Hi, I'm new here and searching out my first property. I live in Long Beach Ca and am looking in Texas

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Hi, I'm new here and searching out my first property. I live in Long Beach Ca and am looking in Texas

Jeb Brilliant
Rental Property Investor · Long Beach, CA · Member since 2015 · 623 posts · 155 votes

Hi all, 

I really like the forum, podcast and blog. I've been trying to learn as much as I can all over the web but this place seems to be the best and biggest. 

I'm looking to buy my first home as a rental property and after getting some advice I am looking in Texas, specifically between Dallas and Arlington. I'm not sure I'm in the right place or state but I can't afford to buy around Los Angeles, Ca where I live. 

Looking forward to learning more on here. 

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Hattie Dizmond
Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
11y

@Jeb Brilliant

Welcome to BP!  You're right that DFW is a growing market.  Read some of the projection, along with the reports on net new jobs created, etc. and you'll get a really good feel for just exactly how amazing that growth is.

With that said, it's an extremely hot market right now. Not CA & FL kind of hot where the prices are inflating without regard for real value. However, the North Texas MLS (NTREIS) covers over 12,000 square miles. Over that entire area, which includes a large % of rural property and the requisite war zone areas, we only have 2.5 months of inventory. My favorite areas - median income areas, median market values $150k - $250k, and highly rated schools - easily have less than 30-days of inventory.

I don't know what areas you of the Metroplex you are planning to target.  You listed Dallas to Arlington, which I'm assuming includes at least the first tier of suburbs in that area as well.  That's still a huge area, and very few agents have the capacity to understand that large and diverse of a space.  The DFW area really necessitates looking at it in terms of sub-markets and micro-markets to make any sense of it.

With that said, if you are focusing on areas such as Desoto/Red Oak/Cedar Hill or South Arlington (south of I-30) or Far North Arlington, your plan to visit prior to purchasing a property will probably be workable, particularly if you are OK with placing the offer using the Section 23 Cancellation Option in the standard TREC contract.  However, if you're looking in the Far North Dallas/Richardson/Plano area, you'll never have the chance to see the properties, before they are already under contract.

The final word of advice I will give is that it's seriously unlikely you're going to find anything in a C neighborhood or above - that will cash flow - on the MLS. It just isn't going to happen. If it does, it will be under contract and off the market before you ever have a chance to do the analysis. Just saying. There is insane investor pressure right now for all the same reasons you've targeted this market.

Good luck!

Hattie

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  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    11y

    @Jeb Brilliant

     Hi and welcome to BP!  I am an investor on the West Coast who also invests out of state due to price barriers.  I am curious why you are looking specifically in Texas, and in that area in particular? 

    0Reply
  • Jeb Brilliant
    OP
    Rental Property Investor · Long Beach, CA · Member since 2015 · 623 posts · 155 votes
    11y

    Hi Larry, 

    Thanks for reaching out. I chose Dallas and the surrounding cities because my uncle (who owns 3 rental properties) suggested it and I read it is a growing area. Once I started looking there it just cascaded and today I have an agent looking at properties for me. I'll fly out there to check out whatever I plan to buy. 

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  • Jeb Brilliant
    OP
    Rental Property Investor · Long Beach, CA · Member since 2015 · 623 posts · 155 votes
    11y

    I'm excited, my agent just looked at a property for me and she liked it. 

    0Reply
  • Hattie Dizmond
    Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Jeb Brilliant

    Welcome to BP!  You're right that DFW is a growing market.  Read some of the projection, along with the reports on net new jobs created, etc. and you'll get a really good feel for just exactly how amazing that growth is.

    With that said, it's an extremely hot market right now. Not CA & FL kind of hot where the prices are inflating without regard for real value. However, the North Texas MLS (NTREIS) covers over 12,000 square miles. Over that entire area, which includes a large % of rural property and the requisite war zone areas, we only have 2.5 months of inventory. My favorite areas - median income areas, median market values $150k - $250k, and highly rated schools - easily have less than 30-days of inventory.

    I don't know what areas you of the Metroplex you are planning to target.  You listed Dallas to Arlington, which I'm assuming includes at least the first tier of suburbs in that area as well.  That's still a huge area, and very few agents have the capacity to understand that large and diverse of a space.  The DFW area really necessitates looking at it in terms of sub-markets and micro-markets to make any sense of it.

