Moving to McKinney but only investing in San Antonio a bad idea?

Question

My wife and I are leaving California (we have no kids so schools are not a consideration to us personally) and we are selling our primary residence and rental property and are moving to Texas with a considerable amount of cash. Here is the dilema,  we are not sure if we wish to move to the San Antonio area or the Dallas Fort Worth area.  I am familiar with San Antonio (mostly north and north east) and would likely live in Beorne or the Diminion if we choose to relocate there.  We have not yet visited the DFW area but are very interested in seeing what McKinney has to offer and looks like.

While I am less concerned about figuring out where we wish to live, I am far more concerned about where we wish to invest.  I believe the DFW has seen a lot of appreciation already and that rents have not kept pace with property tax increases.  Therefore, the cashflow potential also seems more limited right now in DFW (where the homes are less than 10 years old) versus parts of San Antonio I was thinking of investing in like Converse, Stone Oak, and generally in areas that serve the military bases.

My primary question is this, how wise is it to invest in your backyard?  If I choose to live in DFW, how wise would it be have all of my rental property in San Antonio, especially when I don't currently own any rental property in either place and have complete freedom to choose where to live and invest?  I like the idea of purchasing a newer home for a rental that has less maintenance and then renting to military families, whom I understand typically make very good tenants.  I am clearly looking for less maintenance, including at the cost of reduced profit margins (looking to purcase rental property between $225k and $300k).  That said, I am not stupid so I don't want to just park my money somewhere when clearly better opportunities exist elsewhere.

If I choose to live in either SA or DFW, who would recommend to HEAVILY consider only purchasing investment property in close proximity to where I live, especially considering I am coming in with no strings attached?  I am really thinking that I may want to live in the DFW area and have 3 or 4 houses in SA but I would love to hear from investors that are more experienced than I am as to their thoughts.  BTW, my strategy would be, regardless of where I choose to live, to have an agent find the tenant and show the house and I would manage the property once there is a tenant in place.  So the way I see it, if I purchase a newer home in SA and have a good tenant in place, then it shouldn't matter too much where I invest minus when I am looking to purchase a new investment property and have to drive to SA from DFW to do house hunting.  I am very much interested in critical viewpoints to this logic.

Katie Greenman · Answer

How wise is it to invest in your backyard?

-Wise! It is necessary if you are planning on managing the property. It is not the only way though.  Many out of state investors invest in Texas using an agent and then hire a property manager to screen and manage.

Even though new builds are supposed to be problem free this is not always the case.

Set yourself up to be pro-active rather than reactive.

Think of bad case scenarios' as a WHEN not an IF so you will be mentally and economically prepared.

Investing in your city of living is wise.  Investing in another city is wise as well as long as you are well prepared. You must be able to trust your property management company.

-

Naz Hossain · Answer

Aaron, I think it would be completely dependent on what your comfort and experience levels are. If you are going to manage it yourself from dallas, are you going to be able to make the drive down if to SA if something were to happen (worst case scenario)? Maybe factor in the cost of a PM to handle the properties for you in SA? You will have to be mentally prepared for the worst - even if you rent out to the best tenants on paper. There are a lot of members here who have a lot of success investing from a distance but they have REALLY good systems in place. So if you have all your ducks in a row - you should not have any problems investing in SA while living in Dallas. Hope this helps

Bruce Lynn · Answer

@Aaron M.   Great question..... I fall back on the Warren Buffet theory of buy what you know.   I think I would move first....get comfortable and then look for your rentals.   Lots of great places to buy.   I don't know San Antonio well, but I would think there is great opportunity in some of the smaller towns between SA and Austin.   I do know DFW and the areas around McKinney are exploding....there's plenty of growth left in McKinney too.

One thing I would think about is if you buy in SA?  How will you know if you will only rent to military families?   While there are plenty in SA, once you put the home up for rent I think you never know who you will get.   I guess you could keep it out of MLS, and advertise in base newspaper, website, and get it to the different housing offices at the base to help focus on families, but you also might be leaving out other great tenants.   So just something to think about.

