Where to Invest: Suggestions Needed for First Timer

Question

Hello all

I am just starting my voyage, and reading everything I can.  I searched the forum, and didn't really find an answer, so here goes:

Do I look for something anywhere in Texas that is within my budget?  (Ok, not anywhere - but farther than an hour from where I live?) - or do I just stay close to home?  Part of the answer I am sure will be if I plan to use a rental agency to manage my rental.

I have heartburn over a rental agency; but if you are more than an hour away from the home, is that feasible in situations where you might need repairs done?  Need to check up on the home every once in a while?

There isn't a ton in my price range; I am looking 150K or under; a "starter" investor but obviously am finding more the farther I move out from Fort Worth

Thank you in advance for sharing your thoughts!

C.

Trent Honea · Answer

You're off to a great start!  Asking questions here on BP is a great way to learn for free.  It's a lot cheaper than "going to school" on a bad deal that costs you $$$.  I love talking about real estate investing, so here's my two-cents worth:

I agree that staying close to home is a good choice.  (That's what I do.)  There's not much inventory available below $150k in the area right now, (if you find some let me know!) so you will probably have to really look for a while to find a good option.

Rents for SFH 3-2-2 brick in an A to B area are running approximately $1 per square food for 1000 sf to 2000 sf, but RETAIL list prices are frequently above $150 per sf.  Of course this depends heavily on the area.  For example Como, Stop-6, SE Fort Worth, and the area around Wesleyan University (areas I think of as C to D generally) will not sustain those rates, while Chapel Creek / White Settlement, most of Benbrook,the areas near Hulen Mall, Saginaw, parts of Cleburne, Mansfield, Arlington, and many others will do so easily.  Those are very rough rule-of-thumb numbers just to get you started, and are my opinions only.  Always do your due diligence before you buy.  Trust but verify!

C and D areas are easier to get a "good deal" meaning low price, but you end up paying for it in the long run.  They tend to take much more of your time, have higher vacancy and repair rates, and I personally don't recommend them for your first deal.  Some people do very well investing in those areas, but I'd suggest you stay away from the war zones until you have some experience.

As you look, don't allow yourself to get in a bidding war with a retail buyer.  That's an easy way to pay too much for the property, assuming you are a buy-and-hold investor.  I've let some deals go that appear good, but someone comes along and makes an offer $10k or more above list.  Remember to not get emotional about the property.  It's an investment - you're not going to live there.

When you think you have a potential deal, use the calculators on BP.  They are easy to use and will give you a good idea of if the deal makes sense or not.  I wish BP was around when I started investing - it would have saved me a ton of time!

Happy Investing!

Bruce Lynn · Answer

I would draw a circle withing the one hour radius of you and pick which towns have some demand factors that promise growth....that might be Weatherford, Azle, Boyd, Justin, Ponder, Decatur Roanoke, etc.   Those are the first cities that come to mind, but there may be others.  Some small towns like Bowie seem to be holding their own....while others seem to be on their way out.

Jordan Moorhead · Answer

@Charlene Stovin stay within an hour or two of where you live. Out of state investing is a BAD idea for your first investment as you need to stay involved and understand the process. I know I’ll get a lot of hate for that but it’s my experience investing both in my area and out of it.

Billy Linn · Answer

@Charlene Stovin It’s important to know the market you’re buying in, what jobs are there, if people come and go with the seasons, etc.

Second, being far away from a rental is challenging when something comes up. We never know if we’ll be able to find someone to take care of an issue for us or if we’ll have to leave town at 11pm to handle something. But that’s rare and investing in different places can be worth it depending on the numbers.

On the other hand, if you’re rental is further away you won’t be tempted to run over there for every little thing and will learn how to handle things remotely.

Guy Gimenez · Answer

Depends greatly on your investment strategy. For many years I purchased over a large area of Texas but there are inherent problems with type of investing. Unless you're investing full-time,  you will need strong relationships / systems in place if plan to  invest outside your local area.

Khanesia Washington · Answer

Charlene, I would suggest creating a small business plan for real estate investing. Since you know about the amount you want to spend, $150k, you know that you can estimate about 1% rent rate @ $1500. Do a rental search, try and learn who that renter is and where they are. I would also suggest that you stay close to home since you are not sure about property management. With a rental property nearby you can have the ability to check in on your property and meet contractors if necessary. Also you'll be most familiar with the city you are in which can help with decision making.

Blake West · Answer

@Rob B. - Thank you! My wife is from Austin and her mother is a Real Estate investor who is helping guide us. Is your friend on Bigger Pockets? Always looking to network with like minded investors.

Rob B. · Answer

Hi Blake, just a few things to consider here. I was just down there visiting a colleague, so admitantly, I'm not as familiar with the different Austin neighborhoods/areas.

I do not think that it is too late by any means. All comes down to the due diligence phase. Before investing in anything, I'd definitely make sure to know the area where you're looking to buy. While I got the sense that Austin is generally a fairly safe area, some neighborhoods really are block-by-block as far as safety/average income level/etc. - I'm just starting to take the area a bit more serious as far as possible REI opportunities so I may not be the best person to ask that question but I can certainly ask my friend and if they're comfortable with it, I'd be willing to pass their info to you!

Charlene Stovin · Answer

@Ronald Rohde thank you; I don’t over allocate myself financially I just get worried if I can’t rent it, I could make the payments for a few months, but that’s it 😳

I could do a HELOC, I have enough equity in my home

Ronald Rohde · Answer

No problem on the debt, it just clarifies whether you are investing $150k cash or leveraging that for a larger purchase. A leveraged $150k will allow for further distance to justify paying other management.

Where to Invest: Suggestions Needed for First Timer

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