Which is better? Dallas or Houston for MF investing

Question

Hi BP, I need your advice. My family and I are planning to move to Texas. I’ve narrowed it down to Dallas or Houston because in NYC the prices are out of control. A single family house in my neighborhood is $1 million on average. Something I cannot afford and don’t want to. It doesn’t make any financial sense to enslave yourself for next 30 yrs. Luckily, i bought a duplex about 10 miles away 7 years ago when the market bottomed. The price has doubled so the Return on Equity is lousy now.

I want to take this property and 1031 into a multi family in Texas. From what I sourced and researched online tells me Houston has more Multi Family properties. Dallas has a lot of condos and SFH. I want to self manage the property and grow my portfolio.  I want to able to scale but SFH will take forever. Can someone familiar with these 2 markets give me some advice? Am I correct on these markets? Appreciate it.

Jessica Wygal · Answer

I have lived in Houston for 5 years now, but I am from the DFW area...lived there my whole life. And i actually disagree...while Dallas in particular may seemingly not have many MF properties...outside Dallas city limits there are tons. And in my opinion thats where I would want to purchase anyways. As far as Houston goes...I see very little MF properties that are worth having...unless you are willing to pay big prices. If you are really looking for MF...I'd check out Arlington, Fort Worth, Crowley, Mid Cities, etc..all in DFW. If you want I can send a list of zip codes and/or properties. Good luck on your hunt...Texas is the best state! haha.

Cody L. · Answer

As long as you're a real buyer, agents will send you pretty good deals in Houston I've found.  Last year I bought 6 deals.  Return on capital on my worst is 20%.  3 of them are infinite as I quickly refinanced and pulled more than all my money back.  One is 30%, one is 40%

Cody L. · Answer

Multifamily.  Inner loop (610). Mostly areas inside the loop that are right near the 'hot' areas but have some upside to their value due to being in path of progress.  Not for everyone. That's the niche that works for me.

Nate Sanow · Answer

One thing from a developer standpoint in Houston I find cool is that there is almost no zoning restrictions. So, one could easily convert into or build mfr’s.

I have also seen a great amount of house hack ready properties coming available periodically, if you can afford 300-700k range there are a ton that have a MIL suite, garage apartment, etc, in Houston.

I’m not yet an expert on Texas, just moved here from oklahoma 5mo ago (which to me is a great place to consider as well!) But didn’t want to see this un-answered. I can’t speak much into the Dallas part even though I like Dallas too, I’d be wrong to try to advise.

Friendly heads up property taxes seem to average 2-3%. That’s my only “complaint “ on the local market. Although maybe NY was comparable; Oklahoma was and is closer to 1% on average and I kinda miss it.

Good luck on the move and your decision!

Mark Sewell · Answer

Account Closed is a pretty knowledgeable guy in the MF space here in Houston.  I think he might have some really good insights.

Corin Prendiville · Answer

I can't speak much to  which is better, Houston seems to be a bigger playground so there is likely more opportunities for MF just because of that. That being said, if you plan on moving to the area like you say I would consider also which city you prefer living in. My wife and I visited Texas last Summer before moving and checked out all of the major cities and a couple smaller ones we liked, we settled on Dallas because of the mix of recreational activities, weather, and price point on properties in the surrounding suburbs (also lack of Hurricanes). We don't mind heat but humidity gets to us as we are from the west coast.We also had a couple of properties in New York that we recently sold on Long Island, the taxes in LI are absurd as the % to value may not be super high but the valuations are out of control and the cities are on top of raising the valuation, I think we were paying about $20,000 per property a year once you add it all up (Long Island is the worst).

Alyssa Dyer · Answer

@Nate Sanow Oklahoma all the way! When I tell people the price points, rent rates, tax rates.. I get so many "too good to be true" comments. Love it when I'm able to show them that it's not!

Matt Millard · Answer

@Nate Sanow I miss it too! Did my first house hack in Norman & do a lot of owner finance & multifamily up there to this day!

Kyle Mccaw · Answer

@Alan Zee check out Lifestyles Unlimited. They are a great resource for multifamily investing. L.U. started in Houston and has a great office in Dallas also.

Corin Prendiville · Answer

Hey Alan,

It looks like you found your way to Dallas. Im sorry about the delayed reply I didnt get a notification and hadnt been checking BP for a while. I hope things are going well for you here.

We are from Seattle, WA we moved to the east coast briefly for the family stuff then got down to Dallas after that. We are currently invested in the market here and still looking for more opportunities, we have a duplex we are wrapping up renovations on and just got a single family home in Irving we plan to renovate and rent out. It is a hot market of course so lots of competition but we are finding things here and there.

If you want to connect in person and discuss real estate feel free to send me a message.

Which is better? Dallas or Houston for MF investing

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