All Forum Posts by: David Y M.

@Bruce Lynn You are right about equity. I was looking at a recent article from Forbes saying 40% of homes don't have a mortgage. I assume Texas data would be somewhere about 50% homes - but I feel like that is representative of mainly people who have lived here 5+ years. I would like to see data on people who have bought homes recently in the last two years. It seems like first time home buyers are most at risk, so that is why I have put a pause on buying. I really hope it won't be terrible, but those unemployment and forbearance numbers are just insane especially for FHA and VA loans.

The main worry that I have is that Dallas and Austin have just grown at such a rapid pace in the last decade. 

I found this article - " house price expectations were less exuberant in the early to mid 2000s, as Texans recalled the significant correction in the late 1980s that followed the mid-1980s oil price bust." which partially explained our softer hit from the GFC. Our economy is more diversified now, but you can also argue that many of those industries are also at risk.

Case Study of Texas during GFC: https://www.dallasfed.org/-/media/documents/research/swe/2013/swe1303b.pdf

Texas Mortgages 2017: https://www.recenter.tamu.edu/articles/tierra-grande/Eye-on-Texas-Mortgage-Debt

Forbes Link: https://www.forbes.com/sites/brendarichardson/2019/07/26/nearly-40-of-homes-in-the-us-are-free-and-clear-of-a-mortgage/#7d17770c47c2

@Conn G. I suppose that is true. As long as a property cash flows well, even a 5% decrease in rents won't really put you negative, and if you house hack it's also a hedge for vacancy/rent collection troubles. However, I'd rather be cautious and just wait it out. I was initially trying to find a place before my lease expired, but it also pressured me to act with haste This is simply my perspective, and would also like to hear those who are more experienced, and see what they are doing. 

Anything worth buying is going to have a bidding war right now due to the low inventory. At least that's what I'm experiencing in my target markets. 

I was looking at some historical data from Zillow on DFW home values and found some interesting stuff. I'm still a noobie analyzing properties, but after looking around these last couple of months I've decided to delay my first property purchase until at least 2021. Just wondering if the more experienced investors in Texas are also doing the same. 

Findings: From 2000-2007 Median home values in DFW increased from ~160k to ~195k, and then proceeded to drop around 2-3% every year before bottoming out at ~170k in 2011/2012. If you look at the decrease from just top (2007) to bottom (2011) then the drop in value is only ~12%.

Not Terrible. 

However, if you look at it from another perspective and see how much of the value add that was destroyed during that time, it is actually around 70% --> (195-170k)/(195k-160k).

In other words, 70% of the home value appreciation in that 7 year period (from 2000-2007) was wiped out during the Great Recession.

Median Home Values have almost doubled since 2012 in DFW, and this is especially true for homes under 300k. Not saying the situation is apples to apples, but forbearance and unemployment are about to be both in double figures which is unprecedented. Despite how robust our economy in DFW may seem, the data shows that we aren't completely in the clear. I just saw a report of around 13% unemployment in the DFW area in addition to a wave of bankruptcies that were filed for major retail players. Other industries including airline, energy, and auto are also at risk but I guess these negatives may be offset if more companies and people begin moving here from higher cost of living areas. Zillow and Redfin also predict a conservative drop in prices of around 2-3% for the next 12 months. 

Yet despite all this news, home prices are going up due to low interest rates and low inventory. Wow.

1. DFW Bankruptcies Link: https://www.bizjournals.com/dallas/news/2020/05/23/bankruptcies-texas.html
2. Unofficial Unemployment Rate as of 5/22/2020: https://apps.texastribune.org/features/2020/texas-unemployment/

@Nhat Tang Not sure if I would touch those properties as a newer investor, but I guess that's interesting to hear. Might look more into it. I'm trying to limit my risk, and am okay with lower cash flow if it allows for less friction in the landlording aspect of things. Still looking but all things point to Fort Worth for me at least.

@Nhat Tang I looked at 75215 and 75216 via my Power BI map as they were top 10 best zipcodes to invest in for cash flow, but after looking in deeper it seemed like these were like C- or D class neighborhoods. Just wanted to see what your experience was in this area with your clients. Do they have trouble collecting rent, or have low quality tenants?

@Bruce Lynn You always give some of the most insightful advice, and I really appreciate it. I think I will back off from this property, and treat it as a learning lesson. 

@Kim Lau 

https://www.zillow.com/research/data/

The data needed to be cleaned so that it would work with Power BI, but I can send you my Power BI file. I checked the rent/ZHVI by market insight on zipcode and it seemed to check out. The data isn't the best as you'll see that the top zipcodes in 1+% are in like warzone areas and based off zillow's home value index which doesn't mean actual median sales price. I also cross-referenced to a crime map on neighborhoodscout to see which areas would be best. It's definitely not perfect.

I just had an inspection report on a home, and there are some issues that worry me. The previous owner had foundation work done to home, but he has poor records and does not have documentation of it being done - easy to say probably no transferable warranty unless I call up every foundation person in the Dallas area and check; however, I'm not even sure if the foundation was repaired correctly to begin with.

Problem/Question: We sent in a lower offer, and came to agreement that no major repairs to be done. What is the best way to approach this issue to seller with findings without pissing them off? Are these red flags to warrant backing out completely?

Findings in Report

1. Weirdly Elevated Room: The structural engineer (SE) said that that 1 room in the house had a differential elevation of 3+ inches. He suspects the contractor who installed the piers did a bad job and elevated the home way too high in that corner. They remodeled the home and retextured the walls, so if we were to "fix" that corner of the home it would throw everything else out of whack and we need to essentially redo the work that was already done. However, it does not adversely impact the structural integrity of the home. It will just be annoying because the floors are uneven in that room. Should I be worried about this if I do move forward with this purchase?

SE recommended we just remove the mature trees as that would be best solution.

2. Root in Sewer Line: There is a root from a mature tree partially obstructing the sewer line next to the sidewalk. Quoted 2k to fix it. How urgent is this to be fixed? Don't want sewage coming back up into my home.

3. Other: Zinsco electrical panel, other small plumbing jobs, sealing jobs, and handyman work.

The HOA on this property I'm looking at prevents me from renting by the room.

How hard would it be to rent this property out to a family if I also live in the home? 

I'm a 24 year old Asian male so... obviously my applicant pool shrinks, but the home is in an A class neighborhood with top tier public schools. I'm wondering if this would attract other people that would not be able to afford so otherwise.

@Lucia Rushton Yup it's pretty difficult to even get in the door right now, but if I increase my offer price by an equal amount wouldn't that essentially net the seller the same amount?