Texas! Pros/Cons & Best Markets

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Texas! Pros/Cons & Best Markets

Firen Forrest
New to Real Estate · San Francisco · Member since 2020 · 14 posts · 18 votes

I'm planning to buy my first property in Q1 or Q2 this year. I'd like to do BRRRR cash buy with all in at <$100K and refinance in 6-12 months. I live in the SF Bay Area but am from Dallas so have been looking into the DFW area mainly. Still trying to land on exact geography though.

I'd love anyone's insights on general Texas investment pros/cons (for example it seems property taxes are relatively high in Texas but tenant rights aren't too extreme like they are here in the Bay Area)

Also which Texas cities/areas are popping best for cash flow with good rent to value and affordable? I'm already priced out of Austin but considering Dallas, Fort Worth, San Antonio, Houston, El Paso. Or some of the smaller metroplexes like Round Rock, San Marcos, Midland/Odessa, Lubbock, etc. 

If you're investing in Texas, I would love to talk. 

Thanks!

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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
5y
Originally posted by @Firen Forrest:

I'm planning to buy my first property in Q1 or Q2 this year. I'd like to do BRRRR cash buy with all in at <$100K and refinance in 6-12 months. I live in the SF Bay Area but am from Dallas so have been looking into the DFW area mainly. Still trying to land on exact geography though.

I'd love anyone's insights on general Texas investment pros/cons (for example it seems property taxes are relatively high in Texas but tenant rights aren't too extreme like they are here in the Bay Area)

Also which Texas cities/areas are popping best for cash flow with good rent to value and affordable? I'm already priced out of Austin but considering Dallas, Fort Worth, San Antonio, Houston, El Paso. Or some of the smaller metroplexes like Round Rock, San Marcos, Midland/Odessa, Lubbock, etc. 

If you're investing in Texas, I would love to talk. 

Thanks!

invest only in markers with 100k+ population and solid job growth. Otherwise, if you’re hit by a recession, smaller markets with less jobs will suffer significantly more.


I would not invest in properties costing less than $100k. Save your money so you have enough for a down payment + rehab $ for a 4/2 SFR in a solid neighborhood... in a good market, so you'll be able to attract a high quality tenant / family that will stay for a while.

For that you’ll pay $150-200k right now, unless it needs a complete overhaul.

Anything under $100k won’t attract a high quality/low maintenance tenant... and will be in a less than desirable neighborhood.

Also, skip El Paso (not large enough nor big enough employment market with diverse job base) and Houston (hurricanes/floods).

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  • Mason Moreland
    Specialist · Midland, TX · Member since 2018 · 198 posts · 148 votes
    5y

    @Dwelvin Morgan there are! One of the syndicators I am partnering with on syndicating development of wine grape vineyard specializes in Lubbock and other tertiary TX markets.


    There was a TON of multifamily built in the last 10 years in Lubbock so there are lots of opportunities there. The older stuff is up for forced appreciation opportunities now (rehab+infill). We have analyzed several deals for 10-50 unit multifamily complexes there to do solo, without syndicating. Like I said, @Matt Moreland specializes specifically in multifamily and commercial properties in Lubbock, so he and his team are a great resource if you are interested in the LBK.

    1Reply
  • Mason Moreland
    Specialist · Midland, TX · Member since 2018 · 198 posts · 148 votes
    5y

    @Alex Grosvenor man good point, I always forget El Paso (not sure why!). Definitely worth a hard look there.

    I agree on DFW in current environment. It's not that they don't exist, but there are few and competition is FIERCE from individuals and institutions. We got into the market in the early 90's through the early 00's and cashflow is good based on those purchase prices + refinancing at current rates. Always be looking to get into a market "cheap" or early haha!

    2Reply
  • Dwelvin Morgan
    Wholesaler · DFW · Member since 2019 · 15 posts · 6 votes
    5y

    @Mason Moreland Thank you for the insight, I used to spend my summers in Lubbock as a young lad and haven't been back in a long while. I'll definitely reach out to matt, thank you again!