While I hear it from many new investors, I'm not always sure newer means less maintenance?  What maintenance do you expect to have on an older home that you wouldn't have on a newer home.   I'm not thinking 50-70-100 year old homes, I'm thinking of 5year old vs 15 year old homes?   Sometimes what we see is outside paint....so you do that and then you're good for another 10-15 years, water heaters....again change that and you're good for another 8-15 years, AC units...again every 8-15 years, roofs ...well they say every 20-30 years, but seems like here is about every 8 years due to hail storms... sometimes I actually think the older the home, the better built it is.  Seems like a lot of builders keep trying to make things cheaper and cheaper and less well constructed in some cases.   So just another thing to consider.

Welcome to Texas and best wishes for wherever you end up and invest.

Jason Hirko · Answer

Well I was speaking in terms of my preference of where to live specifically, BUT yes I also think San Antonio is a better place to invest than DFW too, but mainly because I chose to live here. And I wouldn't agree that there is a commonly held belief that investing in DFW is better - it is just a larger MSA, so the sheet number of investments there is going to be higher. Look at the last 10 years trend lines in Dallas Country and Bexar County in home sales, median home price, and rental index, and you'd be hard-pressed to tell the difference. At the end of the day, both are good places to invest. But I would encourage you to research San Antonio and get a feel for the intangibles. It reminds me a lot of Austin 15-20 years ago, and we all know what happened with their RE market!

Ronald Rohde · Answer

I would be opposed to investing 4-6 hours away. Its less convenient than living near Love field and flying down to Austin though. I could do that for a total trip of 4 hours sometimes.

Jason Hirko · Answer

@Aaron M. I am biased (I moved from Portland to San Antonio...Boerne specifically), and after being in Texas for 11 years, I can tell you I much prefer San Antonio to DFW. But at the end of the day, it is personal preference. With respect to investing in your own backyard - I would say it is a good idea. I bought a bunch of rentals outside Houston and hired a property manager. It was OK, but after Hurricane Harvey, I couldn't get my PM on the phone for a week, and the highways were closed into town and I had no way of even calling a tenant to see if they were OK and the house was still standing until I was able to make the drive a week and a half later. When I got there, 3 houses were flooded and I had to stay for another two weeks demoing everything myself and trying to find an available contractor. After that, I put everything up for sale and re-invested in San Antonio.

Joe Scaparra · Answer

@Aaron M., I grew up in Universal City next to Converse.  My dad retired from Randolph AFB.  I too, put 20 years in the USAF and now live in Austin, TX.  That being said I also own 9 rental properties consisting of 19 doors and I manage another 6 for my kids.  I do all the property management.  Half my investments are in the Austin MSA and the other half are in Bryan College Station (2 hours away) and lastly I have one property in Ft Worth.  I am also retired, so I think I can relate to your situation.

I gather you have a substantial amount of cash to invest.  I often think about if I were to start over would I do things differently.  I like the idea of investing close to where you live.  My properties in Austin are extremely easy to manage for several reason but being close by is definitely an advantage.  Bryan College Station is not much of a problem but it is handicap due to me being a Aggie and so I usually go to all the home football games there in the fall.  My Ft Worth property is the farthest away and I bought it on a golf outing while visiting my sister and brother in law.  I also have a brother in the North Dallas area (Flower Mound) and he has several duplexes close by.

Since you are thinking of buying 3-4 properties, I would focus on the locale that you live in or close by.  Getting a PM to find you tenants is great but maintenance, tenant problems and being able to drive by your properties from time to time is a lot easier to accomplish if the properties are close by.  The rental markets are strong both in SA and Dallas.  I think you can find worthy deals in both areas.  You seem to want to focus on new properties due to maintenance concerns and thereby willing to sacrifice some cash flow for ease of management.  If that was the case, you should invest in the vicinity of where you live.  SA may be less expensive but I believe rents will be lower as well.  I don't really see much of a difference if buying new starter type homes in either location.

As far as renting to military, I think they make good tenants but there is no guarantee that you will have them as tenants.  There are a lot of renters looking and just a smattering of military.  The nice thing about Texas is everyone is flocking here and tenants are not hard to come by regardless SA or Dallas.

