First time investor: Tampa or Dallas?

Question

Hi fellow investors, happy New Year!

My boyfriend and I are living in SF Bay Area, and we are looking to invest in a SFH remotely with <300k house price, good appreciation and positive cashflow. We are first-time home buyers.

We looked at Jacksonville FL, Tampa FL, Miami FL, Austin TX, Atlanta GA, Dallas TX, Denver CO, Charlotte NC. The data we gathered include:

- Median house price growth over past 5 years

- Population growth over past 10 years

- Tax rate (income and property tax)

- % houses in the market that are within our 300k budget

- and some other factors

We narrowed the list of cities down to Tampa FL, and Dallas TX because:

Both:

- No state income tax

- House price growth over the past 5 years look good

- Plenty of houses within our budget

Tampa:

- Pros: Nice environment (by the ocean!); 5-year house price growth 45%

- Cons: One of the most vulnerable population centers to a hurricane strike; not sure about future growth

Dallas:

- Pros: House price growth was very fast in the past 2 years; maybe has a bigger potential to grow because tech companies in the Bay Area seem to like moving to Texas

- Cons: High property tax; house price growth not as fast as Tampa in the past 5 years

I would love to seek your advice on:

1. For the goal of <300k house price, good appreciation, and positive cashflow. Which city would you choose to invest and why?

2. If you think we made silly mistakes in selecting the city to invest in, could you point them out?

Thank you very much!

Michael Haynes · Answer

Hello Cheryl Vargas. When I started buying mostly mis-advertised property in South Tampa 30 years ago, my Agent said that the only area in the whole of Hillsborough County that had gone up in value over the last ten years was at the corner of Gandy Blvd and Bayshore. Bill Davidson showed me a Duplex and House on two lots that were being advertised with only a picture of the House, four blocks away and I bought them. The next ones he found were just off of the Bayshore and closer to downtown. Two Duplexes on two lots and they only showed a picture of one, which is why everyone thought the property was expensive. I was able to Finance by the Owner with $10,000 Down at the going Interest Rate for the first year on my first four properties. PITI and all the Emergency Repairs left me with $100 to $150 a month from the rents on each House and Apartment. Some accepted my Offer at slightly less than Asking Price. I tried to get a Real Estate Broker to manage for a short time and when I got off the Oil Tankers in 1999 I just managed them myself. I always had one Handyman who could fix everything and working with him taught me to continue on my own, when they died. We had an Investment Club in Tampa with 500 old guys who each had money that they just wanted to park somewhere and make 20% a year, which was possible at that time. I learned how to trade Mutual Funds while I was on the ships and made $100,000 for my Rental Portfolio Investing. When I was off the ships I would fly to Brazil where I was building a few simple houses for my Retirement. In 2008 we had the Economic Collapse and anyone who did not own their Rentals outright or had saved a lot for the downtrends, lost all or most of what they had. I know a major Developer and a Builder and my Insurance Agent was working for a company and they all lost 120 or more properties by 2010. I struggled for six years with a Lawyer and was able to do five Short Sales with a Letter of Forgiveness from the Bank to save three of my Rentals and two of the ones I bought with my girlfriend. All of our properties were in Primo Locations, especially the ones in South Tampa which exploded with development ten years ago on the East side of Dale Mabry Hwy. The properties we have sold in the last five years have been netting $100,000 to $150,000 profit each. Two of them have been Tax-free sale of our Residence and we split it up to pay off all Debt to end up with a paid off home for each of us and cash. I just sold my four Commercial lots with a house that rented for $1000 a month for 20 years. I netted $340,000 with the use of my Carry Forward Deductions. I am selling my last home in Tampa as my Tax-free Residence of the last two years, for $200,000. It's a 3/1 block house with extras, all fixed up with nothing special. With the money from my Commercial property I moved outside off Tampa City Limits to Valrico and paid Cash for a 3/3 Townhome with one car garage and a pool I can do laps in. I paid off the mortgage on my house in Tampa to eliminate all costs to carry it until I finish the fixups and sell it next month. Being that it is the top of the Market Cycle with all kinds of Economic problems, I am not looking to buy another Rental house or Duplex until the next Crash. All of my other properties are paid off and I can retire to my beach home and collect $3000 a month in Rents with a small farm and mountain property where I am going to raise cattle with my neighbor. From Investing in Mutual Funds I learned how to trade Stocks and then Options on Stocks and partnered with my friend from the Club when it closed ten years ago. He taught me Options. I taught him Futures. Then, he specialized in Micro-scalping where he can make $2000 in two hours in the morning session, trading just the S&P ES Future. He is a retired cop from NY and has not had a losing day in two months. I went after the one signal that works for Entry to short term Trends and after I sell the house in Tampa, I can stay home or travel and make money with my laptop and a fast internet connection. The one thing I looked for anywhere in the world was how to make money Tax-free or Tax-deferred. Real Estate was my Buy and Hold. Futures and Directional Options on the SPY are my Daily Cash Flow vehicles. The idea of making a killing with Real Estate in a short time frame for a Newbie is something that I hard to get them to understand. Trying to teach someone how to make money trading the Markets is even harder. That's why I say that you should find a fixer upper and move in, to make it your Residence. Two years or more later, you can sell it Tax-free which is the best type of Flip. During that time you look for one or more fixer uppers at discounted prices, using Creative Financing if possible. You rent those until you sell your home and make that one your next Tax-free Sale of a Residence as your Investment vehicle. That way you end up buying only properties that you would live in and do your due dilligence to make sure your are right on the Money.

