Buy and hold investing in Lubbock

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Buy and hold investing in Lubbock

Jeff Gonzales
Engineer · Santa Fe, NM · Member since 2016 · 14 posts · 8 votes

Hi BP,

I'm a fairly new investor and am interested in purchasing my next property in Lubbock. I acquired my first buy-and-hold property in February of this year through a turnkey provider (shout out Memphis Invest!) and feel comfortable enough now to facilitate a deal on my own. I currently live in Santa Fe, NM and would like to purchase a property out of state because the cashflowing deals here are few and far between (not to mention out of my price range).

I've been doing quite a bit of research and have settled on Lubbock as the place I'd like to invest in next. I have several questions for the community, though, as I've never actually been to Lubbock. Before I dive into the questions, here are a few criteria I'd like to mention:

  • I'm interested primarily in single family homes in A class and B class neighborhoods
  • Possibly interested in multifamily properties in B or C class neighborhoods
  • Price range is < $200k

That said, here are some questions I have. 

  1. Is it realistic to expect +/- 1% monthly rents in A and B class neighborhoods? I've been looking at areas such as Quincy Park and Tech Terrace, and it seems like this is achievable. It seems like there is lots of inventory in the $150k range that could rent for $1400-$1500. (Also, please correct me if neither of those neighborhoods I mentioned about is considered class A or B).
  2. Texas Tech students obviously comprise many of the renters in Lubbock. I would prefer not to rent to students, but rather to rent to families. How realistic is this? For this reason, I've also been looking at properties within the Frenship isd district. From your experience, are there are a decent amount of families who rent?
  3. Any suggestions for realtors or property managers? I'm partial to those who have experience with out-of-state investors, but am open to suggestions. 
  4. Any suggestions for areas of town that meet my criteria? I've also been looking at the neighborhoods northwest/west of Texas Tech. I'm not opposed to buying on the outskirts of town, or even in surrounding towns (Idalou, Wolfforth, etc.).

Thanks for all your help! Hopefully I'll get to meet some of you in the near future - I'm planning my first visit to Lubbock to scout properties in July/August.

Jeff

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Matthew Ries
Investor · Lubbock, TX · Member since 2017 · 43 posts · 18 votes
9y

Just to give you some perspective on the city's growth.

2005/2006 - I came to school at TTU and west of Loop 289, and South of 82nd street were very undeveloped.  Milwaukee was just a newly constructed road with no businesses.

Fast forward to present day - the city is well developed out past 130th St.  Milwaukee is a N/S running street with ~50k cars/day of traffic and lined with businesses.  A new Loop 88 is to be built connecting US-84 -> 130th St -> to Hwy 179 (Wolfforth) -> Shallowater

Lubbock Cooper is the 2nd fastest growing school district in the state of Texas (this might be a stat from 2016)

There is new construction going up straight S of town from University all the way to Milwaukee.

You can find new builds ~$96-105/sqft, but the numbers are really thin given the higher taxes in Cooper and Frenship.

Tech Terrance is expensive, and rented almost entirely to students, but if you go just outside Tech Terrance you can find great prices and still fill them with students.  Student rentals can be great, I think they bring balance to our market.  You have 2 hospitals, multiple universities, a law school and a medical/health sciences school bringing in quality tenants.

I tend to try to stay west of University and south of 4th St. - I don't have any intention to slum lord east of I-27 or deal with some of the large duplex neighborhoods off of Erskine St - that's just my personal opinion.

Let me know if you ever need anything in town.  Good luck!

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  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 888 votes
    9y

    @Jeff Gonzales congrats on your purchase. Memphis is a great place to start. The city has so much to offer, and I love living & investing here!!!

    1Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Jeff Gonzales:

    Hi BP,

    I'm a fairly new investor and am interested in purchasing my next property in Lubbock. I acquired my first buy-and-hold property in February of this year through a turnkey provider (shout out Memphis Invest!) and feel comfortable enough now to facilitate a deal on my own. I currently live in Santa Fe, NM and would like to purchase a property out of state because the cashflowing deals here are few and far between (not to mention out of my price range).

    I've been doing quite a bit of research and have settled on Lubbock as the place I'd like to invest in next. I have several questions for the community, though, as I've never actually been to Lubbock. Before I dive into the questions, here are a few criteria I'd like to mention:

    • I'm interested primarily in single family homes in A class and B class neighborhoods
    • Possibly interested in multifamily properties in B or C class neighborhoods
    • Price range is < $200k

    That said, here are some questions I have. 

    1. Is it realistic to expect +/- 1% monthly rents in A and B class neighborhoods? I've been looking at areas such as Quincy Park and Tech Terrace, and it seems like this is achievable. It seems like there is lots of inventory in the $150k range that could rent for $1400-$1500. (Also, please correct me if neither of those neighborhoods I mentioned about is considered class A or B).
    2. Texas Tech students obviously comprise many of the renters in Lubbock. I would prefer not to rent to students, but rather to rent to families. How realistic is this? For this reason, I've also been looking at properties within the Frenship isd district. From your experience, are there are a decent amount of families who rent?
    3. Any suggestions for realtors or property managers? I'm partial to those who have experience with out-of-state investors, but am open to suggestions. 
    4. Any suggestions for areas of town that meet my criteria? I've also been looking at the neighborhoods northwest/west of Texas Tech. I'm not opposed to buying on the outskirts of town, or even in surrounding towns (Idalou, Wolfforth, etc.).

