High end rentals in DFW

[Michael W. McCord]

I've got a house under contract in the Canyon Creek neighborhood in Richardson that I plan to gut and renovate. It's a typical mid century ranch style common the neighborhood that has good open floor plan potential. As the neighborhood has gotten so hot, there is a ton of flipping as the upside is pretty big. There are also quite a few teardowns with 1.2-1.6m customs going up in their place. Rather than go with the crowd and flip for a profit, I was thinking of renting as I have noticed shockingly few rentals in the area. To make the numbers work I would have to get at least $3,500 per month from a tenant. Anyone in DFW or other Texas metro areas have experience with high end rentals? Or know of a website or publication that deals with this? I have yet to hear a podcast or see any information on this. Thanks all!

[Will Fraser]

Hi @Michael W. McCord, this sounds like an intriguing opportunity!  I specifically love the idea of using the existing home (after renovations) as a rental property and then in the next 15-30 years, when the market has gone through a few iterations, determining the best-and-highest use.  You may end up with a fully paid off parcel that can be redeveloped into something much more valuable, or a home that can be updated and sold for a handy profit.

I'd recommend looking for other similarly priced rentals in your area and checking out the competition. If there are almost none, then that may be a good sign, but if there are a lot and their DOM is high, caveat emptor!

[Rob Lee]

High-end rentals are becoming more common in the area. American Legend created a new construction community of homes that rent for $3000+ a couple of years ago. These new homes are generally 2,500 sq ft and up in size. 

[Lucia Rushton]

@Michael W. McCord. How much work are you going to do? Will your property compete with the finishings of the $1M properties?

Have someone run comps on square footage and age in the area.

[Michael W. McCord]

@Lucia Rushton I plan to put in 100k and while it will be nice it does not compare to the 1m+ stock. However sales comps for that type of house are high 6's and low 7's which makes a great flip. Hence all the activity. I did have someone run rental comps and there are only 2 or 3 in the whole area near my age and sq. footage which is why I'm asking this question in the first place.

[Ronald Rohde]

Check MLS, if its a good school district, people will rent at $3k plus. But they have lots of options for housing at that price.

[Adam Kay]

I would look deep into the comps, if there's nothing nearby stretch the radius and find a comp with a similar school rating and area. This is Dallas, rentals are all over the place, you will find a comp. I've seen rentals for $15k/month down in preston hollow.

[Rob Lee]

Hey Michael,

How is it going? What did you decide to do? Flip or rent? 

Rob

[Michael W. McCord]

Originally posted by @Rob Lee:

Hey Michael,

How is it going? What did you decide to do? Flip or rent? 

Rob

Hi Rob,

I ended up renting for my asking price of 3900/mo and in fact just posted rehab details in the Deal Diaries forum here if you're interested.

https://www.biggerpockets.com/...

Mickey

[Rob Lee]

That's AWESOME Mickey! Congratulations!

[Harrison Sharp]

Canyon Creek is an insanely hot neighborhood - My parents live there and have a rental there. You can easily generate over $3,200 in that neighborhood if you do a good job. Even in the neighborhoods by Pierce you can get close to 3k on high end rentals. 

[Andrew Postell]

@Michael W. McCord this price point is WAY over what successful rentals are in our market.  Comparatively speaking I can rent a $200,000 home for about $1600 per month.  So 5 $200,000 homes will have significantly more profit than one $1million home.  Then numbers are even more profitable if I rent $150,000 homes.  And that's why we target homes that are $250,000 and lower in value when we rent.  There are more people who rent at that price point and they are more profitable.  I hope all of this makes sense.