Single-Family Investing in RGV?

[Conor Kearns]

BP Forum,

Thoughts on single-family investing in the Rio Grand Valley in Texas (McAllen, Harlingen, Edinburg, Pharr, Mission, etc.)?

-Conor

[Boone Tyson]

@Conor Kearns Great question. I live and work in the RGV. My wife an I live in Edinburg, office in McAllen, am an agent and also invest here in Hidalgo county. There is a lot of buzz around MFH right now. I've had quite a few investors reach out to me with interest in 4 plexes primarily. The market seems pretty saturated with buyers for MFH and it doesn't seem that most current list prices for MLS properties in MFH are reasonable enough to justify going that route. There are a few and I have nothing against MFH. I helped an investor purchase one and we closed on it Friday and are making another offer today. There are deals out there. I also purchased a 4 plex this year.

That being said, I think the greatest potential for cashflow, purchasing properties well above your 1% rule, and capturing the best long-term growth and appreciation is in SFH. That's not necessarily the case everywhere and may not be the case here forever, but I feel as though we see better deals below market value in SFH than MFH. The ratio of average rent prices to the average selling prices of the exact same properties seems to be pretty high compared to some other markets I've looked at. I think this is because we have such a large percentage of the local population that needs rental housing and doesn't have the ability to purchase.

I mostly flip because my business partners aren't really interested in buy and hold right now. One flip we have under contract right now is at a purchase price of about 87k and needs about a 20-25k rehab. Its an average flip at 3 bed/2 bath/2 car garage on a large lot and about 1500 sq. ft. living space.

That exact same house already has an addition for a 4th bedroom that would be super easy to bring up to par. Probably the same we will pay to demo it and clean it up. As a rental, there would probably only be a need for about 15k worth of work. A good sized 4 bedroom rental in that area should easily generate $1200-$1300 per month depending on how nicely it was finished out. Conservatively looking at a good amount above the 1% rule and if it was a traditional conventional loan and you paid out of pocket for the rehab, your PITI payment would only be about $700 at 5%, with a 20 year Amortization, $2500 in taxes, and $800 in insurance. If you assume 10% vacancy, 10% repairs, and 10% prop management, you still cashflow $175 per month at $1250 per month rent. No doubt in my mind that buy and hold is the highest and best use of this property long-term.

Deals like this one are not that uncommon here and this is just one example. That's why I think SFH is such a good option right now.