    Thanks for all your help! Hopefully I'll get to meet some of you in the near future - I'm planning my first visit to Lubbock to scout properties in July/August.

    Jeff

    Jeff - 

    That is awesome!  Reach out to Wade Mitchell of Mitchell Property Group over there and I'd be happy to make an introduction if you cannot get him.  He and his wife are awesome and super knowledgeable about that area.  He would be a definite positive resource for you buying in Lubbock.

    Best to you and love hearing you taking even more steps to build your portfolio! 

    Chris

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  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    9y

    From just online research, you seem on the right track. I am curious if they are just lacking supply or if students just eat up large chunks of demand. 

    0Reply
  • Jeff Gonzales
    OP
    Engineer · Santa Fe, NM · Member since 2016 · 14 posts · 8 votes
    9y

    @Chris Clothier, thanks for the recommendation! I'll reach out to him today.

    Also, I owe you and Memphis Invest a huge "thank you" for helping me score my first property. Your team was a dream to work with. 

    1Reply
  • Jeff Gonzales
    OP
    Engineer · Santa Fe, NM · Member since 2016 · 14 posts · 8 votes
    9y

    @Ronald Rohde I appreciate the feedback! The supply seems steady. Overall, Lubbock is what I would consider "boring", which is what I'd prefer. Although a houseful of students could change that really quickly haha. 

    0Reply
  • Corey Zant
    Real Estate Broker · Lubbock, TX · Member since 2016 · 30 posts · 20 votes
    9y

    @Jeff Gonzales 1% is certainly achievable. 2% is unlikely unless you find deals off market. I analyze daily and I find the better MLS deals go for 1-1.5%. I'm curious how you narrowed down to Quincy Park and Tech Terrace? (two majorly different neighborhoods). If you want to rent to families and not students, then you'll want to steer away from Tech Terrace. Tech Terrace is highly competitive anyway, especially if you're not going to rent to students.

    Are you looking for rent ready properties? Or deals to force appreciate?

    Good luck! I'd be happy to provide any info—send me a message if I can help answer any questions in particular. I've lived and operated in Lubbock for 10 years now—it's growing like crazy here and definitely a great place to invest!

    0Reply
  • John Claborn
    Lubbock, TX · Member since 2014 · 38 posts · 18 votes
    9y

    I've not heard much about Quincy Park being a great place for investors. It's a great neighborhood for young families though. We looked at Quincy Park when we moved our family. Appreciation is certainly high in SW Lubbock, but cash flow potential I doubt would be very high because of the price of the homes compared to the rents. I like to find properties with 1.5% rents or higher, so Quincy Park likely would not allow that.

    Wolfforth (Frenship) has higher property taxes than the city of Lubbock, but it is a very popular school district with more people moving out there, similar to South Lubbock and Cooper ISD. My realtor doesn't recommend Wolfforth, but certainly recommends SW Lubbock properties based on the appreciation. I like to have a Cash Flow aspect as well, so I've stayed out of SW Lubbock for now.

    Tech Terrace is the investor hot spot. Prices are inflated due to demand. It's where the college kids want, therefore it's where the investors want to be. So purchaser demand is extremely high pushing prices higher and higher. If you can find a deal in Tech Terrace, jump on it. 10's of other will if you do not.

    Lubbock is just a very hot market right now. I had my realtor bring me a home for $99k in central Lubbock on Friday morning at 10:00a, and by the time I could run numbers at 1:00p that day, there were 4 offers with an accepted contract. 

    Students are a great crowd, and a growing crowd in Lubbock. I rent to a law student right now, and it's great. So either direction is fine. I would advise getting set up with a realtor here locally and really dig through criteria. Quincy Park and Tech Terrance aren't preferable for me personally, but they might be for someone else. 

    Everyone's style is different. A guy that I meet with regularly to discuss real estate has a completely different model than me. He's all in on appreciation, while I'm more of a cash flow/appreciation type of investor. So I'm willing to wait a little longer. 

    Bottom line is, even in a hot market, is every piece of property is a great buy at the right price. If you're aiming at 1% rents then I think that's achievable in Lubbock almost anywhere you want to go though.

    Just my opinion from my personal experience.

    0Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @Jeff Gonzales:

    @Ronald Rohde I appreciate the feedback! The supply seems steady. Overall, Lubbock is what I would consider "boring", which is what I'd prefer. Although a houseful of students could change that really quickly haha. 

    Boring is good! Excitement tends to cost money. Good luck 

    0Reply
  • Jeff Gonzales
    OP
    Engineer · Santa Fe, NM · Member since 2016 · 14 posts · 8 votes
    9y

    @Corey Zant That's great to hear! I was getting concerned because many 3/2 properties in the $130k-$160k range seem to barely make the cut for 1%. 

