Location, location, location for my rental

Dallas, Texas
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Location, location, location for my rental

Taahir Shaikh
Member since 2023 · 9 posts · 7 votes

Hey BP family,

In the process of putting in offers for a SFH, with a primary residence loan. Will be my first ever home here in Dallas Fort Worth, but I've lived here all my life and feel that it's my competitive advantage knowing the ins and outs of a majority of the metroplex. My plan is to buy the home, live in it for a year, before renting it out. Standard 3/2, 1750-2,250 square feet.

I came across a website called Niche.com, and it tells you a little bit more about the demographics of an area, and one thing specifically it told me was about the percentage of people who rent/own in that zip code. This may be a really naive question, but it got me thinking, is it more attractive to a rent a home in an area where most of the surrounding area owns? Or via versa? 

Does it even matter at all? I saw a zip code where almost 85% of people (assuming the data was correct), owned their home and I just wondered if having a rental property in that neighborhood is a good idea. 

Thanks for any help on this! 



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Andrew PostellPro Member
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
2y

@Taahir Shaikh thanks for the post!  Always great to hear from a fellow Texan.  I love the primary home strategy.  Many people start out that way and would highly encourage someone to go this route if they are able.  It provides so many protections that aren't in place if you buy off market.  Highly suggested.

Now, what type of property should you be targeting?  You should 100%, without hesitation, be targeting a home that fits your personal needs above everything else.  Meaning, do you want need a reasonable commute time?  Do you need a specific school zone?  Do I need to feel safe in this neighborhood?  And maybe you don't need any of things...maybe you have other things?  I have certainly purchase a specific primary home because it was all I could afford. That can be a personal need too!  

Generally speaking, when we target an investment property in the DFW area we are targeting a 3BR 2BA home that is below the median price point.  So, below $350,000.  If you examine a $600,000 home, I will out rent that property with two $300,000 homes.  And significantly out rent it with three $200,000 homes.  So, if your current primary home falls beneath that $350k home then it will rent very well when you move out.  If it's over, I would still encourage you to purchase if it meets your primary needs. Even though there will be less "competition" at that $600k home, there's less renters too.  At the lower price point, that's where people will compete against each other to drive up rents.  And if the economy gets a little dicey (maybe like right now) a $600k renter might downgrade to a smaller home to save $$.  All sorts of reasons to considered homes below that "Median" price point.

Hope all of that makes sense but feel free to ask anything else.  Thanks!

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  • Ali Radoncic
    Lender · Dallas, TX · Member since 2017 · 100 posts · 57 votes
    2y
    Quote from @Taahir Shaikh:

    Hey BP family,

    In the process of putting in offers for a SFH, with a primary residence loan. Will be my first ever home here in Dallas Fort Worth, but I've lived here all my life and feel that it's my competitive advantage knowing the ins and outs of a majority of the metroplex. My plan is to buy the home, live in it for a year, before renting it out. Standard 3/2, 1750-2,250 square feet.

    I came across a website called Niche.com, and it tells you a little bit more about the demographics of an area, and one thing specifically it told me was about the percentage of people who rent/own in that zip code. This may be a really naive question, but it got me thinking, is it more attractive to a rent a home in an area where most of the surrounding area owns? Or via versa? 

    Does it even matter at all? I saw a zip code where almost 85% of people (assuming the data was correct), owned their home and I just wondered if having a rental property in that neighborhood is a good idea. 

    Thanks for any help on this! 



    I am in the process of "house hacking" myself in the far north Dallas area. I am licensed and have access to the MLS which allows me to see pretty clearly who is owning and renting for the most part.

    Just my opinion - If I am a tenant, I think I would want to rent in an area where most people own their homes and are living in it themselves.  Completely subjective though.  There are a ton of beautiful apartment complexes to choose from where everyone is obviously renting and its fine.

    I find these questions fascinating because there isn't a right or wrong answer but it makes me think.  If I view myself as a tenant, and I want a 3/2/2 in a nice neighborhood, would I want my neighbors all to be tenants too?  I think selfishly I would want to be surrounded by home owners haha even though I would be renting.

    Good question though.  @Taahir Shaikh - if you were a tenant looking for a standard 3/2 1750-2250 Sqft home, would you want to sign a lease where more people own?  

    2Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    2y

    I think it is a rare consideration for most renters if they move into a rental neighborhood or not.  Might be a slight consideration for some owners.  Never once have I had a renter ask about this.  Not sure I've had an owner ask either, but for owners you can often tell a rental neighborhood from an owner occupied one.

    One thing those websites probably don't tell you is how many of the renters are in apts vs homes.  So those stats can be misleading.  Probably 90% of the renters are in apartments not homes.  I am making up that number, but I am not sure the research is there and might depend on the price range of the homes or maybe the neighborhood you are looking.   If you could find out # of apt units and #of homes in the city and then use your rental #, you could come up with how many homes are rentals.

    I've seen a stat one time for example that said 50% of the people in Irving rent.  I don't think that is true of homes, it is the population and there are lots of apartments in Irving.   If you look at a zip code and you pull up one at NW Hwy and 75 on the east side you might see 80% of the people rent, but think of the Village and all the other apartments around there.  Might make sense.

