Single Family Rentals - DFW, Houston or SA? Why?

Question

Hello! I am a soon to be out of state investor and am reading/watching everything I can get my hands on. Texas seems (to me at least!)the state with the most opportunity (lots of potential deals, cash flow, more recession proof, good value, population growth and appreciation) (I was also intrigued by NC). If you are investing in single family rentals what market in Texas are you in and why?

Bruce Lynn · Answer

Lots of companies moving to DFW area. Hopefully the growth continues or accelerates after the Covid-19 recession. Scwab and TD Ameritrade building HDQ here. Amazon rumors to be taking a second look for a HDQ2 type operation after cold reception from Brooklyn. Goldman Sachs looking for 2nd HDQ type location in DFW with all division represented. HDQ will remain in NYC for now and they have another similar location in Europe I think London. Chairman says no reason to believe all financial talent is in NYC. Think of Dallas rent vs Manhattan? I believe it was the governor who said the other day there at 600 CA companies seriously looking at moving to Texas. Mazda has been looking at Texas to move North American HDQ from CA after success of Toyota NA HDQ move. Many other companies have moved big offices here in the past few years...Liberty Mutual, Chase, State Farm....often with 1000s of employees. We'll see more.Just got off video conference with Texas A&M real estate economist today and while not rosy, things seem better here than many parts of the country. I can send you the link when it gets posted.If you draw a big circle around the city...I like the smaller cities on the edge of that circle....so in the North, places like Princeton, Lavon, Anna, Melissa, Celina, Aubry, Pilot Point, Denton, Sanger, Valley View, Ponder, Justin, Saginaw, Azle, Weatherford, Aledo, Burleson, Crowley, Cleburn.

Stone Saathoff · Answer

I haven't seen anyone mention San Antonio yet outside of the original post, if you like a low price of entry and a diverse economy, this is also a great option. Many many Texas brands have their HQ here, not to mention the military presence and some of the stability that comes with that. Also home to a lot of medical workers and tech industries, as well as tourism.For single family rentals this is a great area.

Collin Corrington · Answer

I hate to bring more competition to San Antonio but yeah, San Antonio =) We have many new businesses relocating headquarters here, population is growing, a diverse economy, there is so much going on. Plus, it is a reasonably priced market and you get get a lot of bang for your buck.

Joseph Cacciapaglia · Answer

The reicitydata.com is an interesting data source that I wasn't aware of. I'm not sure the 10 year numbers are the most relevant though. If you look at those trend lines, it appears that Dallas may be done with it's expansion phase, especially if you look at the population and home value curves. Looking at the most recent years, San Antonio appears to have the best trend line of the 3.

Bruce Lynn · Answer

@Mason Grande Jim Gaines video here... https://www.youtube.com/watch?v=XNDDRhWSSE8

Yuechen Zhao · Answer

Agreed with the above that Dallas - Forth Worth seems to have the most growth potential. Past history cannot predict the future, but there are some good headwinds for DFW. Over the last 10 years, DFW's annual population growth is 3.1% compared to Houston (1.4%) and SA (1.88%). Median household income wise, DFW is also highest at 2.83% annually compared to Houston (2.55%) and SA (1.54%). Based off of these numbers, DFW has the most vibrant economy attracting the most number of people. San Antonio... not so much. reicitydata.com is a good source for looking at data like this, or the Google public data explorer.

Sameer Bhalesha · Answer

All three cities are growing and will be great choices. Location and buying the property at a discount are critical to success as a real estate investor. Depending on your strategy, appreciation or cash flow, or both. Covid-19 will bring great deals for homes above the city's median house prices. Homes under median house prices will decrease, but not as much as luxury homes. You will have to choose the right neighborhoods, depending on your strategy. To beat 1% rule and have an appreciation, the best area would be C+ to B+. B+ to A properties are typically more appreciation focus than cash flow focus. C and below are cash flow, but you do not want to deal with troubles like bad tenants, and robbery. Gentrification is key to massive appreciation. You want to get to a neighborhood where it is 25% to 50% gentrification and then ride it when it becomes 75% gentrification. With that method, you can build a strong cash flow asset while it appreciates greatly. If the area is not gentrifying but is B location (home prices are near the home median prices), then the neighborhood may be a great cash flow asset and appreciation. Location and Discounts are key. It does not matter which city you go invest in!

Stone Saathoff · Answer

@Phillip FloresWherever you can find them! Four units are not super common here. What I have seen a couple times lately are some slightly un-traditional setups where they converted a single family house into 3 units and a casita out back into another, making a fourplex. Honestly, as long as the numbers line up and your cash flow is there, it's still 4 units on the same property. Pretty good deal if you can get that in a neighborhood near downtown where appreciation is on the rise.

Ronald Rohde · Answer

4 plex is rare in DFW, true for all of Texas really. We never were land constrained so didn't need to build dense multi-units. You can find duplexes and small MF all over. Its just hard to manage and scale since you can't afford on site PM.

Mason Grande · Answer

@Ronald Rohde that was also my gut feeling about Houston - especially seeing recent events. I really do like DFW's diverese economic profile although it sounds like as a whole it is slightly overpriced and good deals are harder to come by.