All Forum Posts by: Costin I.

1. Are you buying a residence or investment property? The subjective criteria for a residence don't translate properly into a good investment property. 

2. New homes aren't necessarily better than older homes, depending on builder, quality and price. A solid inspection is required for brand new homes and you'll be surprised by some of the findings.

3. RR West is pretty much land locked - not much new development there. Same as with Cedar Park, those prices will only go up because of that. Leander has plenty of empty space to expand and build, that's why so many new houses, lower price points and likely lower appreciation.
RR East has more open spaces, and can annex more, thus likely lower prices. Plus a clay soil problem, making the foundation issue a question of when, not if. But foundations need to be maintained all over TX, so you need to learn to do that anyway and anywhere.

4. School ratings are a very important criteria in property location selection. Between an older/smaller/pricer house in an excellent schools area and another newer/bigger/cheaper one in mediocre/lousy schools, the former will always beat the later. Schools quality affect many other factors - criminality, shopping, vacancy, etc.
But, beware, school ratings change - new master-planned divisions might start with new schools with low or no ratings, evolve into excellent schools as the nice houses get occupied by young professionals, and devolve in rating as the kids grow up and go to college (a 15-20years cycle IMO) and a new generation might move into the now old and soon obsolete houses. 

5. IMO, A-class or above properties do NOT make good rentals, because a. they likely require high rent, b. they are too nice to place anyone in (or require serious vetting), thus requiring the “perfect” tenant, which is hard to find, hard to qualify, and more important, hard to keep.

• Why? Because someone with those qualifications will be a. very demanding as a tenant b. in a temporary situation (either corporate placement, or someone gathering their down payment and/or figuring out things, areas, schools, etc. before c. moving into their own residence. Thus creating frequent vacancies, with the associated expensive make-ready operations.
  A-class might make good investments due to high appreciation (but counting on that is closer to speculation than investment), but they will be lousy cashflow rentals, even when paid off.
• Nice properties attract nice tenants (at least in theory, or at least nicer tenants). You should tailor your expectations in line with the property class rental you are offering and the tenant pool it’s likely to attract.
  What we desire as the ideal tenant might be different from what is a good tenant for the type of property you have and might be different from how it’s expressed in your rental criteria and what flexibility you are willing to accept.
  More than that, a property of a different class than its neighborhood will have trouble attracting matching tenants - a reason not to over-remodel a property above its neighborhood class/comparables. [FYI - We tested this with one of our rentals, made too nice for the surrounding neighborhood, and while having no problem attracting visitors due to excellent photos and marketing, many declined to apply after seeing the neighbors and street, and a couple even didn’t stop by - the property was showing as an A- class in marketing and in person while being in a C+ blue-collar neighborhood. Thank God for good schools that saved our behinds in this case].

So, back to the first question - are you looking for a residence or for a investment rental?  A $600k 4-bed, 3-bath is a fancy residence around here and a mediocre investment property.

@Neil Narayan - what do they call "the hottest ZIP codes"? 

The ZIPs with the most activity? With most inventory? With most price drops (as in "hot, don't touch")?

I don't know about other areas in TX, but I keep a close eye on Austin-SAN corridor, and I'm familiar with the market in Kyle, New Braunfels and NE San Antonio. And IMHO, the prices are dropping big time (on avg. 10K/month...houses that were above 300K a year ago are not selling at 250K now) and the available rentals saturation is worse than I seen during summer season (with rents dropping from 1$-1.08/sqft to 0.8$/sqft and very little contacts and applications...just go in Zillow and look how many rentals are on the market now in Kyle, New Braunfels or Converse). 

So, hot Zip codes, don't touch or you'll get burned. Or buying opportunities if the bottom is reached soon. All depending on perspective.

I would take it with a big grain of salt, I think Opendoor is trying to drum up interest, given how many properties, they and other institutional buyers, are having on the market (e.g. AMH4Rent dumping their TX portfolio, just do a search in Kyle and Buda). 

https://www.cpapracticeadvisor.com/2024/12/27/boi-reporting-...