    1Reply
  • Alex Grosvenor
    Realtor · Dallas, TX · Member since 2020 · 146 posts · 148 votes
    5y

    @Mason Moreland People forget about El Paso because it's at least 8 hours away from any other major city in Texas.

    If you want to get into a market cheap and early then El Paso is the place. Its actually a pretty prime spot to be in.  It's 8-10 hours to any of the central Texas cities, 8-12 hours to anywhere in California , 10 hours from Vegas, 10 hours from Colorado. Couple of hours to Phoenix. That's about a 2 hour flight to any of those places. You can see into Mexico. You can drive the highways along the wall. Mountains are everywhere.

    8-10 hours may seem like a far drive. I spent 3 years in the military in El Paso. We took 4 day weekend vacations to all of these places always driving and multiple times. I know a lot of other people there who have done the same thing. 

    If you look at all of the information it makes sense why more and more people are moving there. It is a long term appreciation play with cashflow now because you get in so early.

    I'm convincing myself into investing there as I typed this lol. 

    3Reply
  • Robert Neal
    Real Estate Agent · Member since 2020 · 52 posts · 41 votes
    5y
    Hi Firen!

    I can speak on behalf of San Antonio. I cannot vouch for the DFW markets but would certainly concur with the other members in that you would be best banking on appreciation as opposed to cash flow solely based on market research. However, here in San Antonio the 1% rule is absolutely obtainable. I have a few properties available right now selling around $100k, turnkey and tenant occupied with no rehab needed renting at $1050-$1100/month. On top of that San Antonio is a growing and appreciating city. We have Austin just up the road, big tech companies continuously migrating in and breaking ground, and I personally see out of state investors as well as investors from other major cities in Texas moving their money to San Antonio real estate nearly daily. If you are looking for a BRRRR investment with $100k all in and looking for immediate cash flow plus appreciation I would certainly recommend at least checking out San Antonio. Lots of great properties around the military bases here and great tenants as well.

    Good Luck!!
    3Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    5y


    @Michael Guzik your statement about "risky" vs "safe" cities in Texas got me to thinking. Is it accurate that a city with a less diverse industry is riskier? I'd agree that on the surface this logic seems to make sense. But I figured it was worth a deeper dive. 

    Disclaimer: I moved all around the US and chose Byran / College Station, TX as my permeate home and the town I would grow my portfolio.

    So I turned to Fred Economic Data to look at a comparison of the home indexes over the last 40 or so years. 

    https://fred.stlouisfed.org/gr...

    As you can see the blue line (Bryan College Station) is less volatile than the red and green lines (Austin and Houston). In this case, I am substituting volatility for risk, which isn't always a fair comparison but, the thing I learned is that our general understanding of the macroeconomics of a city doesn't always hold true. 

    @Firen Forrest my advice to you would be to pick 3-4 markets that look good (ie diversified economy, growing population, good appreciation) and then really dive deep to see if this market supports your strategy and goals for your investment portfolio. 

    [email protected]443-812-0357
    Schwartz Realty Group5116 Reviews
    WebsiteView Page
    3Reply
  • Karl McGarvey
    Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
    5y

    @Mark Ham that means youre offering too much! Lowball and create the deal

    0Reply
  • Karl McGarvey
    Real Estate Agent · Houston, TX · Member since 2019 · 763 posts · 500 votes
    5y

    @Firen Forrest ever thought about BRRRRing into a vacation rental? TONS of coastline in TX that people easily forget about. These areas also have a log of LTR possibilities as well.

    And no (because I know this is coming) not all coastal areas are marked as flood zones, so you can protect your asset with lower insurance rates!

    Just another twist on what you could do with your money.

    0Reply
  • Travis Watts
    Investor · FL · Member since 2017 · 247 posts · 245 votes
    5y

    Hi @Firen Forrest I've been investing in Texas for the past 5 years. Mostly Dallas/Fort Worth, San Antonio and Lubbock. Though there are many factors to vetting a market, I look at migration trends (see below data) diversification of employment, tax-friendly states, landlord/tenant laws (in favor of landlords) to name a few. I'm a big fan of Texas investing. Hope this helps.