    With that said, if you are focusing on areas such as Desoto/Red Oak/Cedar Hill or South Arlington (south of I-30) or Far North Arlington, your plan to visit prior to purchasing a property will probably be workable, particularly if you are OK with placing the offer using the Section 23 Cancellation Option in the standard TREC contract.  However, if you're looking in the Far North Dallas/Richardson/Plano area, you'll never have the chance to see the properties, before they are already under contract.

    The final word of advice I will give is that it's seriously unlikely you're going to find anything in a C neighborhood or above - that will cash flow - on the MLS. It just isn't going to happen. If it does, it will be under contract and off the market before you ever have a chance to do the analysis. Just saying. There is insane investor pressure right now for all the same reasons you've targeted this market.

    Good luck!

    Hattie

    1Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    11y

    Welcome to BiggerPockets Jeb and good luck investing!

    Podcast Guest on Show #121
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  • Lee L.
    Investor · Los Angeles, CA · Member since 2014 · 285 posts · 142 votes
    11y

    @Jeb Brilliant

    Your agent is always going to like the property. Texas is vast. Don't feel like you have to rush into it. Go see it, and drive around specific neighborhoods before you start putting down offers. Especially since this is your first home. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Jeb Brilliant

      investing out of state has its risks... but you mitigate that greatly by having relatives there.. I would stick close to those areas were they live and work .. nothing better than having relatives' nearby that have your true interests at heart.

    @Hattie Dizmond

    So Hattie are you saying the wholesalers and or turnkey operators are the only one's that have properties that cash flow in your market and this person can only find those through off market.. My experience is MLS is usually cheaper than Turn key in most cases .. wholesale being wholesale who knows. And if the market is that hot and I am sure it is as I play there a little and its what I have experienced why would any turn key or wholesaler do anything but put their inventory on the MLS and sell it in a day or two? Like what happens on the west coast.

    Lastly when you say cash flow what exactly do you mean... that at todays prices if one was to put 20% down that there would be NO positive cash flow after expenses... and that's the definition of cash flow.. but if one put 40% down then one could get positive cash flow.. I always find the blanket statement there is no cash flow to be subjective and subject to downpayment constraints... just curious to hear your answers on the above. 

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  • Christopher Friedman
    Member since 2015 · 6 posts · 1 vote
    11y

    Hey Jeb! Welcome to BP! 

    0Reply
  • Hattie Dizmond
    Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Jay Hinrichs:

    @Jeb Brilliant

      investing out of state has its risks... but you mitigate that greatly by having relatives there.. I would stick close to those areas were they live and work .. nothing better than having relatives' nearby that have your true interests at heart.

    @Hattie Dizmond

    So Hattie are you saying the wholesalers and or turnkey operators are the only one's that have properties that cash flow in your market and this person can only find those through off market.. My experience is MLS is usually cheaper than Turn key in most cases .. wholesale being wholesale who knows. And if the market is that hot and I am sure it is as I play there a little and its what I have experienced why would any turn key or wholesaler do anything but put their inventory on the MLS and sell it in a day or two? Like what happens on the west coast.

    Lastly when you say cash flow what exactly do you mean... that at todays prices if one was to put 20% down that there would be NO positive cash flow after expenses... and that's the definition of cash flow.. but if one put 40% down then one could get positive cash flow.. I always find the blanket statement there is no cash flow to be subjective and subject to downpayment constraints... just curious to hear your answers on the above. 

    Actually, I thought what I said was pretty clear, that being that the MLS is yielding very few deals in C class and above neighborhoods...very few being almost none. The listings it is yielding are being pounced upon like raw meat in a hyena cage. So, my point was that to think you can see a listing and then plan a trip to look at it, prior to making a decision is not likely to yield positive results in this market.

    As for wholesalers, very few pure wholesalers (meaning they don't actually take down any deals themselves) have good deal flow in DFW right now. I have no idea what the Turnkey guys are doing, because I don't try to buy Turnkey. I do know where most of the big Turnkey operations are finding the majority of their properties, and it isn't in neighborhoods I care to target. As for why a wholesaler wouldn't put their property "on the MLS and sell it in a day or two?", for all I know the Turnkey guys may be doing that very thing. But, why would a wholesaler spend even 2 cents to list a property, when there are 150 flippers and buy & hold investors begging for deals? In my mind that isn't even a logical question.

