Things you should know before you buy real estate in Texas?

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Things you should know before you buy real estate in Texas?

Account Closed

Real Estate Marketer · Corpus Christi, TX · Member since 2015 · 239 posts · 46 votes

I just want to see what I can learn from people that are investing here in Texas.

I would like everyone to just leave one thing about investing in Texas.

I'll start:

Don't depend on the oil business to keep your rentals full.

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Shital Thakkar

Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes

I am agree @Jay Hinrichs, with your concerns but following advantages make your investment risk free in Texas... Any particular kind of recession will not affect you investment just like it can happen in other places..

Most inexpensive real estate out of top 15 Metro.
Rock Solid Economy
5 cities include in Top 10 fastest growing city of USA (Austin, Houston, San Antonio, Dallas and Fort Worth)
#1 infrstructure
Best place to do business
Most diverse economy
Highest number of Fortune 500
Second biggest economy in US after CA.
etc...

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Steven Adams
League City, TX · Member since 2016 · 17 posts · 8 votes
9y
I don't have a lot to add to this discussion. But I'm from Ingleside. Getting this going up here in League City. Want to learn form myself then spread the knowledge to my family. Would love to connect next time I'm down there.
1 Reply
John Truong
Real Estate Investor · Houston, TX · Member since 2013 · 110 posts · 23 votes
9y
In Houston, property tax and insurance are high.
5 Reply
Brad GibsonPro Member
Rental Property Investor · Midland, TX · Member since 2016 · 185 posts · 180 votes
9y
Ditto on property taxes and insurance. Prices for both of those in Texas are exorbitant compared to other states. I think that might primarily be because there is no income tax & because the insurance lobby OWNS the Texas Legislature and governor, thus by proxy...they own the Insurance Regulatory Commission.
1 Reply
Chuck Webb
Houston, TX · Member since 2011 · 115 posts · 70 votes
9y
I has gotten to a point to where protesting your property taxes will fall upon def ears when you stand before the appraisal board.
2 Reply
Daniel J.
Conroe, TX · Member since 2016 · 237 posts · 43 votes
9y
@Chuck Webb They are theoretically working on changing that. They had a public hearing about it recently with some senators. We'll see what happens though.
3 Reply
Jason Hirko
Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
9y
@Account Closed TWIA for gulf coast counties... that's a killer!
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
1. Tax's sky high
2. foundation issues over the course of ownership
3. Insurance wind and hail
as long as one takes these factors into account with your capex and long term ownership and buys accordingly you get real numbers
were I see out of state folks get a little sideways is they don't understand expansive soils.. and they buy when the house has owner exemption only to have their tax's about double on them next year. And insurance is high because of wind and hail coverage
Podcast Guest on Show #222
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3 Reply
Shital Thakkar
Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
9y
I am agree @Jay Hinrichs, with your concerns but following advantages make your investment risk free in Texas... Any particular kind of recession will not affect you investment just like it can happen in other places..
- Most inexpensive real estate out of top 15 Metro.
- Rock Solid Economy
- 5 cities include in Top 10 fastest growing city of USA (Austin, Houston, San Antonio, Dallas and Fort Worth)
- #1 infrstructure
- Best place to do business
- Most diverse economy
- Highest number of Fortune 500
- Second biggest economy in US after CA.
- etc...
7 Reply
Chuck Webb
Houston, TX · Member since 2011 · 115 posts · 70 votes
9y
@Shital Thakkar
Sounds very promising if you have the cash to make it happen.
0 Reply
Justin Fox
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
9y
The property taxes are what they try to bone you on every year it seems. Really? Is my property really appreciating 6%+ in a bedroom community on the outskirts of.... Beaumont? You just have to *****, whine, complain and send photos of every little bit of wear/tear/damage there is.
Insurance is inexpensive, at least I think so (compared to taxes anyway). I'm getting dwelling coverage including wind/storm for 750/year on one? 577 on the other. I have higher deductibles and only insure the initial loaned amount/construction cost.
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Donald Dickerson
Investor · Houston, TX · Member since 2016 · 36 posts · 22 votes
9y
Here in Houston, I use Conners & Assoc to contest my prop taxes for all my taxes every year. It does help.
1 Reply
Nancy Wang
Dallas, TX · Member since 2015 · 27 posts · 1 vote
9y
@Justin Fox My insurance company does not allow me to insure the loaned amount. All my insured amount are much higher than the purchase price - e.g. I made a purchase of $192k but they insurance amount is $320k. The insurance company said they have a formula to calculate the rebuild cost for this square footage and this furnish level. How were you able to obtain an insurance to cover only up to the loan amount?
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Justin Fox
Software Developer · Vidor, TX · Member since 2015 · 922 posts · 639 votes
9y
@Nancy Wang
You just need to talk to an insurance broker and get them to find an insurance company that will. You'll also have to make sure it will satisfy your mortgage company. I think they'll have to ask underwriting to see if it flies with Freddie/Fannie or whoever else.
We have two mortgages with the same company and pre-underwriting tried to tell us (on the second loan) freddie/fannie requires full replacement but you can do only the unpaid principal balance if your mortgage is 80% Loan to Insurable Value. I'm guessing that's how we're getting away with it. We build homes and cash out. The bundled closing costs puts us at >=80% and satisfies underwriting.
