All Forum Posts by: Brian Adams

That area I don't have a lot of experience in, but for the right price is certainly somewhere I'd be happy to have a rental. Some of the homes are quite a bit older (for Killeen - where the average year built for MLS sales is 2001).

A similar area that I prefer if I were spending marketing dollars, for example, would be the SW side (76549 ZIP Code) in newer areas like Conder Valley, Windfield, Thunder Creek Estates, Westpark - essentially the box formed by 190, Ft. Hood St (195), Clear Creek and Stan Schlueter. Mostly newer homes ('80s-'00s) that can still be had at discounts and a popular side of town where stuff stays rented/gets sold. There's still a lot of development just south of Stan Schlueter there which I think is driving that, as well as the Texas A&M campus around there.

@Charlie Nghiem

I know folks who have bought duplexes for about $100k in our area, gross rents $1200-$1300, and have been happy enough with it to do it again. However the particular person I am thinking of is local and manages it himself.

For an out of area investor, I wouldn't touch a duplex that rents for less than $750/side.  Not $700. Not $725.  $750.

There are many fourplexes on the market - about 40 - however only 4-5 of those are properties I would personally want to own at ANY price (unless you gave it to me, in which case I would immediately try to sell it to someone else). Definitely be very particular if looking at fourplexes. The couple areas that work (again, $550/2 bed, $650/3bed) should gross about $2400/mo and actually keep rented pretty well. There are many fourplexes, all with the same comparable rent, so just a few nice touches will make your building stand out. It won't improve your rent, but renters will rent yours before the other ones, keeping your vacancy modest. I replaced my floors with tile and added a few trees to an otherwise very dull front yard for some character.

I would say the average tenant lease is probably about 3 years - a little less for duplex and fourplex tenants. PCS assignments are usually 3-5 years, but tenants do terminate their lease maybe half the time when they are deployed, and sometimes elect to move to different rental housing or purchase a home in the area.  Those choices would obviously increase your turnover and shorten your average lease duration.

The nature of the multi-family housing in particular is generally not someplace someone is looking to stay long term (though I have one tenant still original to when I bought my building in summer 2012), especially when there is ample, affordable SFH rentals on the market as well. You might have a 2-3 months search between tenants, who even if they stay only an average of 2.5 years comes out to a 9% vacancy rate.

I don't see vacancies of 12 months unless there is a problem with the property or it's overpriced. Again, it is a large town where 2/3rd of the inhabitants are renters. If your building is in good shape, good location and priced right, you shouldn't have major periods of vacancy.

@Leland Barrow 

Neither I nor Kevin said you were wrong about most of those items. It is a 1 industry area and I understand some investors aren't interested in that kind of market. Diversification is always good. It is a higher turnover area as mentioned. Low income - maybe, though I think it closely matches the cost of living for the area. Certainly budget for all of these, as well as the high transaction costs for sellers when creating an exit plan.

The deployment concern is, in my opinion, majorly overwraught because of how the Army currently works in the current military operational tempo, and what an actual large scale military involvement would look like (it would be a tremendous boon for the area as new units were stood up, new soldiers posting here from basic, National Guard, and defense contractors flooded in, the Army Reserve activated and sent to Hood, etc.).

And while a 1 industry town at the moment, it is a large city, the largest between Austin and Dallas, and still growing rapidly. Major recent infrastructure has been completed including the new VA hospital (for which reason many military retirees stay in the area), and Highway 190 (soon to become Interstate 14, a much needed highway connecting the Fort Hood/Waco area to Huntsville/College Station) http://www.kxxv.com/story/30695293/us-highway-190-...

These improvements should improve the area's opportunities to diversify and attract new business with the astonishingly low cost, underemployed and highly qualified labor pool in the area (a lot of college grad Army spouses looking for jobs). There is also the new and expanding Texas A&M Central Texas campus. 

There are reasons that many investors have, no doubt, crossed off the Fort Hood market, and that is fine. It has it's pitfalls and an excellent recommendation to be wary of those. I can just relay to the OP that A) he'll probably want better duplexes than what $80k can buy, even in our area, and B) yes, people successfully cash flow in our area.

Killeen may not be the perfect market, but as an agent, I see and hear from many investors who are asking about our area, driven away from all the other Texas markets where deals and numbers simply aren't there except for the established guys whose marketing machines are running full tilt. I think Killeen would be a fine market, especially for a smaller guy who is looking for an affordable price entry point and an introduction to buy-and-hold real estate.

@David Sharp

When you say 1/1, 2/1 etc. I assume you're talking about multi-families?

Apartments?

