Buda/Kyle or Fortworth for LTR & long hold?

Question

Hi BP community,I am looking for a turnkey investment for long term rental and long hold to ride the appreciation wave and would like insights on suburbs south of Austin like Buda/Kyle and suburbs close to Dallas around the Fortworth area. Although I'd have liked to invest in Austin proper, that ship seems to have sailed since there is no way for the math to work with current interest rates. I'm considering 20% down and am open to negative cash flow for upto $300 per month (including property management fees) for the first few years (<3yrs ideally) till the curve improves to break even and turn positive for cash flow (hopefully no longer than 5yrs). Is this realistic in the current market in Buda/Kyle/Fortworth areas? Interest rates and increasing property taxes are the primary concerns. - If yes, would you recommend one over the other and why? - If no, are there other areas to look at for the math to make more sense? Appreciate any insights and pointers.

Jason Sousa · Answer

Hey there, I live and invest in the area you are questioning. Here is the thing about Buda/Kyle. Both are great markets but I think Buda is a bit better and here is why. Kyle has super high taxes and also the market is booming but it is hard to find a place that even makes the 1% rule. In Buda you can find a similar home that has a lower price to entry and the taxes are a bit cheaper. Also Buda has a more established shopping area and things to do. For LTR it is perfect.

Kevin Coco-Senyszyn · Answer

@Vika Kunta The "appreciation wave" can quickly crash if people decide they've been riding a bubble. If you get caught in a down market with a -$300 CF, you're basically SOL until the market rebounds, which could take a decade. Conversely, if you can achieve even a $1 cash flow, enduring a 10-year holding period becomes more bearable.To answer your question, I can't speak for Buda and Kyle, but our investors have been achieving cash flow and appreciation here in Fort Worth and in Killeen, which is a growing secondary market outside of Austin. As interest rates and property taxes rise over time, you can adjust by increasing rent to offset these expenses.I've also heard some new builds in markets north of Dallas are picking up steam. The benefits there are low maintenance and expected growth/appreciation, but you run the risk of having slower rentals for the first couple of years. Might be worth looking into if you're close to the $350k price range and looking for something that won't require hefty rehab, inspections, and closing costs upfront.

Vika Kunta · Answer

Thanks for all those insights y'all - appreciate it!

Ryan Kelly · Answer

@Vika Kunta the question is technically an impossible one to answer as no one has a crystal ball on how much appreciation and cash flow a market will produce over the next 3-5 years. Are we about to head into a recession? Will jobs be lost? Will lending standards tighten? These are all factors outside of Austin and Fort Worth that will impact both markets. On a high level, the Fort Worth suburbs will likely be a bit cheaper than the Austin suburbs including Buda and Kyle. The Austin MSA still leads the nation in population growth which is predicted to continue. Ultimately, you could build portfolios in both areas as a hedge if you feel strongly about Texas as a whole.

Saad Munir · Answer

Looking at Texas myself for my next investment (I'm based in Boston) and I'm looking at the DFW area as prices are lower, lots of Californians moving to those areas still just like Austin, and there do seem to be a good mix of small multifamilies from my searches and discussions with folks in the area. Cash flow is important of course but at the end of the day I think playing the long game is critical as many folks have already said here. Appreciation and rising rents will go hand in hand and that's what i believe the focus needs to be. Chess versus checkers. My biggest concerns are property management fees (might have no choice being so far away unless its a newer property) and, like you Vika, taxes (very surprised by how high TX taxes seem to be).

Jennifer Volek · Answer

Fort Worth is a hidden gem in my opinion. There are still many areas that need revitalization, so there is room for growth. Finding a cashflowing deal of $300 a month after all expenses, (cap ex, maintenance, vacancy, hoa, property management) is going to be competitive and rare. There are always ways to work around the lack of cashflow by doing Medium term rentals or house hacking.

Bruce Lynn · Answer

Happy to assist you in Fort Worth area.One place like Buda/Kyle is Burleson/Crowley/Cleburn area south of Ft. Worth.I would also look at the cities between Mckinney and Denison, north of the metroplex.If we can find them, I like the 3bed/2bath/2car garage properties around $250K.

Eliott Elias · Answer

If you are asking if it is realistic to negative cash flow in the Austin MSA, the answer is yes. If you are asking if you should do it, the answer is no.

Cade Edwards · Answer

@Vika Kunta Welcome to BiggerPockets! There are some great companies on here. Please feel free to message me with any questions.