if it is in a pretty rough location where raising rents might be a little more difficult. 

    If your SFR has that much equity and is cash flowing strong, I would maybe see if you could get a line of credit on that equity so you could still utilize it to get more properties. I know getting a LOC on a rental is a little more difficult, but is doable.

    0Reply
  • John WilliamsBusiness Member
    Property Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
    3y

    Why have negative cash flow when there are opportunities in other markets to obtain positive cash flow? We've got a great balance of cash flow and appreciation here in Clarksville, TN. I'd keep searching... don't settle for negative cash flow

    [email protected]931-272-3065
    Rent My Home - Property Management4.8211 Reviews
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    0Reply
  • Hector Adrian ortiz
    Homeowner · pico rivera · Member since 2022 · 5 posts · 0 votes
    3y

    Some things to keep in mind also are that property taxes in Texas are reassessed every year and you cannot get a HELOC in Texas. This is more of a FYI before getting into the Texas market. If I would have know this I would have done a few things different.

    0Reply
  • Garrett CrosbyPro Member
    Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
    3y

    Personally, I would only be selling my SoCal SFH if I knew I was upgrading to another growth market that cash-flows right out the gate. The current climate is not too friendly to a lot of sellers out here. If you are able to take out funds while holding your asset here for a couple more years to invest in other cash-flowing properties, that might be the play in my opinion. Completely understand the desire to get as many doors as possible - but it's important to consider your risks too. What happens if you have vacancies, capital expenses, monthly maintenance, etc. Things add up. And if your property is not cash-flowing, those expenses hurt even more.

    As an investor out here in SoCal I'm happy to talk more about this with you if you want some help brainstorming options. :) 

    [email protected]
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  • Pia Grace Fernando
    OP
    Member since 2023 · 4 posts · 1 vote
    3y

    Thank you so much for all your inputs and advice. I appreciate it. I received great information from all of you.

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    Why would you not find a better deal?

    [email protected]248-209-6824
    Logical Property Management4.9459 Reviews
    WebsiteView Page
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  • Ramandeep Sidhu
    Rental Property Investor · San Jose, CA · Member since 2020 · 75 posts · 44 votes
    3y

    It depends on your investment goals and risk tolerance. The opportunity to purchase an 8-door apartment in Texas could potentially provide higher returns in the long-term, particularly if you are able to raise rents by the end of 2023. However, it is important to consider the negative cash flow of $400/month and ensure that you have a plan to cover that cost until the rents increase. Consider the current market conditions and potential changes in the next year. If you are comfortable with the short-term negative cash flow and believe that the potential long-term returns outweigh the risks, then it could be worth considering the purchase of the 8-door apartment in Texas.

    0Reply
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