That's the only reason I can think of that would allow us to do it. Here's some Fannie Mae documentation from B7-3-02: General Property Insurance Coverage:
"For a first mortgage secured by a property on which an individually held insurance policy is maintained, Fannie Mae requires coverage equal to the lesser of the following:
- 100% of the insurable value of the improvements, as established by the property insurer; or
- the unpaid principal balance of the mortgage, as long as it at least equals the minimum amount—80% of the insurable value of the improvements—required to compensate for damage or loss on a replacement cost basis. If it does not, then coverage that does provide the minimum required amount must be obtained.
B7-3-03, Determining the Amount of Required Property Insurance Coverage provides a formula for determining the amount of property insurance coverage generally required for a first mortgage."
If Fannie is securing your loan, you should be able to knock it down to 192,000 coverage instead of 320,000, or at least something cheaper and up your deductible to 5%. I'm not an insurance agent or loan advisor, so call some people.
0 Reply
Jacob Passmore
Insurance Agent · Abilene, TX · Member since 2016 · 85 posts · 19 votes
9y
@Nancy Wang
Pm sent
0 Reply
Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
9y
Taxes are less than what people pay in California. Texas is a non-disclosure state. Which means that taxes aren't reported to the city. I pay about 10k a year on a 12 unit apartment complex. It's valued about 200k what I paid for it on the tax site and is worth about 200 k more than I bought it for at this point and time.
That said it is a cost you have to account for. I've researched quite a few markets and Houston is by far the best market. If you want to learn more feel free to join us in the Houston forums.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Kevin Wood I dont think non disclosure has any bearing on tax;s the taxing authority puts there own value on the assets regardless of what you pay for them. LOL thats why Texas to those who are not up to speed with how things work there can get totally fubared and wish they never invested there
Podcast Guest on Show #222
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Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
9y
@Jay Hinrichs We disclosed one of our houses and it became the assessed value of the property. I don't know how the city would argue that a recent transaction was not indicative of the purchase price. Additionally, whenever I buy houses in Houston I receive a letter asking me to disclose my purchase price for tax purposes. Maybe my situation is unique.
0 Reply
David Thompson
Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
9y
Thanks ****al for bringing a positive and more rationale spin on Texas ! More to like than dislike and interesting that for several responses until you showed up that it was all headed around what not to like though that was not the title of the article. Folks, its all about growth, jobs, population, relatively low cost of living and overall good quality of life. Don't miss the forest from the trees. Great podcast from Carl Dean gives good overview what's happening here and why you want to be investing here. Texas Enterprise Fund is a key catalyst.
https://www.linkedin.com/pulse/why-texas-great-inv...
1 Reply
Cameron TopePro Member
Property Manager · Katy, TX · Member since 2015 · 1k+ posts · 1k+ votes
9y
@Account Closed
With the shear size of Houston I have found it easy to focus on niche markets and have plenty of volume. Conversely, I have to constantly be cautious of the shiny object syndrome.
[email protected]832-770-7090
2 Reply
Jared Watson
Investor · Austin, TX · Member since 2015 · 222 posts · 58 votes
9y
it rains for months at a time then it gets real damn hot
5 Reply
Gates Mueller
Real Estate Agent · San Antonio, TX · Member since 2016 · 21 posts · 15 votes
9y
Texas' population is growing and the economy here is better than the rest of the country. You can read about either of those facts with just a little bit of research. Yes, expansive soils cause foundation issues so repairs should be something you consider. Sure, people complain about property taxes, but the alternative is to be in an area with less growth and a slower economy so keep that in mind. The different real estate markets that are showing huge growth (Houston, Dallas, Austin, San Antonio) all have ups and downs, good areas and bad areas, so you just need to do your homework.
2 Reply
Preston Rhone
Austin, TX · Member since 2016 · 4 posts · 0 votes
9y
I am curious on how the numbers add up for cash flow properties. I started searching in Austin and couldn't find anything that would have positive cash flow. Moved search out to Kyle/Buda, and even here the 1% rule seems nearly impossible. I have seen some around .85-.9%. Thoughts on if that would be a bad investment?
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
9y
Check your title insurance, Schedule BII, Exceptions, no coverage for oil and gas leases or mineral rights, that is a nightmare. BTW, some schemer in Dallas is offering to sell you mineral rights, but they don't really own them, it's my understanding they are trying to catch this old woman crook, so if you get offers call the TREC or authorities.
Oh, and the owner of the oil right has no obligation to return the property to its original state after drilling, like paving your parking lot where the derrick stood! (but then there are some with a public relations department, you might be lucky!) :)
1 Reply
Shital Thakkar
Specialist · Dallas, TX · Member since 2010 · 511 posts · 252 votes
9y
@Preston Rhone
- Yes, 1% rule is hard to find in Austin, as Austin is fastest growing city in USA since last 5-7 years in row.
- Houston slow down little because of Oil, you can concentrate in Houston suburbs like Katy, Spring etc...
- Hard to find 1% in Dallas, but you can still get good deals in FortWorth.
- With interest rate around 3%, you can still get good deal at 0.8-0.9% rule
0 Reply
David Veeder
Investor · Dallas, TX · Member since 2014 · 112 posts · 83 votes
9y
Be ware of the property taxes is Texas. With home values on the rise, they are going up fast. Around 3% of value in Dallas market.
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