DFW still a viable market for buy and hold?

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DFW still a viable market for buy and hold?

Nick Van Sandt
Westminster , CO · Member since 2016 · 11 posts · 2 votes

We are trying to find a good market for a long term buy and hold SFR 3/2 and looking to get something around 100k using traditional financing in at least a B- neighborhood.

The numbers don't make sense in our market in Denver so we are looking at out of state.  After researching some of the popular cash flow markets like Indianapolis/Cleveland/Chicago/Memphis/KC/Florida/Alabama we feel the Texas would be the best fit due to growth/economy and weather.  

We narrowed it down to DFW area or San Antonio within TX.  

1.  I'm curious to hear others thoughts that have had experience in these markets to hear your opinion on which you feel would be better for a long term buy and hold.  

2.  I know DFW has been a hot market for some time now so I was curious first off if it's still even likely for a first time out of state investor to be able to find deal or if that train has left the station.  It does seem that there is some inventory in our price point in south Dallas in the Balch springs and Fruitdale areas and also southeast Fort Worth but was curious to hear if anyone on here is investing in those areas or if the neighborhoods are a bit rough.

We greatly appreciate the insight and look forward to hearing your thoughts on where you would invest for a buy and hold SFR!

Thanks,

-Nick

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Travis Lemley
Lender · Dallas, TX · Member since 2017 · 50 posts · 27 votes
8y

Nick,

DFW is still a good market for a number of reasons. The job growth and population growth seem to be in line. Further the jobs that are coming are long term and building the local economy. Most of what I have seen show approximately 750k new residents from 2017 to end of 2021. Housing/ apartment starts are not keeping up so the price to buy is increasing. That said as others mentioned a BRRR is not a bad start. You can find deals with some equity, but it wont be considerable. The advantage is values are appreciating at or above 10% year on year so you get it on the back side. You are also most likely not going to experience any challenge in your lease up and can be picky with your tenant selection if you get into the $200-$250k value range.

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  • Kenneth McKeown
    Real Estate Agent · Dallas, TX · Member since 2016 · 432 posts · 341 votes
    8y

    @Nick Van Sandt I lived a year in San Antonio and I'm now an agent and investor in the DFW market. I can definitely say the numbers aren't as nice in Dallas... but with that being said... I didn't see myself (young and single) staying in San Antonio to live forever. I've made it work however in Dallas and have a decent rental portfolio in Dallas now and love it here. Your correct with it being hot for quite some time - but I'm actually having wholesalers reach out to ME for properties now (versus sending me properties) because the inventory is so low. It would be a lot easier to get your feet wet if you lived here - I'm not sure how great investing from out of state might be. I wouldn't say it's impossible to invest in DFW anymore - but it's definitely not pretty numbers like you may see a lot of on BP.

    If you have any questions about San Antonio though I'd love to help you, or feel free to reach out to my good friend @Tim Macy who's a genius down there in San Antonio. 

    3Reply
  • Neil Aggarwal
    Lender · Richardson, TX · Member since 2014 · 537 posts · 228 votes
    8y

    Buying properties at a good price takes some work, but DFW is still a great rental market.

    0Reply
  • Hiron Fernando
    Dallas, TX · Member since 2015 · 50 posts · 17 votes
    8y

    Nick, yes the cap rates have compressed a lot on the DFW market lately. That being said, there are still 1% deals to be had, but are very difficult to find in good neighbourhoods. Most rentals will run you around $130k purchase price, in good areas. In South Dallas, as mentioned its much easier to find deals under $100k, however these are D class areas. I would be very careful before purchasing in those areas.

    Good luck and I hope this helps a bit.

    3Reply
  • Scott L.
    Investor · Flower Mound, TX · Member since 2017 · 182 posts · 198 votes
    8y

    If you expand your market to the 4 counties that make up Dallas and Fort Worth areas. You can still find some deals. Call it a 90 min drive circle around DFW airport. Dallas County (Dallas) and Collin County (Plano) are getting tougher, but some opportunities in the East. Tarrant County (Ft. Worth) and Denton County (Denton, Lewisville) still have some opportunities IMO.

    2Reply
  • Andy WebbPro Member
    Rental Property Investor · Carrollton, TX · Member since 2013 · 750 posts · 538 votes
    8y

    @Nick Van Sandt - 100k rent ready (it sounds like rent ready is your target with traditional financing) AND B-neighborhood will be a long-shot. You would do better to follow the BRRRR strategy and get into a property for a lower out of pocket.

    Andy

    3Reply
  • Nick Van Sandt
    OP
    Westminster , CO · Member since 2016 · 11 posts · 2 votes
    8y

    I appreciate all the feedback and this is very helpful.