I can't intelligently speak to apartments, though it's something I'd like to expand my business to as an agent. But for 4plexes, you ideally want a building with two 3 bedroom units and 2 two bedroom units, 3/2s renting for $650/mo and 2/1.5s renting for $550/mo. For a duplex, you want just 3/2s that rent between $750-$800. 

Even at these numbers, there are property managers who are dropping fourplexes altogether. But there are still several quality PMs who will take on buildings that meet this criteria. Any less and probably not - you'll be scraping the barrell for local PMs (something you definitely don't want to do in this market) or running them in-house.

Downtown Killeen - aka the 76541 zip code - is going to have mostly D class apartments, maybe some Cs.

For SFH units, you want MINIMUM 3/2s, ideally 3/2/2, with target rents of $850-$1250.

Some of this is true above, but not quite all of it. Firstly, why wouldn't investing for cash flow be a good long term wealth building strategy. Huh?

Definitely don't invest for appreciation in our market. I don't recommend doing that in any market. Recently, local home values have paced the inflation rate. But there are a lot of cash flow opportunities for buy and holders.

Duplexes in your price range are PROBABLY not great finds. I would target duplexes that rent for at least $750/unit, $1500 gross. These are buildings a quality property manager would take on. Most on the MLS at the moment that meet these criteria are asking between $140,000 and $160,000, so anything you can find off market for less is a deal, and likely 8% cap +.

The danger of deployments is almost entirely ameliorated by the Army's deployment timeline. 1CD has three brigades, and the post has several other large units like 3CR and III Corps HQ. The Army staggers these units' deployments, so that there is usually only one BDE gone at a time. That effect is already priced into the market.  In the event of a war, more units would absolutely deploy - but units and training areas would also be expanded. There's a reason the area's population has grown 60% since the War on Terror began just 15 years ago.

That said, do plan on higher turnover due to PCS stations often lasting a mere 3 - 5 years, deployments and the like. And yes, while we certainly respect their service and sacrifice, military members can be just as bad tenants than any other tenant (said as a former Army CPT). I plan on but consistently beat a 10% vacancy rate with my fourplex. Just be very careful to buy the right kinds of buildings (e.g. no 2 bedroom SFHs, EVER).

Fourplexes are getting a lot of interest right now. I know many investors who BRRRR SFHs very successfully. Flipping in the area mostly sucks because of high homeowner equity, the VA loan's 100% financing, and stiff builder competition. I've had many inquiries about apartments but so far have been unsuccessful pinning down a nice C-B class building for the folks I've spoken with, unfortunately. They are building more apartments in Harker Heights.

And actually, I think targeting Killeen for a 1st investment is a relatively safe option, depending on your acquisition and marketing strategy. Price points are low, competition is not as fierce as Austin/San Antonio/anywhere else in Texas, and the rental market is strong (2/3 of residents are renters vs. 1/3 nationally). Getting a simple 8% cap rate is achievable for a newbie investor - not going to make you rich quick but a great way to get your feet wet.

I also highly recommend "house hacking" for locals willing to live in a multi-family with owner occupant financing.

I'm an agent and former military in the Fort Hood area. Definitely still an affordable area though fourplexes and duplexes continue to rise in price (they bottomed out in 2011 when out of state owners were fire selling and getting foreclosed on).  Not a lot of distressed units, but for about $150,000 you can get a gross rent of $1500/mo in a duplex. $200,000 will get you a monthly gross of $2400 in a fourplex (though very few good fourplexes on the market at the moment).

I love Hood for its proximity to the Texas Triangle and I-35. I would never recommend investing for appreciation (and our market currently appreciates none), but I see a lot of buy and holders interested in our area for rentals and cash flow.

I love what you're doing - I wish I had done the same with my first two VA loans - multi-families/house hacking. I wised up on my third home when redeploying from Afghanistan and bought a fourplex in Killeen that I lived in before PCSing to the Captains Career Course at Fort Sill (where I also bought a home - though Lawton is not an area I would be comfortable building a significant rental portfolio).

The brokerage I work for, StarPointe Realty, does a good job and manages my own fourplex I own in Killeen.  

Other PMs I usually recommend depending on the type of property is Linneman Realty or Lone Star Realty, though I have no personal experience with either. 

If you can make the time, there is a local Killeen MeetUp that meets every first and third Thursday at El Chico. Nothing fancy - usually 6-12 people just having lunch. I'm a Realtor in the area and try to make as many as I can.

http://www.meetup.com/Real-Estate-Investors-of-Killeen-Fort-Hood/

Please do. I'm a local Realtor and know quite a few. I try to go to the auction as often as I can - the #1 best place to meet investors in your market, in my opinion. There is also a small local REIA - very informal - that meets for lunch 1st and 3rd Thursdays at El Chico.

I have some investor articles I wrote on my website and about the local market. Not allowed to link to them here, but hopefully have some useful information.