All Forum Posts by: Mike Arias

Quote from @John Michaels:

I came across this BP thread listing the Top 10 Real Estate Markets for Cash Flow in 2024
https://www.biggerpockets.com/blog/best-real-estate-markets-...

However, it didn't mention some of the markets I see talked about the most like
Ohio and Tennessee etc  I don't see anyone talking about McAllen or Idessa Texas.
What am I missing? Would you agree with this list ? It was printed in January.

McAllen, Texas
Odessa, Texas
Corpus Christi, Texas
El Paso, Texas
Decatur, Illinois
Fayetteville, North Carolina
Mobile, Alabama
Lubbock, Texas
Rochester, New York
Flint, Michigan

Texas can be good to find better value for properties than other parts of the country. I bought in the Rio Grande Valley, where McAllen, TX is in. However, be aware that for investors (who do not live in the property as their primary residence), there is NO LIMIT to how much your property appraised value, and therefore your property taxes, can increase from year to year! (If you live in the property so that you can claim the Homestead Exemption, your property appraisal can "only" go up a max of 10% per year. But if is a rental, there is no limit to the increase.)

I bought a 4 plex in 2023 and the appraisal district valued it around $407k. This year the valued it at $490k!! Nothing has changed about my property - I made no improvements - that caused it to increase 20% in value in 1 year! A 20% increase in property taxes (or anything higher than 5%) can really screw up your multi-year pro-forma and your projected returns.

In Texas, you are allowed to protest the value the appraisal district appraises your property at. And it can be definitely worth it, IF you win. I paid about $10,000 in property taxes last year. Now I am looking at $12,000. So I will definitely try to protest the appraisal increase. And there are professional tax protesting companies in Texas. They are usually paid a fee of 25%, 30%, or 35% on the taxes they save you, IF they are able to achieve a property value reduction. 

In my example, I paid $10,000 on a property valued (by the appraisal district) at $407,000. $10,000/$407,000 = 2.46% tax rate (approx).  This year my property is valued by the appraisal district at $490,000. $490,000 x 2.46% = $12,054 potential property tax bill. Let's assume the tax protester I hire charges 30% on any tax savings achieved, AND they are able to lower my appraised value. Let's say they convince the appraisal district to lower the value from $490,000 to $445,000. They knocked $45,000 off my value. $45,000 x 2.46% = $1107 in tax savings. I would have to pay the protester $1107 x 30% = $332.10. This does help, but my property taxes still went up more than 9%!  ($445,000-407,000)/407,000 = 9.3% increase. 

I also don't think it's common to convince the appraisal district that your property did not appreciate at all, unless you can back it up with pictures that your property was damaged or is in worse shape that it was the year before. The best I've seen anecdotally is just to limit the increase to 10%, but again, many other states limit the increase to 5% or less. So 10% is still high, IMO.

So I'm not saying McAllen and the Rio Grande Valley aren't good places to invest. But just be aware that the property taxes are hard to control, and you would want to fight them every year (b/c the appraisal district will likely increase your property valuation every year). Good luck!

@Rhyna Orillaneda

There are some good options in CA and people still want to live there despite all the bad press. I'm a former CA resident now in Tahoe Reno Nevada. Nevada has many of the draws of CA and the added benefits of low property taxes that don't assess on sale, landlord friendly, no state income tax, and multiple tech and manufacturing jobs like Tesla, Apple, Google in the area. Tesla is in the middle of building the Semi truck manufacturing plant. Reno is also geographically restricted from over building forcing appreciation. While not the cheapest market in the USA there are all the signs of strong appreciation without the hassles of CA investing. There are also multiple strategies STR at Lake Tahoe, MTR and LTR that can be used. Happy to share more data and insights.

Quote from @Mike Arias:

Quote from @Luis Somoza:

Quote from @Mike Arias:

Thank you, all. Reason I ask is that I maybe moving in the near future and start investing in real estate afterwards. I am trying to figure out if I should exclude buying a condo as my primary because it is more restrictive to get HEL/HELOC that I can use for real estate investing. @Sasha Mohammed, I had no clue about what a "townhouse" means. So I should ask whether a townhouse is a true condo or attached SFR? If a "townhouse" has HOA fees, does that automatically make it a condo or PUD? Is PUD and condos basically the same?

I do tend to hear more negatives about a condo so that will probably not be an option anyway. 

@Sasha Mohammed is right a townhouse is more of an informal term - it's technically an attached SFR located in a community governed by an HOA, so much like a detached SFR located in a community governed by a HOA, they are all technically called PUD's, or planned unit developments.

In a condo you own a unit within the building that is governed by the HOA, unless you're in a detached condo community - drawing a blank on the term for it right now - basically its a group of SFR's in a condo development, but those aren't treated the same as traditional condos. The financial health of the HOA is very important for a condo's viability.

My question is why would you need a HELOC after you buy your new home?

To purchase investment properties. It may not be right away. Without getting into a long story, I will have a decent equity (down payment) when buying that primary house. A year or maybe slightly sooner, I would like to pull most of that equity [I know it will be based on LTV] to buy investment properties.

I see borrowers do this all the time. Do the math on the delta on the payment difference between a first mortgage at X balance and Y balance. The terms on a HELOC/HEL will usually be worse and your combined payment between both loans higher. The return for every dollar you put down on a home on a 30 year fixed rate mortgage is about 15-18 years in terms of the difference in monthly payment. Food for thought.

Hope that makes sense.

Quote from @Mike Arias:

Thank you, all. Reason I ask is that I maybe moving in the near future and start investing in real estate afterwards. I am trying to figure out if I should exclude buying a condo as my primary because it is more restrictive to get HEL/HELOC that I can use for real estate investing. @Sasha Mohammed, I had no clue about what a "townhouse" means. So I should ask whether a townhouse is a true condo or attached SFR? If a "townhouse" has HOA fees, does that automatically make it a condo or PUD? Is PUD and condos basically the same?

I do tend to hear more negatives about a condo so that will probably not be an option anyway. 

@Sasha Mohammed is right a townhouse is more of an informal term - it's technically an attached SFR located in a community governed by an HOA, so much like a detached SFR located in a community governed by a HOA, they are all technically called PUD's, or planned unit developments.

In a condo you own a unit within the building that is governed by the HOA, unless you're in a detached condo community - drawing a blank on the term for it right now - basically its a group of SFR's in a condo development, but those aren't treated the same as traditional condos. The financial health of the HOA is very important for a condo's viability.

My question is why would you need a HELOC after you buy your new home?