    It seems it would probably be a better use of time to focus on Tarrant County and Denton County but I feel it would be valuable to learn more about San Antonio as well.  Appreciate the info on this @Scott L.

    Thanks @Kenneth McKeown for Tim's info and I'll be sure to reach out.

    0Reply
  • Andy WebbPro Member
    Rental Property Investor · Carrollton, TX · Member since 2013 · 750 posts · 538 votes
    8y

    We have had better luck in Tarrant and the southern part of Dallas county lately. San Antonio has more value and Houston is seeing a lot of post-Harvey activity - you might shop there as well.

    1Reply
  • Bart H.
    Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
    8y
    Originally posted by @Nick Van Sandt:

    We are trying to find a good market for a long term buy and hold SFR 3/2 and looking to get something around 100k using traditional financing in at least a B- neighborhood.

    The numbers don't make sense in our market in Denver so we are looking at out of state.  After researching some of the popular cash flow markets like Indianapolis/Cleveland/Chicago/Memphis/KC/Florida/Alabama we feel the Texas would be the best fit due to growth/economy and weather.  

    We narrowed it down to DFW area or San Antonio within TX.  

    1.  I'm curious to hear others thoughts that have had experience in these markets to hear your opinion on which you feel would be better for a long term buy and hold.  

    2.  I know DFW has been a hot market for some time now so I was curious first off if it's still even likely for a first time out of state investor to be able to find deal or if that train has left the station.  It does seem that there is some inventory in our price point in south Dallas in the Balch springs and Fruitdale areas and also southeast Fort Worth but was curious to hear if anyone on here is investing in those areas or if the neighborhoods are a bit rough.

    We greatly appreciate the insight and look forward to hearing your thoughts on where you would invest for a buy and hold SFR!

    Thanks,

    -Nick

     I think you will have problem finding that in the city of Dallas proper.

    Just about everything I see sub 200K, or at least sub 150K is either in terrible neighborhoods, in poor condition or both.

    Or has multiple offers.

    3Reply
  • Travis Lemley
    Lender · Dallas, TX · Member since 2017 · 50 posts · 27 votes
    8y

    Nick,

    DFW is still a good market for a number of reasons. The job growth and population growth seem to be in line. Further the jobs that are coming are long term and building the local economy. Most of what I have seen show approximately 750k new residents from 2017 to end of 2021. Housing/ apartment starts are not keeping up so the price to buy is increasing. That said as others mentioned a BRRR is not a bad start. You can find deals with some equity, but it wont be considerable. The advantage is values are appreciating at or above 10% year on year so you get it on the back side. You are also most likely not going to experience any challenge in your lease up and can be picky with your tenant selection if you get into the $200-$250k value range.

    4Reply
  • Nick Van Sandt
    OP
    Westminster , CO · Member since 2016 · 11 posts · 2 votes
    8y

    Thanks for the additional insight.  

    @Travis Lemley It seems like using the BRRR strategy would be the best way for us to start especially early on.

    @Andy Webb Houston is definitely an option for us as well but we would have to be careful not to choose a place that can easily flood.  Even though those storms are rare we are looking for a very long term buy and hold.

    0Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Nick Van Sandt I lived in DFW last year and my girlfriend is still there so I visit often. The economy in dfw and Texas in general is fantastic and I don’t see that changing anytime soon. That being said you need to be aware that property taxes in dfw are high and are often reaccessed every year. The often will go up. Finally the weather is nice but you can get hail. Dfw just got hail yesterday and it can easily ruin your roof which will make it more expensive to own rentals there. Just things to be aware of
    4Reply
  • James H.
    Investor · Dallas, TX · Member since 2016 · 135 posts · 62 votes
    8y
    Just to drive home your comment about property taxes:

    I have a home in Collin County (Plano) which has experienced a 60% increase in property taxes since 2012.

    I have other properties in the City of Dallas which have experienced 40%+ increases in property taxes since 2012.

    Plan to spend 25-30% of your gross rents for property taxes.


    Originally posted by @Caleb Heimsoth:

    Nick Van Sandt I lived in DFW last year and my girlfriend is still there so I visit often. The economy in dfw and Texas in general is fantastic and I don’t see that changing anytime soon.

    That being said you need to be aware that property taxes in dfw are high and are often reaccessed every year. The often will go up.

    Finally the weather is nice but you can get hail. Dfw just got hail yesterday and it can easily ruin your roof which will make it more expensive to own rentals there. Just things to be aware of

    4Reply
  • Nick Van Sandt
    OP
    Westminster , CO · Member since 2016 · 11 posts · 2 votes
    8y

    Thanks for the info about the property taxes it seems they have risen quite a bit and will be something we carefully consider when running initial numbers.  @Caleb Heimsoth

    @James H.

