Hey Folks,
I'm a fairly new RE investor. I recently have moved to Frisco, Tx from 2014 from midwest and boy the market is hot here. Properties have shot up like crazy in the recent past. I would like to invest however thinking the appreciation is still there atleast for another 3-5 years especially when still lot of people and companies are moving. With that assumption (please chime in if you disagree), I would like to invest in Collin County - around Frisco preferrably or Tarrant - Keller ISD for SFR around $200K. In this market, i'm not getting 1% rent, but is it ok to invest here especially when the market is hot and me being local ? Taxes are definitely high here but being local makes me feel little more comfortable. Please advise. I'm looking at possible SFR properties - Tarrant county/Keller ISD, the range is about $101-110/sq.ft. and rents are .80c/sq/ft. --> $1450-1500 on a 3bdrm/2ba 1800 home.
Any thoughts/advice/suggestions for a rookie are greatly appreciated. Thanks.
Hey Folks,
I'm a fairly new RE investor. I recently have moved to Frisco, Tx from 2014 from midwest and boy the market is hot here. Properties have shot up like crazy in the recent past. I would like to invest however thinking the appreciation is still there atleast for another 3-5 years especially when still lot of people and companies are moving. With that assumption (please chime in if you disagree), I would like to invest in Collin County - around Frisco preferrably or Tarrant - Keller ISD for SFR around $200K. In this market, i'm not getting 1% rent, but is it ok to invest here especially when the market is hot and me being local ? Taxes are definitely high here but being local makes me feel little more comfortable. Please advise. I'm looking at possible SFR properties - Tarrant county/Keller ISD, the range is about $101-110/sq.ft. and rents are .80c/sq/ft. --> $1450-1500 on a 3bdrm/2ba 1800 home.
Any thoughts/advice/suggestions for a rookie are greatly appreciated. Thanks.
I live in Frisco and stopped looking at SFR 2 years ago. Maybe I got out too early, but the market is very hot and near a peak. IMHO, It will be ok for another 12-24 months as the curve flattens out, but we are near the top of the appreciation cycle. If you can't get 10%+ cash-on-cash, keep looking. Two years ago, I switched to multifamily investments and they have been doing well. I like the concept that I can force appreciation by increasing NOI. MF in DFW is also getting expensive, so my last acquisition was in Norman, OK. Proforma is 12% cash on cash and 19% IRR on a 5-year proforma.
Have you considered looking at the 380 corridor between Denton and McKinney, a ton of construction but some deals to be found out here.
@Vindy M. Hello! Great areas but very difficult to find solid deals because it is so hot. But as luck would have it, I am working a deal right now in Little Elm, Frisco ISD, that might work perfect for you. Either as a small flip or great longterm rental. Inbox me so we can chat. Also, there are other great areas to invest in the DFW, so don't limit yourself too much. We buy and sell around 30 deals a month all across the metroplex. Looking forward to hearing from you.
@Vindy M. I do not expect the current rate of appreciation to last anywhere near five years. Do not simply go out and buy homes at full retail and expect to make money unless you can hold the property without refinancing for at least 10 years.
Many of the areas farther out are much more profitable.
Basing your business model on appreciation, especially in the short term, is a fools errand. Like @Account Closed said if you can't afford to hold a non-cash flowing property for 10 years don't do it.
@Vindy M. I do not expect the current rate of appreciation to last anywhere near five years. Do not simply go out and buy homes at full retail and expect to make money unless you can hold the property without refinancing for at least 10 years.
Many of the areas farther out are much more profitable.
I agree, I bought a Duplex in Gunter below market value, it cash flows and I put about 20K of forced equity in by getting much below market, but your right its so hard to find deals like that through conventional means, MLS, Realtor, Zillow and expect it to appreciate 8% a year.
I'm not a big direct marketing guy yet, as thousands are doing that in North Texas, even radio ads are popping up on all channels now, billboards, bandit signs, there is so much blood in the water, makes me want to do turn keys in Kansas or Memphis, etc.
Appreciate all the feedback guys. @Tim Ball will reach out to you this weekend. I went ahead and got a couple properties in Tarrant County (Ft. Worth & Keller) priced around $190K with 20% down. I'm financing and netting about $150-200 - i'm not factoring in the monthly $$ going towards my principal.