Lastly, I am not sure what the make up of type properties were available in CA but here in Texas, duplexes abound and make nice cash flow properties.  Duplexes seem to be more prevalent in the South and Texas certainly has its fair share.  I am almost strictly a duplex investor and investing is good in Texas.  Most duplexes are older, I usually buy those that were built in the 80s.  Sounds like you're interested in new builds.  New Braunfels and Kyle to the North of SA have some very nice new built duplexes that might work well for you.  I am sure Dallas has pockets of them as well.  They won't cash flow as good as older properties but should do fine for someone who has a little more cash to put down.  Just a consideration.  Cheers!

Shane Griffin · Answer

Aaron - welcome to Texas!

My opinion would be based on 2 things:

• 1. Are you going to do a 1031 exchange with your current rental property? If so, rolling that over into San Antonio might be the faster option due to you already knowing the area and having a comfort level with it.If not, then maybe wait until you get settled in wherever you move to determine where you want to invest.
• If not, then maybe wait until you get settled in wherever you move to determine where you want to invest.

• If not, then maybe wait until you get settled in wherever you move to determine where you want to invest.

• 2. Do you feel comfortable managing a rental from a distance?We own a rental property in Bryan/College Station and live in Fort Worth. We chose to hire a property manager. We rehabbed it prior to renting and it has very little maintenance issues. However, if something did go wrong, it would cost me $100+ dollars in gas to get down there, a hotel for a night and my time. (that's a couple months of PM) I also do not have to answer the phone at midnight if there is a water leak or the microwave light goes out. Just my opinion, I would factor in a PM in the numbers if you are looking to invest out of town. Even if you don't do it, you know the numbers work if you ever needed to.
• We own a rental property in Bryan/College Station and live in Fort Worth. We chose to hire a property manager. We rehabbed it prior to renting and it has very little maintenance issues. However, if something did go wrong, it would cost me $100+ dollars in gas to get down there, a hotel for a night and my time. (that's a couple months of PM) I also do not have to answer the phone at midnight if there is a water leak or the microwave light goes out. Just my opinion, I would factor in a PM in the numbers if you are looking to invest out of town. Even if you don't do it, you know the numbers work if you ever needed to.

• We own a rental property in Bryan/College Station and live in Fort Worth. We chose to hire a property manager. We rehabbed it prior to renting and it has very little maintenance issues. However, if something did go wrong, it would cost me $100+ dollars in gas to get down there, a hotel for a night and my time. (that's a couple months of PM) I also do not have to answer the phone at midnight if there is a water leak or the microwave light goes out. Just my opinion, I would factor in a PM in the numbers if you are looking to invest out of town. Even if you don't do it, you know the numbers work if you ever needed to.

That being said, McKinney is a really cool area that has a great downtown atmosphere. That area is continuing to blow up with new construction. We almost move there but my wife's job took us to the other side of the metroplex. I don't know much about San Antonio or that market, but I do know the scenery is a lot better down there.

Best of luck on the move!

Mike Freeman · Answer

I agree with Shane and Naz, how comfortable are you with managing a property a few hundred miles away from where you live. You have a rental property now which I suppose you mangage yourself. What issues have come up with that property, that if you were a few hundred miles away, would be a considerable hardship on you to manage the resolution of the issue?  If you are retired and can leave at a moments notice to resolve the issue, or on vacation and cannot be reached and you are ok with resolving it when you return from vacation, or you have a handyman arranged to handle issues, but you cannot reach him, etc.  Just think through the issues that can come up, and decide if you can handle it at a distance.  I live in Mckinney and have 3 rentals in North Texas, and I use a property management company.  I have 3 rentals out of state and I use a property management company.  I sleep comfortablely when on vacation, knowing if there are issues, I just tell someone to take care of it.  Yes, it reduces your cash flow to use a PM, but in the end it just depends on how you want to use your free time and quality of living.

Naz Hossain · Answer

Similar to Jason I live in San Antonio as well which is probably the only reason I started investing in SA. Doing my research it is difficult to ignore the future prospect of the city. With Houston, Austin and DFW so much farther ahead of SA, it is a pool of opportunity.

Moving to McKinney but only investing in San Antonio a bad idea?

Most Popular Reply