Is Dallas overvalued at the moment?

Question

Been thinking of investing in turnkey properties in Dallas.

What are your thoughts, have the appreciation boat already left? It looks like prices soared around 40-45% in the past five years. Anyone have experience investing there and if have thoughts as to whether it's too risky to invest there at the moment?

Andrew Herrig · Answer

@Jack Smith I think the fundamentals of DFW are solid (population/job growth). I don't expect the kind of appreciation we have seen the last 3-4 years, but I also don't see a crash. Affordable (i.e. median and below) housing is severely underbuilt so there is a large base of renters that can't afford to own a home without moving far outside the city.

That said, finding properties that cash flow AND are in decent neighborhoods is getting difficult. Property taxes are killer in Texas. In the last year or two, the rents on my properties have not kept pace with the increased assessments, let alone any other costs going up. Almost 20-30% of the rent just goes to pay the tax bill.

Bart H. · Answer

I think the question comes down to what are your goals?

IF you plan on holding for 10-15 years, I think there will be reasonably price appreciation and rent appreciation.  IMO this metro area is one of the fastest growing areas of the country.  I would expect it to continue as companies move to low tax, low regulation states.  Like others have said, I don't expect a big correction, I don't think the market is overvalued.  I just think home prices will level off (unless we get Amazon)

Having said that, I can tell you that the property taxes have gone nuts.  Its clear to me that there is a push to increase tax revenue by pushing the envelope of property price appreciation.

I believe that it is always possible to fine deals in any market.  And I believe it can be done in Dallas.  But I can tell you, my wife and I personally are finding fewer properties to take a look at, and even fewer worth making offers that meet our numbers.  And I its getting really tough to find houses that cash flow.

Unless you live here, or have experience/deep pockets, I just don't think Dallas is the place I would be looking to invest.

I would be surprised if you could find anything turnkey that provided much in the way of returns.  We cant find anything and we are willing to do the rehab.

Chuong Pham · Answer

Compare to some part of Cali and New York prices in dallas have not reach their peak yet. Job growth and population growth are still increasing in all Texas market. If you are looking for a place to protect some of your money than Texas is a good place.

I personally invest in DFW and there are deals but there are so many investor from all around the country looking for 6-8% cap rate that any good property be out bid. Most of my deals are off market.

Just make sure you get a deal because you can't protect a bad investment.

Account Closed · Answer

You lost me at "turnkey." There are some good deals still left but you can forget getting one from a turnkey company in Dallas.

Ali Boone · Answer

I don't think it's risky there right now, but the appreciation boom is certainly over. Prices in Dallas now are higher than they were before the 2009 crash. Not saying there won't be any appreciation there anymore, but the boom is definitely past. There is still some cash flow, so that's a perk over some other markets, but it's definitely not the most advantageous market out there by any means. Cash flow is really squeezed, prices are sky-high, and inventory is low.

But everyone and every situation is different. If you have a particular reason for wanting to buy in Dallas, a personal reason, than that's a totally different story. But if you're just bouncing market ideas around and are wondering where Dallas stands, I don't think it's the most advantageous place you could buy right now.

Larry Fried · Answer

IMHO turnkey in Dallas in current market is more of a long term hold, and little cash flow in the near term kind of play.  If you are going to do turnkey, I think any number of midwest markets are better cash flow opportunities right now.  Then it is a question of finding the right team to work with.

Is Dallas overvalued at the moment?

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