Besides, when people talk about cash flow (in case it's being financed), are we talking about NET $$ or also consider the $$ that goes towards the principal in your mortgage payment ? Thanks
I have a property in Keller area. This last round of tax increase is pushing my mortgage payment past my rent so I'm on the fence to figure out my next step. Property tax increase is really hard to deal with when the rent increase in the area hasn't caught up.
When I calculate my cash flow, I only account for repair reserve, PM, mortgage (PITI). You should also account for Capex (~$200-$250).
Good luck.
Henry
Appreciate all the feedback guys. @Tim Ball will reach out to you this weekend. I went ahead and got a couple properties in Tarrant County (Ft. Worth & Keller) priced around $190K with 20% down. I'm financing and netting about $150-200 - i'm not factoring in the monthly $$ going towards my principal.
Besides, when people talk about cash flow (in case it's being financed), are we talking about NET $$ or also consider the $$ that goes towards the principal in your mortgage payment ? Thanks
That is a great question, Brandon Turner's excel spreadsheet calculates CoC return as true cash flow, then he has a total return calculation that factors in pay down. I have always said $ per door to mean true cash flow in wallet and not the mortgage principal pay down..
I have a property in Keller area. This last round of tax increase is pushing my mortgage payment past my rent so I'm on the fence to figure out my next step. Property tax increase is really hard to deal with when the rent increase in the area hasn't caught up.
When I calculate my cash flow, I only account for repair reserve, PM, mortgage (PITI). You should also account for Capex (~$200-$250).
Good luck.
Henry
I have started taking my maintenance reserve say $4000 every year and at the beginning of the lease put in Crowdfunding for 12 months @7-8% earnings. If I get into a pinch, I can use a credit card to pay for a temporary repair and use cash flow to pay of the min balance until the funds free up at the 12 month mark.
It may sound risky put it has never happened to me yet where I lose money. The gains can then be rolled over next year into a cash reserve, you do this a few times and you can have a true cash reserve for your properties just sitting in a money market account, and top it off each year to account for inflation 3-4%.
This might help ease your cash flow when taxes go up which you can not control, you can forward save the cash reserve for Cap Ex, Repairs.
Just an idea I'm not saying its for every one.
Some investors I know do not plan for cash reserves and treat capex like rehab and take out hard money when a water heater breaks, roof, etc. They pile the cash flow into reserves and re-invest with the hopes of having a large maintenance reserve along the way, still a bit risky, a bit of speculation, but creative.
Hey Folks,
I'm a fairly new RE investor. I recently have moved to Frisco, Tx from 2014 from midwest and boy the market is hot here. Properties have shot up like crazy in the recent past. I would like to invest however thinking the appreciation is still there atleast for another 3-5 years especially when still lot of people and companies are moving. With that assumption (please chime in if you disagree), I would like to invest in Collin County - around Frisco preferrably or Tarrant - Keller ISD for SFR around $200K. In this market, i'm not getting 1% rent, but is it ok to invest here especially when the market is hot and me being local ? Taxes are definitely high here but being local makes me feel little more comfortable. Please advise. I'm looking at possible SFR properties - Tarrant county/Keller ISD, the range is about $101-110/sq.ft. and rents are .80c/sq/ft. --> $1450-1500 on a 3bdrm/2ba 1800 home.
Any thoughts/advice/suggestions for a rookie are greatly appreciated. Thanks.
I live in Frisco and stopped looking at SFR 2 years ago. Maybe I got out too early, but the market is very hot and near a peak. IMHO, It will be ok for another 12-24 months as the curve flattens out, but we are near the top of the appreciation cycle. If you can't get 10%+ cash-on-cash, keep looking. Two years ago, I switched to multifamily investments and they have been doing well. I like the concept that I can force appreciation by increasing NOI. MF in DFW is also getting expensive, so my last acquisition was in Norman, OK. Proforma is 12% cash on cash and 19% IRR on a 5-year proforma.
Man, I don't know what I'd do if I was starting out now. For most of my investing career here in DFW I used to have several REOs that I could look at my leisure, pick one, put 5% down, cash-flow and poo poo the rest.
No more.
I stopped buying rentals in 2012 and have been slowly selling into this market.