How is the Killeen TX rental market?
Austin, TX · Member since 2016 · 42 posts · 13 votes
My real estate agent has sent me several duplex listings in Killeen varying from 30-85K. I don't have much for a down payment which makes these well within my reach. I only wonder if Killeen is a good place to start.
I am from the Austin area. If anyone from the area has knowledge of Killeen rentals can I directly contact you over phone or PM or even buy you lunch to talk about the rental market there?
I don't mean to sound rude but investors from outside of our market are far from experts on it. Killeen is not a good place for building long-term wealth? I know a couple of very wealthy real estate investors in Killeen. One guy owns over 30 income properties and another one owns over 20. I own 9 (8 income) properties and I do alright. :) All of my bills are paid monthly with plenty left over. Our market has risks but every market has risks. If the influx of high tech jobs left Austin tomorrow I'd think that market would see different appreciation in the future. Our market is heavily influenced by Fort Hood and if every soldier deployed real estate investors here will be in serious trouble. If that were to happen, the U.S. is in serious trouble and building wealth in real estate will actually be my lowest concern. I don't comment on real estate outside of my expertise because I know real estate is market dependent. It's more than just a numbers game. If you just follow numbers you'll probably get torched in this market. I firmly believe you need to know a real estate market down to the small details. You need to know tenant quality, tenant tastes and rental demand down to the zip code level. After that, you need to know it down to the subdivision level if you really want to do well. Valuation is different on a micro-scale...demand is different...builder quality is different...the list goes on and on. You will never see me comment on another market other than this one because I'm the first to admit I'm not an expert on it. No comments on Houston, Dallas or Austin from me because I'm an expert in Killeen and it's surrounding cities. @Brian Adams is speaking the truth. You'll be wise to look his way for advice on Killeen and its surrounding cities. There is good business for a real estate investor here if you find the right expert to mentor you. Happy investing and good luck to you all.
I keep hearing about more and more activity in that area. LIsting Spark is going to do business there, so that says something.
Some of this is true above, but not quite all of it. Firstly, why wouldn't investing for cash flow be a good long term wealth building strategy. Huh?
Definitely don't invest for appreciation in our market. I don't recommend doing that in any market. Recently, local home values have paced the inflation rate. But there are a lot of cash flow opportunities for buy and holders.
Duplexes in your price range are PROBABLY not great finds. I would target duplexes that rent for at least $750/unit, $1500 gross. These are buildings a quality property manager would take on. Most on the MLS at the moment that meet these criteria are asking between $140,000 and $160,000, so anything you can find off market for less is a deal, and likely 8% cap +.
The danger of deployments is almost entirely ameliorated by the Army's deployment timeline. 1CD has three brigades, and the post has several other large units like 3CR and III Corps HQ. The Army staggers these units' deployments, so that there is usually only one BDE gone at a time. That effect is already priced into the market. In the event of a war, more units would absolutely deploy - but units and training areas would also be expanded. There's a reason the area's population has grown 60% since the War on Terror began just 15 years ago.
That said, do plan on higher turnover due to PCS stations often lasting a mere 3 - 5 years, deployments and the like. And yes, while we certainly respect their service and sacrifice, military members can be just as bad tenants than any other tenant (said as a former Army CPT). I plan on but consistently beat a 10% vacancy rate with my fourplex. Just be very careful to buy the right kinds of buildings (e.g. no 2 bedroom SFHs, EVER).
Fourplexes are getting a lot of interest right now. I know many investors who BRRRR SFHs very successfully. Flipping in the area mostly sucks because of high homeowner equity, the VA loan's 100% financing, and stiff builder competition. I've had many inquiries about apartments but so far have been unsuccessful pinning down a nice C-B class building for the folks I've spoken with, unfortunately. They are building more apartments in Harker Heights.
And actually, I think targeting Killeen for a 1st investment is a relatively safe option, depending on your acquisition and marketing strategy. Price points are low, competition is not as fierce as Austin/San Antonio/anywhere else in Texas, and the rental market is strong (2/3 of residents are renters vs. 1/3 nationally). Getting a simple 8% cap rate is achievable for a newbie investor - not going to make you rich quick but a great way to get your feet wet.
