Who Is Investing in Houston, TX.

Question

I would like to hear from investors who are buying long-term buy & holds in Houston, TX.  We have had a team studying and investigating the market and I would like to hear from actual investors now on their thoughts.  Any particular parts of town that you like - more importantly do not like?  Any problems with property management in the city or contractors within the city.

We are already in Dallas and will absolutely set up our own shops in Houston (i.e. - property management and renovations) but knowing on the front end what other investors are dealing with can only help.

Would just love any feedback and personal insight to the market.  Thanks in advance!

Chris Clothier · Answer

This post is turning out to be very good for me.  I like getting differing points of view.  It really does help us make decisions.  IN the end, investors purchase the investment property from us after we have purchased, renovated and rented, so I have to think about their risk tolerance first and foremost.  Some will want the risk that may be associated with areas like ponderosa forrest and others will not.  So having multiple viewpoints on good and bad areas from investors is really good info.  It also helps us from a management perspective since we will be building a management company in the market as well.

Thanks for sharing.

Chris

Ali Boone · Answer

Chris! Yes please branch into Houston! I have people all the time interested in properties there. Will soooo send them your way. Tell Matt, tell Matt!

John T. · Answer

@Eric Tait , as I was writing my previous post, in the back of my mind I was thinking that other investors might find opportunity in Ponderosa Forest.

Eric Tait · Answer

Funny you should mention Ponderosa Forest,

We own 2 properties in that subdivision all in for just around 100K (after 28K rehabs using hard money) both appraised for over 145K and cash flow $500+ a month and we get offers from people to purchase all the time.

So its interesting how two people can look at the exact same situation in a different way.

Chris Clothier · Answer

@John T. - that kind of information is priceless.  Thank you very much for your input.

Chris Clothier · Answer

@Eric Tait  and @Dion DePaoli -

I really appreciate the extent that you guys went.  I will be in touch Eric to talk a little more in depth.  Dion, I may reach out to you as well to spend a few minutes if possible going into a little more detail on the deed restricted areas.  That is a term I have not come across yet and I want to know how it is applying to Houston.

All in all, your analysis is what we have found, but I would still love to hear from anyone else on here.  I need to know if there are specific areas to stay away from.  I know some simply want me to stay away from their areas!  LOL - But, there is plenty of property to go around - I'm not looking to take from anyone, just enter the market a little faster and stronger than we did in Dallas.  We are going to take what we learned from that process and apply it to Houston and hopefully make some great relationships in Houston just like we did in Dallas.  It is all about everyone from wholesalers, contractors all the way to the end investor making money, reaching their expectations and feeling happy with the process!  So feel free to share any other info. we should know about the market...

Chris

John T. · Answer

I've lived in and near Houston for quite some time.  I will not invest in Houston.  However, if I had to invest in Houston, I would follow Eric Tait's suggestion to buy "around the perimeter of Houston."

For your information, the following link will show you the areas in Houston to avoid because of high crime rates (also known as "war zones").

Another peculiarity of Houston is that there is no zoning.  Therefore, you could have Section 8 apartments, strip clubs, tattoo parlors, etc. built next to affluent subdivisions.  One example of many is Ponderosa Forest subdivision, which is located in far North Houston off of FM 1960 and Ella Boulevard.  Ponderosa Forest was an affluent subdivision with rising property values until about 2006.  Property values have fallen each year since 2006 because of nearby crime ridden apartments and run down commercial development.

Dion DePaoli · Answer

A little off kilter, but we are into many loans secured by Houston real property.  From my perspective, many of the homes outside of deed restricted areas can be a little slippery in evaluation.  We obtained BPO's for all of them but had to go a couple rounds with many of the agents and their evaluation.  From a high level look, the homes inside the deed restricted areas held value much better and tended to be more stabilized homogenous locations.
	
	The rental market seems to be be pretty decent but there can be issues with renters with kids and the school zones they fall into.  Again, the deed restricted developments seem to do a little better on average.  
	
	We don't get to pick and choose like REI so much, so we have to take an opportunistic approach and take what is provided in the pools we bid.  Just like any other market the vendors are both good and bad and we have had to find decent folks to work with when needed.  To some extent, the market didn't wash out all of the lesser experienced/less qualified agents and low level contractors like other markets that tanked, so I would say simply be prudent.  
	
	All in all, I think it is a good market but I also think over the last couple years there has been a little hype in excess.  There are places that have seen some decent decline in values.  The deprecated zones are spotty it seems and cater to the hourly wage earner opposed to the salaried worker.  Those same assets tend to have more of a fall behind and catch up cash flow, clearly depicting the hourly wage grind and the flux of hours worked.

Eric Tait · Answer

I am currently holding long term in this market.

My personal investment philosophy has me buying outside the two loops (I-610 and Beltway 8) around the perimeter of Houston.

I stay away from inner city property (older and higher touch management from my experience) but many people I know make money there.

I look for mid-late 70's 3/2/2 and 4/2/2 that rent for a minimum of $1000 a month. This can be found in older subdivisions, I like to buy at $40-50 a square foot and then put $10-20 in for rehab, this gives me a nice equity cushion plus it will still cash flow upwards of $400/month.

Texas is tricky with property taxes and MUD taxes so you have to look at the tax burden expressed as a percentage of assessed value. Here in Houston it can run from a low of 2.6-2.8% in the city of Houston to as high as 3.5% in some suburbs, so you have to get your tax certificate, also add $200-$500 per year in HOA fees. (paid as a one time payment yearly)

Feel free to PM me, if you would like more detailed information as I do not want to write a book on here.