All Forum Posts by: Brian Adams

@Jarrod Weaver

I wasn't here early in the War on Terror but understand in 03 or 04 that most of Fort Hood was deployed, and that it was essentially a ghost town. Since then, the Army implemented the ARFORGEN cycle - I think it's called something different now - whose purpose is, in part, to spare military communities the impact of all the local units' deploying simultaneously. Here, only 3CR, or 1 of the 3 1CD brigades or III Corps/1CD HQs deploy at a time.

Now, if the crap hits the fan and America is completely mobilized for war, that is a different story. But vacancy rates will probably not make the top 10 list of investor concerns in that event.

@Darwin Crawford and @Lars S. - 

There certainly are investors active in Killeen.  Mostly buy and hold types.  I know a guy who flies in from CA every month just for the Bell county foreclosure auction.  

I wrote an article about some of the MLS flips I've observed here as a real estate agent.

http://www.hoodhomesblog.com/investing/blog/who-sa...

Again, those are just deals that came off the MLS.

My experience working with investors in our area is that they have a hard time overcoming the initial frustrations of selling in our market - unlike the rest of Texas it seems, we are a buyers market where you can expect 6 weeks to close, pay the buyer's closing costs, title, survey and a generous option period. The VA loan makes up over 50% of transactions here.

Because many in the Army choose not to buy, Killeen is a lopsidely large renter market - another reason it works well for buy and hold. I and others have talked elsewhere in BP about the concern about it being a single employer economy while, while mostly true, shouldn't foreclose the market to your consideration for many reasons.

Finally, Killeen is not a small town - it is the largest town between Austin and Dallas, and that is not including the Harker Heights and Copperas Cove markets with another 50k population - there are opportunities here, especially at these price points compared to competing markets.

@Alvin Price

I'm sure @Laura Sulak can provide insight into Temple/Belton, a market I don't know well. 

But as for Killeen - it is definitely a military town - 54% of loans are VA loans. It is also a buyer's market at the moment, meaning higher closing costs for sellers. Flippers on the whole probably have a harder go of it, but most investors prefer the buy and hold strategy in our area, where there is a large, well qualified renter population.

Killeen is also a larger market than most people realize - the largest city between Dallas and Austin. 

The price points in Killeen are much more manageable than Austin, and homes tend to be newer and therefore hopefully in better condition.  I wouldn't write off the area, especially for buy and hold investors.

Yes @Nicholas Ameluxen.  

http://www.meetup.com/Real-Estate-Investors-of-Kil...

It's very informal, usually 6-12 people show, often some newbies, but I'd still recommend it to anyone who is interested in our market. I try to make as many as I can.

@Nicholas Ameluxen

Killeen pitfalls: it's a buyer's market, so sellers often pay very high closing costs (commissions, 3%-ish buyer closing costs, title policy, survey, $500 toward home warranty) that can make transaction costs as much as 12% of your sales price.

There is a lot of new housing AND a lot of turnover with military moving in and out, meaning a lot of new mortgages and homeowners with no or even negative equity. The VA loan makes it worse. It's great, but 100% financing and financing in the funding fee means literally every VA purchaser is underwater on their home for the first 5 or so years. 54% of buyers use a VA loan in our area.

No appreciation - or rather, just enough to keep up with inflation. I don't recommend purchasing for appreciation in any market, but especially not Killeen.

The high turnover also impacts rentals - 2-3 year is the typical duration of any given tenant.  The turnover means you can keep units filled if marketed right, but still, turnover is no fun.

Some of these "pitfalls" are also advantages. For example, the relatively new age of homes (the median is only 15 years old, built 2001) means that they will be more modern and hopefully fewer major capex requirements - which is good for a buy and hold investor (not so much flippers who need those kinds of problems to get deals).

@Nicholas Ameluxen

Killeen is definitely at or below those price points.  And I agree with @Jason Hirko - most investors are about rentals, not flips, though I wrote an article  on my website about the flips I've observed local investors pull off.

I wouldn't worry about the base at all.  It's the largest US military base by population in the world. Lots of other reasons I've mentioned in other posts about why it's not going anywhere.  The rental market isn't going anywhere either. There are other investor headwinds (high turnover, high transaction costs, most homeowners have low equity), but I wouldn't cross it off my list.

Even if the Army downsizes, that is not always bad for posts, especially ones like Fort Hood. For example, Hood is one of the major training locations for Army Reservists who come in for their Weekend Warrior exercises and two weeks in the summer. It is also cost effective for the Army to consolidate resources during draw downs, meaning Hood might actually get more resources during a troop draw down as other bases go poof and remaining units are consolidated on larger posts.

Early in the War on Terror - I was still in high school - apparently the Army deployed several units from Hood simultaneously.  I'm told it was a ghost town. Since then, the Army has become more aware of the impact of deployments on local populations and markets and staggers deployments among units within a post, part of what was called the ARFORGEN cycle when I was still in.

While I wouldn't discount the "long major employer" issue entirely, I don't think it is wise to write of Killeen for that reason alone. It's the largest city between Austin and Dallas.  Fort Hood is the largest American military base IN THE WORLD by population, and the 2nd largest by size (White Sands is bigger). Look at a map of giant Texas, and you see a giant hole in the middle that is a giant playground for the US Army. It isn't going anywhere.

I would recommend evaluating Killeen on the deal and fundamentals like you would any other area. 

There are some headwinds to investing though. Sellers are expected to pay closing costs, not many owners with equity, high transition due to military PCSing, and other items.  But there are investors in our market who thrive.

Glad to hear it! @Junior Mendoza

Let me know if you have more questions.

@David Sray

I've got an article for that, too!

http://www.hoodhomesblog.com/investing/blog/fort-h...

That article was published at the beginning of this year, and gives a good overview of the recent history of our area's multi families.

Since then, from what I've observed and commented on in my most recent quarterly update is that the multi-family market does appear to have plateaued. I am working with two would-be fourplex buyers right now - both "house hackers" - who simply cannot find anything because it is all mostly overpriced.  I have NOT observed a lot of them coming up for sale, however - no. What seems to be the case is that all the ones for sale now are overpriced, as the sellers have seen the rebounding market and are hoping the market catches up to their price, not the other way around.

I bought my fourplex in 2012 for $177k on Alan Kent. This last year, fourplexes in that neighborhood were selling in the $190ks. So the demand is still there.

I don't know what kind of multi-family deals other areas have, but in our area I would be mostly looking at fourplexes that you would acquire for $195k-$200k with a monthly gross rent of $2400. There are fourplexes that can be had for a lot less, but I would be particular about the area.