I also highly recommend "house hacking" for locals willing to live in a multi-family with owner occupant financing.
I don't mean to sound rude but investors from outside of our market are far from experts on it. Killeen is not a good place for building long-term wealth? I know a couple of very wealthy real estate investors in Killeen. One guy owns over 30 income properties and another one owns over 20. I own 9 (8 income) properties and I do alright. :) All of my bills are paid monthly with plenty left over. Our market has risks but every market has risks. If the influx of high tech jobs left Austin tomorrow I'd think that market would see different appreciation in the future. Our market is heavily influenced by Fort Hood and if every soldier deployed real estate investors here will be in serious trouble. If that were to happen, the U.S. is in serious trouble and building wealth in real estate will actually be my lowest concern. I don't comment on real estate outside of my expertise because I know real estate is market dependent. It's more than just a numbers game. If you just follow numbers you'll probably get torched in this market. I firmly believe you need to know a real estate market down to the small details. You need to know tenant quality, tenant tastes and rental demand down to the zip code level. After that, you need to know it down to the subdivision level if you really want to do well. Valuation is different on a micro-scale...demand is different...builder quality is different...the list goes on and on. You will never see me comment on another market other than this one because I'm the first to admit I'm not an expert on it. No comments on Houston, Dallas or Austin from me because I'm an expert in Killeen and it's surrounding cities. @Brian Adams is speaking the truth. You'll be wise to look his way for advice on Killeen and its surrounding cities. There is good business for a real estate investor here if you find the right expert to mentor you. Happy investing and good luck to you all.
@Charlie Nghiem the population of Texas has doubled in the past 40 years. 90% of that growth has happened within 50 miles of I-35. Killeen is in that threshold. Nothing is every guaranteed but Texas is a very fotunate market. If you find a property where your numbers work here then use it. There have been many a successful investor that has started out with a smaller property value and gone on to make it big. I like how you want to get some local advice. Stick to the numbers that make a successful transaction and if the numbers work then it will work out for you. Good luck!
This is social media for opinions. You take opinions and advice for what they are and considering the source. I stand behind my opinion 100%. I am knowledgeable on Killeen, but hardly an expert. I would invest in Killeen if there was a great deal or two. I have looked at deals in Killeen. Would I advise anyone to make that their primary market...no. In my opinion it is a sub market for diversification or cherry picking deals only. @Account Closed down played a large deployment, but large deployments can and do happen, oil fields can and do crash with the oil market, automotive manufacturing can and does crash with changes in demand. However, unlike automotive manufacturing, or oil fields, soldiers are meant to deploy. Soldiers deploy more often than the Permian Basin falls or Detroit plunges. I also do not invest in Midland/Odessa or Detroit for the same reasons I would not heavily invest in Killeen, they are markets that are dependent on one industry.
As a veteran I also understand that a soldier is not just a soldier. Soldiers are people....people that happen to be generally low income, young, and transient by nature. If I said what are the top five qualities I am looking for in a tenant base, the words low income, young, and transient would be far from making that list. I also would not develop a wealth building strategy around that tenant base.
Neither I nor Kevin said you were wrong about most of those items. It is a 1 industry area and I understand some investors aren't interested in that kind of market. Diversification is always good. It is a higher turnover area as mentioned. Low income - maybe, though I think it closely matches the cost of living for the area. Certainly budget for all of these, as well as the high transaction costs for sellers when creating an exit plan.
The deployment concern is, in my opinion, majorly overwraught because of how the Army currently works in the current military operational tempo, and what an actual large scale military involvement would look like (it would be a tremendous boon for the area as new units were stood up, new soldiers posting here from basic, National Guard, and defense contractors flooded in, the Army Reserve activated and sent to Hood, etc.).
And while a 1 industry town at the moment, it is a large city, the largest between Austin and Dallas, and still growing rapidly. Major recent infrastructure has been completed including the new VA hospital (for which reason many military retirees stay in the area), and Highway 190 (soon to become Interstate 14, a much needed highway connecting the Fort Hood/Waco area to Huntsville/College Station) http://www.kxxv.com/story/30695293/us-highway-190-...