    A place like Frisco or Prosper might show a very low % of renters as there are very few apartments there.

    3Reply
  • Lynn Wong
    Member since 2023 · 56 posts · 23 votes
    2y

    @Taahir Shaikh From my 1st rental experience. I just bought my first rental house in a nice neighborhood that most people own their home. The problem that I see is the rent comp is very low so I might end up not breaking even but I am sure I will get equity later on. If I use that money buying 2 houses some where else I will have cash flow. I hope to use the equity from this house to get my 2nd one down the road. Good luck!

    0Reply
  • Mark R.
    Real Estate Broker · TX · Member since 2008 · 50 posts · 22 votes
    2y

    All things equal, I would prefer to have a rental in an area with fewer rental competitors. It wasn't a major consideration in my past experiences. 

    3Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @Taahir Shaikh thanks for the post!  Always great to hear from a fellow Texan.  I love the primary home strategy.  Many people start out that way and would highly encourage someone to go this route if they are able.  It provides so many protections that aren't in place if you buy off market.  Highly suggested.

    Now, what type of property should you be targeting?  You should 100%, without hesitation, be targeting a home that fits your personal needs above everything else.  Meaning, do you want need a reasonable commute time?  Do you need a specific school zone?  Do I need to feel safe in this neighborhood?  And maybe you don't need any of things...maybe you have other things?  I have certainly purchase a specific primary home because it was all I could afford. That can be a personal need too!  

    Generally speaking, when we target an investment property in the DFW area we are targeting a 3BR 2BA home that is below the median price point.  So, below $350,000.  If you examine a $600,000 home, I will out rent that property with two $300,000 homes.  And significantly out rent it with three $200,000 homes.  So, if your current primary home falls beneath that $350k home then it will rent very well when you move out.  If it's over, I would still encourage you to purchase if it meets your primary needs. Even though there will be less "competition" at that $600k home, there's less renters too.  At the lower price point, that's where people will compete against each other to drive up rents.  And if the economy gets a little dicey (maybe like right now) a $600k renter might downgrade to a smaller home to save $$.  All sorts of reasons to considered homes below that "Median" price point.

    Hope all of that makes sense but feel free to ask anything else.  Thanks!

    4Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    2y

    My first SFR in the DFW area (Grand Prairie) was in a good school district with almost no rentals. My ROI still isn't that great compared to my rentals in working class hoods that weren't nearly as nice. I would buy cheaper homes in blue collar areas that rent for $300/month less. Your profits will be much higher.

    2Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    2y

    @Taahir Shaikh The only real benefit I can see to this strategy is that when you go to sell it you will have a more likely pool of buyers who want to live in the house as opposed to investors who want to rent the house and will not pay as much for it.

    0Reply
  • Pavan K.
    New to Real Estate · Member since 2024 · 48 posts · 28 votes
    2y
    Quote from @Taahir Shaikh:

    Hey BP family,

    In the process of putting in offers for a SFH, with a primary residence loan. Will be my first ever home here in Dallas Fort Worth, but I've lived here all my life and feel that it's my competitive advantage knowing the ins and outs of a majority of the metroplex. My plan is to buy the home, live in it for a year, before renting it out. Standard 3/2, 1750-2,250 square feet.

    I came across a website called Niche.com, and it tells you a little bit more about the demographics of an area, and one thing specifically it told me was about the percentage of people who rent/own in that zip code. This may be a really naive question, but it got me thinking, is it more attractive to a rent a home in an area where most of the surrounding area owns? Or via versa? 

    Does it even matter at all? I saw a zip code where almost 85% of people (assuming the data was correct), owned their home and I just wondered if having a rental property in that neighborhood is a good idea. 

    Thanks for any help on this! 



    Interesting question. I'm in the same boat,about to purchase a SFH(610k$- 3000sqft) in a owner occupied community and rent it. I still have no clue if it will rent. There are no rental SFH nearby except for townhomes. If I don't get a renter, probably will have to play around with the rental amount. 🤞. Good luck to you!
    1Reply
  • Matthew Gentile
    Real Estate Agent · Worcester, MA · Member since 2023 · 88 posts · 52 votes
    2y

    It is a great questions @Taahir Shaikh. One major consideration to take into account would be do the zoning, laws, HOA etc... allow for rentals in that neighborhood. I'm not familiar with Texas so maybe they all do but still something to consider. No one in my experience leasing condos ever cared who owned and who didn't, it doesn't seem to be of any concern in MA.

    Good luck to you. I think there is a lot of value for SFH rentals if you find the right deals for sure.

    0Reply
  • Kyle MccawBusiness Member
    Property Manager · Keller, TX · Member since 2011 · 1k+ posts · 1k+ votes
    2y

    @Taahir Shaikh  there are plenty of great feedback posts here. Especially read @Andrew Postell 's response. He had lots of solid advice. But I will add this...drive 2 neighborhoods. One 85% rentals and the other 85% owner occupied. Now tell me which is cleaner, nicer and has a better potential for a higher return when you go to sell or refinance. I believe it will be clean that the owner occupied neighborhood will hands down be the better.

    McCaw Property Management4.4900 Reviews
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    1Reply
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