Investment Condos in Coppell/Plano/Frisco?

Question

Hi everyone,

Asking for some advice on specific condo/townhouse communities you are aware of in Coppell/Plano/Frisco ISD which have units priced at <$200K (preferably <$150K) and would attract higher-quality tenants with school-age kids due to the excellent schools. First time investor so wanted to start with a condo/townhouse so that it would be easier to maintain vs. SFH. I understand townhouse/condos are more of cash flow plays (vs. appreciation) so wanted to get in at lower price to be cash flow positive...hence the recommendation ask.

Specific community names would be appreciated...e.g. one I'm aware of is Meadowridge townhouses in Coppell. Also your experience in managing similar condo/townhouse investment properties in the north DFW suburbs. Thank you!

Alfie Park · Answer

Thanks for the insights everyone! Definitely talked me out of the condo/townhouse idea.

I decided to make my first purchase in far north suburbs (Frisco/Prosper/McKinney north of Eldorado). Got in around $200K and should be able to generate a little positive cash flow with more emphasis on long-term appreciation given terrific schools, commercial/highway development, and companies moving HQ's more north (e.g. PGA, Dr Pepper).

Posted about it on this thread: https://www.biggerpockets.com/forums/758/topics/751326-help-first-investment-property-in-north-dallas-suburbs?page=1#p4418627

Omar Khan · Answer

@Alfie Park I will have to agree with Account Closed comments. The West Collin County market has been on fire over the past few years. Instead of trying to get in at a lower price you would be lucky to get int at listing price.

You can get decent property management in the area but you'll have to find the right properties first.

Account Closed · Answer

@Alfie Park  You are several years late if you want to get "in at lower price" and certainly if you want to be cash flow positive in western Collin County.

Alan E. · Answer

I was looking at condos as an option if i couldn't get a multifamily. Great insight.

Maurice D. · Answer

right, I hate HOA Condos.

I have one rental, which cash flows nicely but it due to an awesome location.  other than that I wouldn't touch one.

Bruce Lynn · Answer

Condos and townhomes hardly ever work for good rentals here in the DFW area.  The HOA dues kill the returns.  What we most often see is the rent is about the same as for a single family home investment, but then subtract $200-$300/a month HOA fees or more and your returns go down 20-30%.  There are a handful of places that might work, but they are few and far between.  Townhomes and Condos also present a whole host of other problems that close living seems to breed.   Witness the current backlash of AirBnB prohibitions own associations have implemented.   Others have prohibited or limited rentals.   What happens if your HOA decides to limit rentals to 10% of the units, or wants 60 days to review all applications you get before approving your tenants.  You think of the worst rule that could hurt your rental business and we can probably find an HOA that has implemented or tried to implement it.

Resale can also be an issue.  In the current financing environment you would think that condos and townhomes are perfect price range for first time buyers, but few are FHA approved any more and some are what we call non-warrantable which makes financing more difficult.  Think 20-25% down payment and better overall credit profile.  We hope that will change and there has been plenty of talk about it over the past couple of years, but more talk than action.  So it can leave you at least currently with poor exit strategy.   You could be left with the option of selling to other investors who never want to pay top dollar to you.

All too often too I see a lot of deferred maintenance on buildings.  So one day someone is going to have to pay for that.  HOA dues often don't do it.  Special assessments do.   So you have to factor that in.

I always say keep an open mind, and if the right deal comes along be open to it, but that seems to be few and far between on condos/townhomes.

You'll probably be way better off with single family or multi-family in the long run.

James Orr · Answer

Hi @Alfie Park... I have a question about your statement:

"I understand townhouse/condos are more of cash flow plays (vs. appreciation) so wanted to get in at lower price to be cash flow positive"

Is that true in your market?

I hear people that say that about my market in Northern Colorado and the actual data does not necessarily suggest that to be true.

For example, here's a chart showing the price per square foot of detached houses compared to the price for attached houses over 20 years. As you can see, in our market appreciation on detached and attached seems to be more in sync... in fact we've seen more appreciation in attached properties lately in Fort Collins, CO.

Similar numbers for another city near us, Loveland, CO:

And finally, here's Greeley, CO:

It may not matter with what you're trying to do, but perhaps, someone with actual data in your market can verify that assumption before you invest based on that premise.

I'd also be curious if our market is the exception to that rule or if our market is normal in this regard.

Alfie Park · Answer

I get it's hard to find these days, so asking for specific TH/condo community recommendations if you know of any. Excellent schools, units selling for less than $200K (and preferably less than $150K). Would be greatly appreciated!