These improvements should improve the area's opportunities to diversify and attract new business with the astonishingly low cost, underemployed and highly qualified labor pool in the area (a lot of college grad Army spouses looking for jobs). There is also the new and expanding Texas A&M Central Texas campus.
There are reasons that many investors have, no doubt, crossed off the Fort Hood market, and that is fine. It has it's pitfalls and an excellent recommendation to be wary of those. I can just relay to the OP that A) he'll probably want better duplexes than what $80k can buy, even in our area, and B) yes, people successfully cash flow in our area.
Killeen may not be the perfect market, but as an agent, I see and hear from many investors who are asking about our area, driven away from all the other Texas markets where deals and numbers simply aren't there except for the established guys whose marketing machines are running full tilt. I think Killeen would be a fine market, especially for a smaller guy who is looking for an affordable price entry point and an introduction to buy-and-hold real estate.
There are many factors to consider in our area. Being a military wife myself, my husband is about to be on his 2nd deployment from Hood. In 8 years. And hes in a MOS (job) that needs to expand. Also, as far as them being young, we also need to remember that, they can get kicked out of the Army for having bad behaviors and not paying bills. I know 2 that have in the last year.
With that said, yes rentals. We have looked into buying a house but it doesn't seem logical when we dont know what the future holds. We live in a "hurry up and wait" world. With the numbers you are talking though, I would highly suggest you talk to one of the agents on here and get locations on that. This is a tricky city. One side is great, the other side not so much.
Finally, we have the #1 cable show not even an hour from us. That might not be as big of a deal to some but Central Texas growth has gone up almost 15% since Fixer Upper became popular. Do I see Killeen ever being a "home" to many forever? Not really. Harker Heights over to Belton/Temple. Yes.
Here are my last words on this topic. I'm not going to beg or twist anyone's arm to invest in Killeen. If Killeen's population growth, low unemployment and low cost of living doesn't convince investors to buy here, I'm sure there is nothing I can say that will. If investors don't come here, there will be less competition and more property for me in the end and I'm completely fine with that. All I will say is I'm doing very well here. Now concerning market risk of a deployment, natural disaster, collapse of the currency or running out of oil or anything. There are no risk free investments anywhere on earth. If investors want risk-free, I'd ask them to explore opening a savings account at a local bank. Even then, there is inflation risk. If anyone chooses to invest here, I reiterate. Please find yourself a real estate expert to help you navigate our market. I don't want anyone losing their life savings. Like any market, it has its pitfalls and more than one investor has gone broke on bad investments. This advice applies to any market in any city. Good luck to you all.
Hi Charlie,
I own a duplex in Killeen and can give you my thoughts about investing here. Message me and we can talk in more detail about the area. I am not an agent or broker...just an individual who is still a newbie with real estate investing, and Killeen is where I have 1 of my 2 real estate investments. Good luck with your search.
Also, Killeen is an hour outside of Austin city center, and is going to pale in comparison to Austin in terms of appreciation. Killeen may work for cash flow, but not for long term wealth building.
I understand that this area doesn't have an appreciation, so I focus on the cash flow only. Only worry is if the property depreciates! In you opinion, if you only had 20K, would you try to save more to invest in a more "stable" market (Austin, San Antonio, Dallas...), or would you invest in markets that were more "risky" to get started immediately.
Killeen is a military town. Your core tenant base is going to be younger, less mature, and possibly more inconsistent. The main positive about killeen is that soldiers have secure jobs and income. The main downside is that a massive deployment may leave you without a tenant base for months or even up to a year. There are special rules for soldiers that allows them to break leases. Areas around military bases can have higher crime than similar cities. These areas often do not appreciate as much as other areas due to the crime and the nature of a military base. This is why property prices are lower than other areas of Texas.
If you owned 20 rentals in Killeen and most of the residing units get deployed then you will probably have some major issues. Diversifying with one or two properties there is probably ok if you have a supporting portfolio. Targeting Killeen as your first investment area or core investment area is probably a high risk low reward strategy. Cheap is rarely inexpensive.