    Now, about cash flow...I don't believe I made a declarative statement that there was NO cash flow to be had.  And, I certainly didn't mention any criteria around a deal.  Jay, you seem to just be in the mood to be contrary.  I can pay cash for most properties, and they will cash flow.  However, I will have also tied up a chunk of liquidity in the deal, so it's difficult for me to truly see that as cash flow.  Right now, in areas of moderate to high desirability, it is difficult to find properties that will cash flow at 20 - 30% down, which I believe is a reasonable down payment assumption for the purpose of discussing cash flow.  There are a number of reasons for this, starting with the lack of inventory, which is driving prices up, followed by the property tax rates, and the fact that many of the desirable areas are in an inverted rent to value situation.

    I am working a deal right now that will cash flow with 30% down and a $22k rehab. I didn't say it can't be done.  I said it's hard, which it is.  Rents are catching up, but they aren't there yet.  If you want to be in C/C- and lower neighborhoods, it's much easier.  We don't work those areas.  I don't feel like I made blanket and categorical statements, if you actually read the context of my response.  I'm a huge proponent of the Dallas area and Texas in general.  I don't think there's any better place to live, work or invest.  But, I would be being disingenuous, if I didn't tell what my research, experience and daily life show to be true.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Hattie Dizmond

      sounds like your market has gone Californian  !!!

    and I agree with your thought process.  sounds like the market there is more of an appreciation play now than a cash flow play.  and that flippers are selling to homeowners more than landlords which I think is a good thing.. as homeowner properties hold value better in a given neighborhood generally.

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  • Hattie Dizmond
    Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Jay Hinrichs:

    @Hattie Dizmond

      sounds like your market has gone Californian  !!!

    and I agree with your thought process.  sounds like the market there is more of an appreciation play now than a cash flow play.  and that flippers are selling to homeowners more than landlords which I think is a good thing.. as homeowner properties hold value better in a given neighborhood generally.

     LOL. The only thing that keeps me from labeling it as Californian is the fact that appreciation hasn't gone atomic. We just have no inventory. I told someone the other day that right now even stupid people know they can sell their properties for decent prices. And, I completely agree with you, gentrification is much preferred to areas heavy on rentals. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Hattie Dizmond

     Its funny when I first got into loaning Hardmoney out your way.... it was all fix and flip to home owners.. then that slowed down and turn key became in vogue ,, now with the strong rebound in some markets buy and hold turn key is being pushed to the side lines and fix and flip to homeowners is back in full force..

    Having seen the effects of both activities fix and flip to homeowners is were its at vis a vi if you have to live in the area... to many rentals is an issue with values.. it tends to stagnate values and can acutally take a B class neighborhood and lower it to C class

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  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    11y

    Jay, I have to disagree that MLS is usually cheaper than Turn key unless you're working with a turn key company that puts huge mark ups on their properties and there are plenty of those. Here are some reasons you don't pay more if you work with a reputable turn key company:

    1. 1. Turn key companies have lower acquisition costs. They buy at auctions and tax sales that the individual doesn't have access to. The deals aren't on the MLS.
    2. 2. They have cost advantages. Turn key companies get substantial volume discounts on supplies, materials and mechanicals.
    3. 3. There are no holding costs like taxes, insurance, utilities and debt service while the property it being renovated and rented
    4. 4. There is no lease up fee for the initial tenant
    5. 5. There are no construction cost overruns or unpleasant surprises.

    I wrote a blog on this topic. You can find it at

    [REMOVED]

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  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    11y

    @Jeb Brilliant what are you objectives and why are you considering TX? If you have established very clear objectives, you'll know if the market is right for you. I find most new investors flounder around when trying to choose a market because they haven't clearly defined their objective and what is most important to them.

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  • Jeb Brilliant
    OP
    Rental Property Investor · Long Beach, CA · Member since 2015 · 623 posts · 155 votes
    11y

    @Mike D'Arrigo I'm really not sure besides the fact that I'd like to supplement my income in the long run and be able to prepare for retirement. By any chance can you recommend any articles about how to choose objectives? I don't actually know where to even star besides the basics. 

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  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Hey Jeb! Where in Long Beach do you live? I'm down there a good bit (I'm up in Venice) because I have some friends down there. Well, by a good bit, I mean I get down there. Not on a super regular basis, but it's fun nonetheless. 

    I'm the same as you. I never bought in LA because I've always been after the cash flow, so always bought out-of-state. Texas can have some nice deals. The cash flow there is lower than some of the good cash flow markets just because TX property taxes and insurance are high there, but it doesn't kill the deals and the properties and areas can be great there.