    2Reply
  • Daniel Campos
    Rental Property Investor · Austin, TX · Member since 2015 · 9 posts · 0 votes
    5y

    @Sheila Jordan hey Sheila how’s the round rock area going. My wife and I stay in central Austin and are planing to purchase a Duplex and house hack it. And we’re thinking of looking into the round rock area

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Alexander Wehrmann:

    I’m also interested in TX market, but specifically looking for 2-4 unit MF. Is there a market in TX that’s better for this asset class?

    Specifically, seems like there isn't a lot of that type of product in the Dallas area, but maybe I'm just looking in the wrong places. Most of the posts above seem to be focused around SFH, are there other small multi family deals available better in certain markets?


    if you invest in MF, 2-4 units is much too small. You'll have management problems. Go 50 units or larger to obtain quality professional management or stick to high quality SFR so you can obtain high quality, low maintenance tenants.

    2Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Daniel Campos:

    @Sheila Jordan hey Sheila how’s the round rock area going. My wife and I stay in central Austin and are planing to purchase a Duplex and house hack it. And we’re thinking of looking into the round rock area


    duplexes in Austin, if you even can locate one that's not in a multi family neighborhood (ie ghetto) will be overpriced vs two SFR.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Travis Watts:

    Hi @Firen Forrest I've been investing in Texas for the past 5 years. Mostly Dallas/Fort Worth, San Antonio and Lubbock. Though there are many factors to vetting a market, I look at migration trends (see below data) diversification of employment, tax-friendly states, landlord/tenant laws (in favor of landlords) to name a few. I'm a big fan of Texas investing. Hope this helps.

     Good to see another investor actually doing market research.  By far the two strongest determinants of property price are (1) population and population growth forecasts and (2) jobs and job growth forecasts.  All else is second.

    As far as cash flow, look at price-to-rent ratios.

    2Reply
  • Brian Ploszay
    Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
    5y

    Parts of Texas are going to be the high growth areas for the next decade.  Small towns in Texas may not benefit.  Yes, it is a big state.

    Taxes are high.   Also get to be knowledgeable about foundation issues.  In Dallas, and Austin, there is soil moisture change that often cracks foundations.

    2Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Gregory Schwartz:


    @Michael Guzik your statement about "risky" vs "safe" cities in Texas got me to thinking. Is it accurate that a city with a less diverse industry is riskier? I'd agree that on the surface this logic seems to make sense. But I figured it was worth a deeper dive. 

    Disclaimer: I moved all around the US and chose Byran / College Station, TX as my permeate home and the town I would grow my portfolio.

    So I turned to Fred Economic Data to look at a comparison of the home indexes over the last 40 or so years. 

    https://fred.stlouisfed.org/gr...

    As you can see the blue line (Bryan College Station) is less volatile than the red and green lines (Austin and Houston). In this case, I am substituting volatility for risk, which isn't always a fair comparison but, the thing I learned is that our general understanding of the macroeconomics of a city doesn't always hold true. 

    @Firen Forrest my advice to you would be to pick 3-4 markets that look good (ie diversified economy, growing population, good appreciation) and then really dive deep to see if this market supports your strategy and goals for your investment portfolio. 

     Is it accurate that a city with a less diverse industry is riskier?

    YES, it is.  When you have only 2-3 industries in town and head into a recession, oil prices drop significantly, etc... or other things happen to weaken those industries, prices/rents will likely suffer.  This is obvious.

    Ideal markets are big (lots of sources of jobs), with a diverse amount of industries / job providers, and cities that are aggressively attracting companies / jobs, other things remaining equal.  These things affect demand and the price of your property.

    2Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Jon Q. I 100% agree that that statement holds true as a generalization. 

    Historically based on the comparison of Houston, Austin, and BCS, the data says the big cities have a more volatile price index. That history includes 2 Gulf wars, 3 recessions, and 6 Presidents. Volatility does not equal risk in investing, but for me if feel safer in a less volatile market. 

    Is it possible that a city with one very strong economic driver could be less risky than one with multiple drivers? I'd say yes. 