I didn't realize, or understand why there would be higher than average crime in a military town, could you elaborate?
I understand the risks with deployment, and adjust my numbers for 2-3 months vacancy per year. I hope I wouldn't run into a situation where there is no one to rent to for a full year.
Some of this is true above, but not quite all of it. Firstly, why wouldn't investing for cash flow be a good long term wealth building strategy. Huh?
Definitely don't invest for appreciation in our market. I don't recommend doing that in any market. Recently, local home values have paced the inflation rate. But there are a lot of cash flow opportunities for buy and holders.
Duplexes in your price range are PROBABLY not great finds. I would target duplexes that rent for at least $750/unit, $1500 gross. These are buildings a quality property manager would take on. Most on the MLS at the moment that meet these criteria are asking between $140,000 and $160,000, so anything you can find off market for less is a deal, and likely 8% cap +.
The danger of deployments is almost entirely ameliorated by the Army's deployment timeline. 1CD has three brigades, and the post has several other large units like 3CR and III Corps HQ. The Army staggers these units' deployments, so that there is usually only one BDE gone at a time. That effect is already priced into the market. In the event of a war, more units would absolutely deploy - but units and training areas would also be expanded. There's a reason the area's population has grown 60% since the War on Terror began just 15 years ago.
That said, do plan on higher turnover due to PCS stations often lasting a mere 3 - 5 years, deployments and the like. And yes, while we certainly respect their service and sacrifice, military members can be just as bad tenants than any other tenant (said as a former Army CPT). I plan on but consistently beat a 10% vacancy rate with my fourplex. Just be very careful to buy the right kinds of buildings (e.g. no 2 bedroom SFHs, EVER).
Fourplexes are getting a lot of interest right now. I know many investors who BRRRR SFHs very successfully. Flipping in the area mostly sucks because of high homeowner equity, the VA loan's 100% financing, and stiff builder competition. I've had many inquiries about apartments but so far have been unsuccessful pinning down a nice C-B class building for the folks I've spoken with, unfortunately. They are building more apartments in Harker Heights.
And actually, I think targeting Killeen for a 1st investment is a relatively safe option, depending on your acquisition and marketing strategy. Price points are low, competition is not as fierce as Austin/San Antonio/anywhere else in Texas, and the rental market is strong (2/3 of residents are renters vs. 1/3 nationally). Getting a simple 8% cap rate is achievable for a newbie investor - not going to make you rich quick but a great way to get your feet wet.
I also highly recommend "house hacking" for locals willing to live in a multi-family with owner occupant financing.
Thanks for your reply, it was very informative and definitely help settle some of my fears about starting out in this area.
The duplex I am most interested is 80K, it's at a 9% cap, bringing in (supposedly) $1250/mo.
I am curious about your fourplex as to keeping your vacancy rate down under 10%. Do you use property management or self manage? What are you doing to keep that rate down?
You mentioned a high turnover rate because PCS stations last 3-5 years. Are you saying that your average tenant lease last 3-5 years? Because that is great IMO.
I would advise against the majority of multifamilies at the price of 80k. The population you would be dealing with at that price are larger headache than you want to deal with no matter your level of experience. Unless you just have a really great deal where you are getting a place well below market value I would not consider. For duplexes your ranges should be +130-150 and the quads I can only guess are +180-230 for Killeen. Look at JWC.com or google Linnemann (top property managers in the area) for an idea and then strategize position geographically. My strategy was as close as I could find near both the Killeen and harder heights city line away from new construction.
I love the back-and-forth in this post! Let me add more fodder:
First off, I live in Austin like you, so for specific market details, listen to the locals first. I can tell you that I've done a few hard money loans to other investors in Killeen recently, and they've never had problems paying me back, so use that as an extra data point.
Personally, I'm both too lazy and not organized enough to do deals more than an hour away (unless they're truly phenomenal), and I tend to discourage new investors from doing the same, although if it's truly your only entrance avenue I would say at worst it'll be a cheap education. All of us smug investors have made many many mistakes along the way, the successful ones just learn from them. Keep in mind that this is coming from a guy who was not investing in RE and only owned his primary residence in the crash in 2006-7ish.
