All Forum Posts by: Robert Steele

McKinney schools aren't that good. I've been buying in Melissa. Your still close to I-75 and the schools are much better. I believe I read recently that Melissa is one of the fastest growing cities in the country.

As a resident and residential investor of DFW for the past 23 years I agree with everything said here and it's all good advice.

I'd like to add one "key factor and risk" you asked about. Here, they build houses like rabbits breed. I know this used to keep some big out of state investors away in years gone by.

I think that's because we are in different markets @Kevin Sobilo

The majority of houses around here are 1950's or newer. I have heard from plumbers that cast iron sewer pipes come in 50 and 100 year life expectancies. My own experience with having to do many sewer line re-routes and repairs (on houses built in the 70's) is that whatever they used in DFW is not the same as what they used in your neck of the woods. The plumbing company I used for years actually stopped doing small stuff and just started focusing on that as there is a large market for those repairs. Granted, I could be conflating some of this with slab leaks as we have lots of foundation movement here. But I specifically know I have had to abandon these cast iron lines outside the slab too.

All my arch shingle roofs have been replaced at least once if not twice over the past 20 years. We have frequent hail storms. So I guess I'll never know how long they would actually last.

That is a good point about better the devil you know. I know my own properties intimately and they are well maintained. Swapping for something else there is always going to be an element of risk. Even brand new homes when you figure out later that the yard wasn't graded properly and you get water in the house every time you get a strong rain storm. Or that the city didn't inspect the sewer line hookup to the city mains (at all or properly?) and sewer constantly backs up. Ask me how I know these things. :)

Thank you for your very well thought out reply @Bruce Lynn

That is a good point about buying near new rather than new and for my intended purpose it is basically the same. In that case I should probably look for near new so that I can get a gauge on the neighborhood first before committing. I know the kind of subdivisions you are talking about and I have also walked through houses like you mentioned. The ones that were bought new and basically never had any maintenance done on them in a decade or more.

I fully expect to replace the heater and HVAC on new construction, but I should get at least ten years care free I would hope. I also know what you mean about these builders putting in the cheapest hardware they can find. Dishwashers and water heaters particularly stand out from what I've seen of late. I always go for four brick walls. I do not want the added maintenance of exterior painting if I can avoid it.

I did not consider PEX. That is a good point. Especially after the last big winter storm we had here a few years ago.

I am a long term landlord. I have a few that I have held so far for 23 years. Given that I intend to hold on to my portfolio for at least that long again, then having something newer now, rather than older makes a big difference 30 years down the road, as you say. 

P.s. It's funny you should mention Princeton. My wife put the kibosh on buying new construction in that area last year. 

This year I sold an older SFH rental (built 1979) I had with no deferred maintenance in Plano TX in order to 1031 exchange it for a similar sized new SFH rental in Melissa TX (built 2021). All cash buy. The older property was close to two major highways with loads of businesses, restaurants and amenities nearby and closer to the center of the DFW metroplex. The new property is in a growing city that is on the outskirts of the metroplex close to one major highway with limited businesses nearby. School districts are similar.

Why the swap? Maintenance. Despite keeping up with it, these older houses always spring up new problems. Not to mention the sewer pipes are cast iron and in this case was getting close to the end of their useful life (50 years). I already had to re-route the main sewer line once. I am retired and older now and don't want to deal with the hassle. Not only that but the newer house is much nicer and gets the same ROI. I should also point out my wife is a RE broker so transaction costs are negligible. We pay buyers agent 3% and then get paid 3% by the sellers agent on the other end.

Now I am thinking of doing it again next year. This time with an older SFH rental (built 1960) with no deferred maintenance in Richardson TX in order to 1031 exchange it for a brand new construction in Denton TX, all cash. On one hand I should probably just stay pat and pay for the maintenance. After all it's all about location, location, location, and I am giving up good central locations. On the other hand having new construction that I won't have to worry about for at least 10 years and can wait while the city expands around it sounds relaxing. Which would you choose?

The cap rates in my single family rental portfolio continue to compress. This is even after raising rents earlier this year by 10%.

In 2012 I was getting ~8%
In 2014 ~7%
In 2016 ~6%
In 2018 ~5%
In 2020 ~5%
In 2022 ~4%

With Treasury rates over 3% and rising it may not be long before I have to reconsider my wealth allocation.

1) At least in Collin County I have found the appraisers to be pretty accurate in their appraisals unless there are mitigating circumstances. So I haven't even bothered with protest companies the past few years. I did successfully protest one property myself last year because it was in such disrepair.

2) Yes. That is pretty common I believe. If not 50%. If you paid $305K and they assessed it at $302K I don't think you have any chance of fighting that one. They pretty much have to appraise it for what you bought it for. Especially if you bought around the beginning of the year. This can really work in your favor if you get a distressed property or distressed seller.

3) Unless you want to take a plane trip or perhaps hire a local attorney.

@Jeffrey Donis Yes, I agree. Word of mouth is better. Unfortunately investors in my network are having the same problem. And those that don't, I think are jealously guarding their contractors. ;)

I should probably just file this rant with Captain Obvious.

In this current environment, getting any sort of contractor is hard to say the least. I don't know if its the booming house prices and everyone fixing up or government handouts acting as a disincentive to work.

Just to name a few examples that come to mine. Two of my tile guys are both booked out for two months. My handyman quit. My lawn service quit. My landscaping guy is booked out for a month. Countertop installer is quad booked all month. On top of that actually getting materials is like pulling teeth. Ordering flooring, I'm being told to order 30 days out. Windows are 6 weeks out. Just like the rest of the economy, a lot of things are out of stock or backordered. It's frustrating what is already a pretty high stress activity.

How are the rest of ya'll getting on?

Unlikely in my experience.