Interested in Texas market

[Adam Barakat]

Currently vested in the TN market and looking to diversify into the TX market. Curious to hear stories on whether the community has found success in the DFW and surrounding areas (ideally 100 mile range south and east of DFW). Vacancy rates, ease of tenancy, etc. interested to connect with an agent and pms in the DFW area as well. Thanks!

[Eric Fernwood]

Hello @Adam Barakat,

The city where you invest is the most important investment decision you will make—not the property. The city determines the long-term financial performance of every property within it. The property is only a container that tenants pay to occupy.

If your goal is long-term financial independence, you need to select a city where:

• Rents increase faster than inflation. Unless rents increase faster than inflation, no matter how many properties you own, you will eventually be forced back to work because you will not be able to pay future inflated prices.
• No rent control of any kind. Some states and cities have enacted various forms of rent control. These can limit your ability to raise the rent quickly enough to keep pace with inflation, restrict your ability to choose the most desirable tenant and make evicting non-performing tenants challenging or unfeasible. Never invest in locations with rent control.
• Significant and sustained population growth. Population growth drives demand, which increases prices and rents. Never invest in a city with static or declining population.
• Rising real personal income (after inflation). Unless income rises, prices and rents are hard-pressed to rise. For example, the following chart shows the per capita income in Clark County, NV (Las Vegas). The compound annual growth rate (CAGR) for 2013-2023 (latest data available) is 5.17%, while the inflation is 2.72% CAGR.

• Low Crime Rates: Avoid cities with high crime rates. Never invest in any city on this list: CBS’s list of the 50 Most Dangerous Cities in America.
• Low operating costs. Every dollar lost to operating costs is a dollar less for you to live on.

Operating Costs

Operating costs vary tremendously by state. Below is an operating cost comparison between Nevada, Texas, and Florida.

State	State Average Insurance Cost	State Average Property Tax Rate
Florida	$10,996	0.19%
Texas	$2,317	1.68%
Nevada	$965	0.59%

State average property tax source.

• Average insurance source.
• Florida's average insurance cost source

To put this in perspective, below are the estimated annual operating costs for a $400,000 property.

State	Insurance Cost	Property Tax	Total
Florida	$10,996	$3,640	$14,636
Texas	$2,317	$6,720	$9,037
Nevada	$965	$2,360	$3,325

Compared to a property in Nevada, properties in Texas and Florida require a much higher cash flow to compensate for higher operating costs. Specifically:

• Florida: Requires $11,311 ($14,636 - $3,325) higher cash flow than Nevada to compensate for higher taxes and insurance.
• Texas: Requires $5,712 ($9,037 - $3,325) higher cash flow than Nevada to compensate for higher taxes and insurance.

The takeaway is that operating costs can have a huge impact on reaching and maintaining financial independence.

Recommendation

Choose your investment city carefully. Your investment must provide a 25 to 35 year pay check. If it doesn’t, you’ve wasted a lot of years and money.