You say you can only afford the bombed-out, low-end properties in Killeen, but keep in mind that unless you move there, you'll likely have to put 25% down on the property. If you simply move to your investment property in Austin, you could get away with a lot less and a slightly better rate to boot. Additionally, I see you own your primary residence, and I'm assuming you have for a while and it's in Austin, so you probably have quite a bit of equity that you could access either through a HELOC or a cash-out refi; have you looked at those options?
Oh, let me add to my other comments that back when I was getting deployed in 2004-05, I kept my lease because I would have lost my BAH if I had terminated it, so they basically got free rent without any tenant to tear the place apart. There are a lot of factors involved in that one that I won't get into (hint: look through the DoD sites and military specific BP threads), but just be aware that a deployment doesn't always mean a lease that is terminated early.
I know folks who have bought duplexes for about $100k in our area, gross rents $1200-$1300, and have been happy enough with it to do it again. However the particular person I am thinking of is local and manages it himself.
For an out of area investor, I wouldn't touch a duplex that rents for less than $750/side. Not $700. Not $725. $750.
There are many fourplexes on the market - about 40 - however only 4-5 of those are properties I would personally want to own at ANY price (unless you gave it to me, in which case I would immediately try to sell it to someone else). Definitely be very particular if looking at fourplexes. The couple areas that work (again, $550/2 bed, $650/3bed) should gross about $2400/mo and actually keep rented pretty well. There are many fourplexes, all with the same comparable rent, so just a few nice touches will make your building stand out. It won't improve your rent, but renters will rent yours before the other ones, keeping your vacancy modest. I replaced my floors with tile and added a few trees to an otherwise very dull front yard for some character.
I would say the average tenant lease is probably about 3 years - a little less for duplex and fourplex tenants. PCS assignments are usually 3-5 years, but tenants do terminate their lease maybe half the time when they are deployed, and sometimes elect to move to different rental housing or purchase a home in the area. Those choices would obviously increase your turnover and shorten your average lease duration.
The nature of the multi-family housing in particular is generally not someplace someone is looking to stay long term (though I have one tenant still original to when I bought my building in summer 2012), especially when there is ample, affordable SFH rentals on the market as well. You might have a 2-3 months search between tenants, who even if they stay only an average of 2.5 years comes out to a 9% vacancy rate.
I don't see vacancies of 12 months unless there is a problem with the property or it's overpriced. Again, it is a large town where 2/3rd of the inhabitants are renters. If your building is in good shape, good location and priced right, you shouldn't have major periods of vacancy.
I think that @Brian Adams @Account Closed all make great points. I also think that their working in the area might give them some extra credibility as well. I grew up in Harker Heights and my family has always managed a small portfolio of real estate investments in the area (Cove, Killeen, Heights, and Belton). I currently work with investors in Austin and I always like to recommend the Killeen area as a good opportunity to start investing at some lower price points.
HOWEVER, to anyone looking to branch out into the area, I would recommend reaching out to someone who works in the local area; possibly one of the people I've tagged above. The Killeen market can be great for investments, but a lot of the "great" looking deals are in parts of town that I couldn't recommend investing in. Killeen is an incredibly unique market where you'll need some local insight and someone who knows the area, but with that insight, you can surely make sound and profitable investments.
Thanks @Account Closed for your kind words. I'm not here to make anyone look foolish. I'm doing very well here and I think it is completely inaccurate to say you can't get wealthy here in real estate. I know two multi-millionaire investors myself. I'm close friends with one of them. In my case, I'm essentially retired at 43. I maintain my real estate license mainly for MLS access and I still actively represent a couple of high net worth clients with investor real estate transactions. My last parting shot to all aspiring real estate investors. I've run across some good advice on message boards but be warned, I've run across some bad advice as well. One guy claimed to own over 100 units in Killeen. He was on message boards giving all kinds of advice. I trust but verify so I ran his name in the Bell County Tax Appraisal District and the guy owned one unit...one property. Real estate is public record folks. Please do some due diligence and make sure your expert is who they say they are.