"A 5th U.S. Circuit Court of Appeals late Thursday reinstated a nationwide injunction that had been issued earlier this month by a federal judge in Texas who had ruled that the Corporate Transparency Act was unconstitutional, Reuters reported on Friday, thus suspending the deadline once again for most reporting companies to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN)."

@Ashish Acharya @Clinton Davis

@Bob Dole - there is more to the cost segregation question than on the surface. Here is a CSS Decision Diagram flowchart intended to bring together all the various questions when assessing the benefits of a Cost Segregation Study (via a professional or DIY).
FYI - You can do a CSS for ~$400, ask @Malik Javed how.

@Brad Herb - one thing to watch when investing in a syndication with an SDIRA is the highly trumpeted ROI in early years via a cost segregation study and the accelerated depreciation it creates...which you'll not be able to take advantage of via a SDIRA.
The same is true for a house—placing a tax-advantaged asset into a tax-advantaged investing account cancels the tax advantages (or many of the immediate ones).
Maybe @Michael Plaks or @Kaaren Hall can explain this better or correct my understanding here?

@Bob Dole Two other benefits of CSS and accelerated depreciation via a cost segregation study: partial disposition and the death step-up basis.  

1. Partial Disposition Benefit: In a cost segregation study, components of a property are identified and depreciated on shorter schedules (like 5, 7, or 15 years). When an owner replaces or retires certain items (e.g., lighting, HVAC, or carpeting), they can claim a deduction for the remaining undepreciated value of those items. This allows the owner to “write off” the value of disposed assets immediately, rather than continuing to depreciate them. The result is an immediate tax benefit in the year of disposition, reducing taxable income.
2. Death Step-Up Basis: (bummer, you have to die for this benefit to kick in, but...) When an owner passes away, the property’s tax basis is reset to its fair market value on the date of death (this is known as the “step-up basis”). A prior cost segregation study increases the depreciation taken during the owner’s lifetime, lowering taxable income each year. Then, at death, the property’s basis resets, effectively erasing the accumulated depreciation. This benefit allows the owner’s estate or heirs to receive the property at a new, higher basis—reducing capital gains taxes if they choose to sell the property after inheriting it.

In short, partial disposition allows tax deductions for retired property components during ownership, while the death step-up basis resets the property’s depreciated value, providing tax relief for heirs. Both offer valuable tax strategies, particularly when cost segregation is applied early.

This is how the same area shows in 3 different flood map systems:

This is for a suburb of San Antonio, not a coastal region.
The first is the one used now by Zillow and Realtor, feeding from First Street - the house and whole neighborhood is not marked currently in a flood zone, but it's deemed a MAJOR risk with 30% chance of flooding in the next 30 years.
The second one is from SARA, and has some portion of the neighborhood in flood plain.
The third one is from FEMA and it shows some portions in 100y floodplain, and the whole neighborhood in a 500y floodplain.
So, which one should you believe?  

I guess, it depends on who you ask - there might be an "expert source" where this neighborhood is already a marina. Question is then, for an investor, should you consider a price premium for "water view"?

@Brett Jurgens if data is non-partisan, yes, it could be helpful if one can access it and knows how to interpret it. If it's used to promote an agenda or to scare you into doing something, then I take it very cautiously (like the jobs numbers, that were adjusted 340% retroactively...do you still place value on that reporting, after repeated significant adjustments?). IMHO, if something is based on fear, there is an agenda behind it. And a lack of solid arguments, otherwise the fear factor would not be necessary.  

Insurance in TX increased substantially in the last years, on average 10% per year, in some cases even experienced 30% annual increase.  

I agree, seeing migration patterns coupled with insurance costs and insurability might be a good macro-economic indicator. Not easy to do, not in a heavily regulated environment. I think a free market would sort this kind of thing in a very efficient manner. 

So, you need Zillow to tell you it's hot in TX and FL gets hurricanes? And that like it's something new, not going on for millennia?

Take it with a big grain of salt - I saw a property tagged with HIGH RISK of HEAT due to a 200% increase of days over 100F in the next 10 years....going from ONE per year to ...drum roll...TWO days per year.

Thank you @Ashish Acharya and @Account Closed!