    You'll have a blast! (and warning- it's addicting)

    0Reply
  • Jeb Brilliant
    OP
    Rental Property Investor · Long Beach, CA · Member since 2015 · 623 posts · 155 votes
    11y

    Hi @Ali Boone, Thanks for responding. I'm usually up in Mar Vista once a week or every other week. 

    What areas do you like with higher cash flow? I'm not set on Dallas, I'm set on trying to get the most bang for my buck. 

    Thanks!

    0Reply
  • Joe Kim
    Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
    11y

    @Jeb Brilliant

    Texas is a great place for buy and hold.

    I bought three rental properties in the Houston area in 2013/2014

    Here are some pros and cons:

    #1 RV ratio is good rent to value.   Typically you can find rents at 1% to purchase price or higher ($1000 rent for $100,000 purchase price).  

    #2 Low unemployment - Texas is at around 4.6% vs. 5.4% national unemployment rate

    San Antonio - ridiculously low 3.8%, Houston - 4.4%

    #3 Good population growth - good jobs and low cost of living is attracting a lot of folks to move to Texas

    #4 Therefore low vacancy rates in Texas.

    Cons:

    #1 Relatively high real estate taxes especially compared to California

    #2 Some areas have higher insurance like in Houston (remember Katrina?)

    #3 Texas has been heating up lately with increasing home prices.  Lots of Hedge funds and internationals have bought up a lot of Texas properties.   Therefore, lots of competition gives an upward push for pricing.

    #4 Huge drop in oil prices if last longer 1-2 year, can start to affect unemployment rate and cause local drop in economy in certain cities (e.g. Houston)

    PM if you have any specific questions.  I also invested in Indianapolis and Memphis.   Now, I'm looking to San Antonio, Tx.

    1Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Oh nice! Mar Vista is right next door to me. I literally drive through it almost daily. For cash flow, it depends on what you are looking for. For example different markets are more advantageous for either SFRs or MFRs (some are good for both), some markets will be a lot more urban than others, and the price ranges vary between markets so your budget would come into play there. With that said, my favorite right now is Philly. It's on the lower end of prices, and it is more urban for sure, but the returns are great and good properties. I'd say for newer nicer properties, Indy is a good option. Houston is another one I like, but as with any of the Texas cities the cash flow will be lower than others because of the taxes and insurance. Still good deals though.

    Other markets that have good stuff are Trenton, Birmingham, Chicago, Atlanta (I'm not a fan of Atlanta anymore but there are deals there), Memphis...

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  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    11y

    @Joe Kim I agree with the majority of your points except the rent ratios. I wouldn't consider a 1% rent ratio very good, especially since, as you correctly pointed out, TX has high property taxes and insurance. You need much more than 1% rent ratios to offset the high operating costs. As a result, you can get far better CAP rates and COC returns in other markets. I like Indianapolis and Kansas City myself.

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  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    11y

    Hey @Jeb Brilliant welcome to the site! It's great to have you!

    Podcast Guest on Show #92
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  • Richard Dunlop
    Investor · Detroit, MI · Member since 2014 · 755 posts · 462 votes
    11y
    Originally posted by @Jeb Brilliant:

    Hi @Ali Boone, Thanks for responding. I'm usually up in Mar Vista once a week or every other week. 

    What areas do you like with higher cash flow? I'm not set on Dallas,

    *** I'm set on trying to get the most bang for my buck. 

    Thanks!

    Lived in Long Beach and Tustin (Orange County) area relocated to Michigan because I couldn't afford Long Beach and definitely couldn't afford a REAL BEACH community .

    *** The best bang for the buck is Detroit and Suburbs

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  • Gino Forte
    Investor · Miami Lakes, FL · Member since 2015 · 65 posts · 5 votes
    11y

    @Jeb Brilliant

    Greetings from Miami, FL and welcome to the BiggerPockets community! I highly recommend that you check out ALL of the BP podcasts because they contain a lot of valuable and insightful information that will help you expand your business. Have a good one!

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  • Dmitriy Fomichenko
    Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes
    11y

    Welcome to BP Family! @Jeb Brilliant

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  • Todd Keith
    Real Estate Investor · Dallas, TX · Member since 2011 · 529 posts · 48 votes
    11y

    Welcome to BP, Jeb. 

    There are still good deals to be had in Dallas. Most of those come from connecting with the sellers directly. There are also good wholesalers out there who can help you find those deals. 

    Have a great week, 

    Todd

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