Michael Haynes · Answer

Hello Kelly Peng, I grew up in Palo Alto, CA and left there 50 years ago. The only reason I was not a millionaire by the time I was 25 was because there was no one who knew anything about investing in those days. I had the money to buy a store downtown and a home to live in. I am now 72 and selling my last rental house in Tampa. I worked on Oil Tankers and if you look at the Historical Hurricane map you will see that the only time Tampa was hit by a Hurricane, was in 1921. I made sure that this was the safest place in the Gulf of Mexico to invest in rental properties. What you are trying to do with Absentee Ownership of Single Family Homes to me is the start of a nightmare. SFH's almost never pay for themselves and you need a Team to do all the work for you, if you are not going to self-manage, which I did for 30 years. You cannot expect Price Appreciation to continue at the current rates. Look at the Real Estate Cycle and not just the current Comp Data. With $300K to invest, there are many other ways to Passively Invest and not have the headaches you are looking for.

Joanne Tsai · Answer

@Kelly Peng

I lived in the Bay Area for years before moving back to the East Coast. A lot of my friends in CA are looking to invest or investing in TX, probably bc a lot of CA companies are moving there....

I’m more interested in all the votes for Tampa, what’s the average DOM for a rental there? I know the market seems pretty competitive when it comes to purchasing, but I haven’t researched much on supply/demand of rental. Also, how was the market impacted in the last crash? My understanding is Texas was less impacted then but obviously labor market could have improved in Tampa since then....

I’m also interested in learning more about Tampa market, would be interested in your opinions.

Andrew Schutsky · Answer

We are also big on Florida (especially the Tampa/St Pete area). We're focused on Multifamily, but SF rentals are just as hot in this market!

Why?

-Job Growth

-Income Growth

-Population Growth

-Job Diversity

-Tampa consistently ranked top 10 in places to live in the US

Greg Moore · Answer

@Kelly Peng I live, work, and invest in the Tampa area. I suggest you connect with @Kathryn Wilson. Kathryn is my wholesaler in Hillsborough and Pinellas counties and has a steady flow of off-market /below-market deals on distressed homes below $300k where you can force appreciation. She also has a solid network (eg HMLs and contractors) since you’re starting from out of state. Good luck!

Luke Skinner · Answer

Hey Kelly,

I cannot speak on the Dallas market but I can tell you the Tampa market is very strong. Billions of dollars of development going into the South Tampa market alone. New districts going up and even during the pandemic this market has been on fire with investors and home owners. Tampa is a sellers market and some investors get discouraged as they may want a higher return. That being said this market offers very strong appreciation that crushes other markets and I see no slowing down. If you want feel free to DM me with any questions. I hope I can help and happy new year!

Jim Dean · Answer

@Kelly Peng

Hi Kelly, I live in SF and am looking into investing out of state as well. Would like to connect and learn more.

Cynthia McGathey · Answer

@Kelly Peng

Kelly,

A vote for Tampa from me as well!  And more specifically Pinellas County along the beaches and downtown St Petersburg.

Appreciation in value has been consistent year over year. Activity and demand is high with the average time on market about 20 days.

In Treasure island alone, which is where I’ve lived for 30 years, more homes sold this year in the pandemic than last year and the price per sq foot increased increased by 19% and the average sale price 38%.

The area is immune to economic issues!

Bruce Lynn · Answer

@Kelly Peng @Matt Nico   I don't think we've ever had hurricanes in Dallas.  We're about 6hours away from the closest coast...300miles.....We do get occasional tornados, but they are pretty isolated.  Never known anyone personally that was affected, because so few actually get affected...unlike hurricanes.  If you're unlucky, you make insurance claim.

I don't know enough about Tampa to compare it to DFW area, but so far we are holding strong.   Lots of people moving here, shortage of housing in these price ranges you describe.  Seems like every week we here about more companies moving here.  To me it looks like Wells Fargo is moving their HDQ here, although they don't say that.  Seems like few execs still in SFO and have scattered about the country.  New campus will house about 4500 they say.  That's in Irving.  Caterpillar also announced HDQ move I believe from Chicago to Irving...maybe 300-400 people.  Two giant chip plants announced for Sherman area.  Goldman Sachs has one of 3 HDQ in Dallas now...along with NY and London....something like 5000 employees at peak.

As far as appreciation...always tough to tell....very confusing market right now....I don't think we'll see the 15-20% we saw the last couple of years...average over 30 years is about 4% I believe, so at some point we probably get back to that.  In my opinion today...prices have stopped moving up.  We see a lot of price cuts right now...you'll see articles that say 50% of the homes on market have had price reductions, but most agents seem to agree that is because people were overpricing very optimistically after market had shifted...we try to tell the sellers where the market is today, but they often have in their mind what their neighbor and friend sold for 6 months ago when we would get 20-30 offers with $100,000 over asking...and all kinds of other buyer concessions...appraisal waivers and buyers picking up most or all of the seller's closing costs.   We still see multiple offers and some over asking, but not like 6 months ago.  Things are starting to even out again.

Sub $300K is not easy, but it is possible depending on what you want to buy....but that is also where the renters are, so buying in a decent area with good schools as low as you can get is normally a good strategy.

Cash flow is always a function of what you put down.  Right now sales prices have probably moved up faster than rents....so you may have to be in the 30%-40% down, 60-70% leverage to cash flow depending on what you want to buy.

If you have any questions just let me know.

Matt Nico · Answer

@Kelly Peng

It seems like you are concerned about a hurricane strike in Tampa. Remember, it does happen in Texas also.

Id take a look at Orlando as well. Home prices have appreciated the same as tampa and rents get stronger every year.

Happy housing,

Matt

First time investor: Tampa or Dallas?

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