    [email protected]443-812-0357
    Schwartz Realty Group5116 Reviews
    WebsiteView Page
    1Reply
  • Matt Moreland
    Realtor · Lubbock, TX · Member since 2016 · 165 posts · 155 votes
    5y

    Focusing on specifically multifamily syndications here in Texas from an anecdotal perspective, the volume of investors looking in tertiary markets such as Lubbock has absolutely exploded in the last 18-24 months. Prior to that a large percentage of MF in the market was owned by local HNW individuals or groups of investors, but as more discover Texas and land on Lubbock, they are seeing deals that remind them of Dallas, Austin, HTX 10-15 years ago. Pretty cool to see it play out firsthand and in the trenches, and be able to come on here and hear what everyone else has to say.

    1Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Gregory Schwartz:

    @Jon Q. I 100% agree that that statement holds true as a generalization. 

    Historically based on the comparison of Houston, Austin, and BCS, the data says the big cities have a more volatile price index. That history includes 2 Gulf wars, 3 recessions, and 6 Presidents. Volatility does not equal risk in investing, but for me if feel safer in a less volatile market. 

    Is it possible that a city with one very strong economic driver could be less risky than one with multiple drivers? I'd say yes. 

    I don’t think I would say “yes”. And I certainly won’t bet on it nor invest my money on it.


    All things being equal, it makes no sense to invest in the less diverse economy.  If that industry gets hit, demand for your rentals are shot.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Gregory Schwartz:

    @Jon Q. I 100% agree that that statement holds true as a generalization. 

    Historically based on the comparison of Houston, Austin, and BCS, the data says the big cities have a more volatile price index. That history includes 2 Gulf wars, 3 recessions, and 6 Presidents. Volatility does not equal risk in investing, but for me if feel safer in a less volatile market. 

    Is it possible that a city with one very strong economic driver could be less risky than one with multiple drivers? I'd say yes. 

    If you could acquire a SFR in Austin vs Lubbock that is the same price, same rental rate, and same condition and all else being equal except location, which would you buy?

    We all know the answer, people have already spoken with their $$$... which is why Austin has and is still growing so quickly, the jobs and diverse economy.

    Austin prices are not that volatile, vs Dallas, Houston, and San Antonio... Austin’s price chart looks like one for the record books, one that all investors want to see... up and to the right.

    0Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Jon Q. you are correct, it's very sound advice to invest in the large cities with strong diversified economies. 

    [email protected]443-812-0357
    Schwartz Realty Group5116 Reviews
    WebsiteView Page
    1Reply
  • Firen Forrest
    OP
    New to Real Estate · San Francisco · Member since 2020 · 14 posts · 18 votes
    5y

    This is absolutely fantastic information and a great discussion. Thank you all for your contributions. I'm getting more excited about potential opportunities in Lubbock, El Paso, and San Antonio and I will focus my research there over the next few days. I love the advice to pick 3 markets and dive deeper. I'll keep posting what I find.

    3Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    5y

    San Antonio and Houston, Texas are also great markets to consider in your market research.

    [email protected]832-776-9582Podcast Guest on Show #469
    NETWORTH BUILDERS5236 Reviews
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  • Account Closed
    Real Estate Investor · Dallas, TX · Member since 2016 · 38 posts · 17 votes
    5y
    Originally posted by @Mason Moreland:

    @Alex Grosvenor man good point, I always forget El Paso (not sure why!). Definitely worth a hard look there.

    I agree on DFW in current environment. It's not that they don't exist, but there are few and competition is FIERCE from individuals and institutions. We got into the market in the early 90's through the early 00's and cashflow is good based on those purchase prices + refinancing at current rates. Always be looking to get into a market "cheap" or early haha!

    Hello Mason, you seem to be very plugged in re: different asset classes and geographies across the state. I would like to pose a few questions offline - please shoot me a DM if you can share a little of your expertise. Regards, Jose R. 

    0Reply
  • Hannah Spagnola
    Home Stager · College Station, TX · Member since 2020 · 3 posts · 1 vote
    5y

    @Gregory Schwartz thank you so much!

    0Reply
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