Real Estate Agent · Allen, TX · Member since 2015 · 106 posts · 13 votes
I am a pretty new real estate investor in North Dallas. I currently only have one SFR rental . I been looking around DFW real estate listing and listening to podcast while I am accumulating money to invest. I heard Texas is a great place to invest but I am just not feeling it personally.
A question that pop in my head is that I notice other state have way lower property tax compare to Texas, so is Texas a good area for investment? Most the property I find only have the 1% rule. Almost impossible for 2% rule. And property tax is taking up most of the expense making it seems like a 150k house would have the escrow payment of 250k house in other states.
My answer is the same as it is every time the CA investors start complaining about Texas property taxes... Our state has a balanced budget. Our schools and infrastructure are well funded. And, none of our towns are going bankrupt. All of that without a personal income tax! It is more difficult for out-of-state investors to wrap their minds around it, because they don't get the advantage of the lack of income tax. However, you do. You also get the advantage of it costing next to nothing to register your car. You don't pay property taxes on your car...I could go on.
You're not going to find many properties in DFW that meet the 2% "rule". However, Rocky hit it right on the head. Stop worrying about the "rules". They are guidelines. Establish your own criteria for minimum monthly cash flow and invest to that number. Don't worry about someone else's rule.
The reality is that in 2014 the top 2 large market, growth areas in the country where DFW and Houston. The top growing Tier 2 market was Austin. The Telecom Corridor area is exploding. There isn't enough inventory in the DFW Metroplex to satisfy the demand for homes, so people are renting who would prefer to buy...all the while new people are pouring in.
Bottom line is after PITI and expenses do you have a profit? Now imagine what that profit will look like once mortgage is off the books. I own rentals from Plano to Roanoke to Cleburne and all areas in between and would not have it any other way. I would suggest looking at areas north of Plano and focusing on homes that minimum meet the 1% rule.
FYI - Recently had a vacancy in Plano and after only 10 days of previous tenant moving out new tenant was moving in.
My answer is the same as it is every time the CA investors start complaining about Texas property taxes... Our state has a balanced budget. Our schools and infrastructure are well funded. And, none of our towns are going bankrupt. All of that without a personal income tax! It is more difficult for out-of-state investors to wrap their minds around it, because they don't get the advantage of the lack of income tax. However, you do. You also get the advantage of it costing next to nothing to register your car. You don't pay property taxes on your car...I could go on.
You're not going to find many properties in DFW that meet the 2% "rule". However, Rocky hit it right on the head. Stop worrying about the "rules". They are guidelines. Establish your own criteria for minimum monthly cash flow and invest to that number. Don't worry about someone else's rule.
The reality is that in 2014 the top 2 large market, growth areas in the country where DFW and Houston. The top growing Tier 2 market was Austin. The Telecom Corridor area is exploding. There isn't enough inventory in the DFW Metroplex to satisfy the demand for homes, so people are renting who would prefer to buy...all the while new people are pouring in.
Very good response Hattie! I recently went back and re-read the Millionaire Real Estate Investor by Gary Keller. I believe this book was published a couple of years before the great economy meltdown. In almost every example he uses, he optimistically uses the .08 rule for basing his investment choices on. I believe a good majority of those were referencing parts of Texas too. Now we are talking about must haves with the 2% rule and 1% rule. The 2% rule disappeared in DFW around 2012, when the foreclosures list started coming down. The 1% rule is still very achievable in DFW if you look in the right places and stick to the C to C+ and B- suburb areas. I get excited every day when I pull up the new listings for a local county, and see those gorgeous little starter homes built after 2000 priced great, in great shape, only to see that they all zone to the Crowley school district. Then I quickly move on to the next target.
Well said @Hattie Dizmond and @Rocky V. ! You both make some great points. I'm a California based investor and LOVE Texas. I have a great rental SFR in Austin and am now turning my attention towards North Dallas. I would like to move to Texas some day in the future, but for now I will continue to invest in a state that is doing all the right things and drawing in large companies from my state (i.e. Toyota)!! :)
We are still finding some properties in the that Dallas area where we can generate a 12% return but they are much harder to find than just 1 year ago. We are still seeing good returns in some of the secondary cities and smaller markets Still, Texas is a great place to invest!