    1Reply
  • Christopher Colburn
    Real Estate Broker · Franklin, TN · Member since 2015 · 18 posts · 13 votes
    8y

    @Nick Van Sandt , here is a list of a few cities you should at look at around the DFW area:

    Desoto / Lancaster / Mesquite / Keller / White Settlement / Cleburne (which is a little bit out of the DFW market but starting to become a good rental market)

    Investors we work with have found great deals in these areas.

    1Reply
  • Nick Van Sandt
    OP
    Westminster , CO · Member since 2016 · 11 posts · 2 votes
    8y

    @Christopher Colburn Great thanks Chris that's very helpful.

    0Reply
  • Rachel Stuart
    Investor · Keller, TX · Member since 2017 · 6 posts · 7 votes
    8y

    I'd consider other Texas markets, like college towns. We've been investing in FW for a while and it takes so much work to get a good lead,  and beat everyone else to get the contract. 

    We're looking in College Station, but Denton, Waco,  Nacogdoches, Lubbock and Abilene might be good bets too. These are mid-sized towns but growing, started with the college but are growing in diversity of industry. Lots of new development. I'd find a good property manager in one of those markets and ask them what kind of properties they want more of, what the average rents are and how much vacancy they deal with. Take average rents and compare with what's available and see where you can find +1%. 

    4Reply
  • Cody Malone
    Lubbock, TX · Member since 2017 · 39 posts · 8 votes
    8y

    I am in lubbock, and i can tell you duplexes and quads are in high demand, there ihas been a recent spike in demand for higher end rentals here in town, renting from 1400 to 1700, which is the top of the market here.  Mainly is the motivation to move into one of the two school districts that most people want their children in.  The college rentals have been pretty flat for the most part, but the cost of entry keeps rising in that sector, so the better returns will most likely be in the frenship or cooper school districts

    1Reply
  • Account Closed
    Irvine, CA · Member since 2016 · 6 posts · 2 votes
    8y

    Hello from CA.  Looking for an investment property in DFW.  Can spend 200K-250K.  What areas would you suggest?  Looking for a good school district as well.   Would it be possible to manage this property on a monthly basis without a property manager?  Thanks 

    0Reply
  • Dylan Barnard
    Rental Property Investor · Justin, TX · Member since 2017 · 134 posts · 57 votes
    8y

    Denton is where my girlfriend and I are looking right now for rentals. We just recently graduated from UNT and know Denton very well, being there for 5 years as a student. Every time we looked for a place to live in Denton ourselves, there were many other tenants applying and trying to rent the same place, so it doesn't seem like you would have a problem with vacancy since there are two major universities nearby. 

    Let me know if you are ever looking for a partner. We are active in the Denton and Tarrant counties looking for rentals and BRRRR opportunities in SFR and small multifamily currently.

    2Reply
  • Colin Conn
    Mckinney , TX · Member since 2017 · 15 posts · 5 votes
    8y

    @Account Closed North Collin County has some good areas that would fit your price range. North of 380 like Melissa, Anna, Celina are growing very fast. Let me know if you would like me to send you some properties. I am a realtor and invest in rentals myself.

    Managing can be done from california if you have some good connections here for someone to call for any repairs etc. Getting the right tentant in place would be harder to vet but its possible. 

    0Reply
  • Account Closed
    Irvine, CA · Member since 2016 · 6 posts · 2 votes
    8y

    @colin conn yes Please send me some properties.  Are there any Duplexes in that area? 

    0Reply
  • Dhaval Shah
    Member since 2011 · 3 posts · 0 votes
    8y

    @colin conn , i would be interested in duplex/fourplexes as well. Can you send me detail?

    0Reply
  • Shital Thakkar
    Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
    8y
    3Reply
  • Christopher Winkler
    Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes
    8y

    We are looking at a $375k duplex to live in 1/2 and with my VA I can pick it up for $2000 per month just for the loan, but the property taxes are over $9,000 a year, about $765 month and after I move out, i lose the homestead and the numbers are just too tight. Very few 3 or 4 plexes and us trying to compete in this market with dozens & dozens of wholesalers scooping up the deals and marketing them @ 80% of ARV with repairs means we waive the white flag and go back to what we do best, work out non performing notes, starting our first equity fund, and let the market eventually go down. Pockets of higher end homes have gone to buyers market with over 6-8 months of inventory, the rest is still red hot for the entry level BRRR homes... Good luck here!

    0Reply
  • Yannes Chiang
    Rental Property Investor · Pasadena, CA · Member since 2016 · 85 posts · 19 votes
    8y

    @Nick Van Sandt $100K for SFH in B- neighborhood in DFW area seems somewhat unachievable at this time. I would recommend connecting with wholesalers to get distressed properties that need repair work. You can try Arlington TX. Great opportunities there

    0Reply
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