    I used Quincy Park and Tech Terrace as examples because both of those areas have a "low" crime rating according to Trulia's crime indicator (which is one of the first indicators I looked at, next to school districts). Quincy Park caught my eye because it looks like there is a lot of new development happening in the area. "New homes" to me says "families and low maintenance costs." That's good to know about Tech Terrace, though - I probably should have inferred that since it's right across the street from the university, haha. 

    I would prefer rent-ready. Again, this will only be my second deal. As I get more advanced and continue to grow my network, I'd be more open to forced appreciation/BRRRR.

    I definitely have some questions for you! I'll send you a PM and a colleague request.

    Thanks for your response!

    0Reply
  • Jeff Gonzales
    OP
    Engineer · Santa Fe, NM · Member since 2016 · 14 posts · 8 votes
    9y

    @John Claborn When you're referring to SW Lubbock, are you referring to areas outside the 289 Loop (e.g., Quincy Park, Regal Park) or inside (e.g., Stubbs-Stewart, Caprock)? I am partial to cashflow myself and am not too concerned with appreciation. 

    Thanks for the tip about property taxes in Wolfforth, though. Texas taxes are already crazy high by my standards, so I'd like to keep those as low as possible.

    The only reason I am hesitant to rent to students is the potential for damage. This may be an unrealistic fear - I know when I was a student, I treated my apartments very well. I appreciate your insight on the topic though. A studious grad/JD student would be perfect though. 

    Do you manage your own units? If not, do you have a recommended property manager that you use? From what I've researched, it seems like 806 Property Management does a great job.

    0Reply
  • Matt M.
    Dallas, TX · Member since 2017 · 16 posts · 7 votes
    9y
    one thing to note is that Texas Tech is working actively to increase enrollment. trying to get to 40k by 2020 which they will do. making it one of the largest institutions in the US. I think Tech terrace is a great neighborhood.
    0Reply
  • Matt Van Winkle
    Investor · San Antonio, TX · Member since 2017 · 9 posts · 5 votes
    9y

    Being an alumni, and having a kiddo only 3 years away from college (who is thinking very strongly about going to Tech), I too am looking at buying 1 - 3 properties in Lubbock over the next 2 or 3 years, so I ma hijacking this thread :).  I need some help in a few areas.

    Management:  I see at least one Property Management recommendation above.  My plan there is to send a mini-RFP with some sample properties I've been watching and get the perspective PMs to give me their thoughts on good purchase price, upfront capital repairs needed, rent etc.  It will also allow me to ask them all a series of questions about the mechanics of how they work - fees, expectations, separations of duties, etc.  However, if you active investors in the area are firmly convinced I should not pass Go and move directly to a specific PM, I'd love to hear the recommendations.

    Financing: I'm fine working out financing here in San Antonio, but I thought I'd see if anyone working in the Lubbock area has strong feelings towards a local bank that is active in the area for investors. I have plenty of capital - actually considering all cash on a couple of houses - so, I don't think I'll have to go HML at this time as I should be able to put down enough to satisfy a conventional. Anyway, I'm open to recommendations of lenders in the Lubbock area.

    Agents:  I have a couple of potential leads here, but I'm open to suggestions/recommendations too.  I'd especially love to know any that work with out of town buyers (as I'm sure there are many with all the parents that pickup houses for their students).  I also know that some of the PMs are agents, so digging in to that is slated to be part of the RFP.

    I appreciate the comments that the 2% rule isn't working out for some.  I've run several properties through some analysis and tend to end up about 1 to 1.2% every time.  As I continue to do my homework, this was bugging me a bit.  I know it's not a hard fast rule, but knowing that the experienced folks are seeing similar results is giving me some confidence in my own practice analysis.

    All in all, I am not in a hurry, but do intend to get a portfolio footprint in Lubbock over the next few years.  1-2 general rent houses and 1 that I may be more flexible on the cashflow on to get an ideal location for my own children to use.  (The one that is 3 years away is the oldest of 3, and I'm betting at least 2 of them could end up there)  Thanks in advance to anyone that has advice to offer.

    1Reply
  • Chad Coburn
    Vendor · Fort Worth, TX · Member since 2017 · 7 posts · 5 votes
    9y

    Good morning all

    I spent a year at Texas Tech before transferring to the University of Arkansas. If you are looking into rentals for college students I highly suggest Tech Terrace. This area has the trolley system that allows students to commute to the University rather easily. The area also has a nice little grocery store, coffee house, and several little eateries and is close to nightlife entertainment (which is on Broadway).

    The bread and butter for rentals when I was there (3 years ago) was between 19th and 35th and University to Canton.

    I lived with 2 roommates on 2621 28th St which was a 3 bed 2 bath under 900 sqft. We paid $1200 a month and our own utilities.

    I hope this gives some insight into the rental market in Lubbock, at least for student rentals that is.

    If you have any other questions about the area I would be more than happy to answer as best I can.

    Cheers

    1Reply
  • Matt Van Winkle
    Investor · San Antonio, TX · Member since 2017 · 9 posts · 5 votes
    9y

    Thanks @Chad Coburn.  Tech Terrace is where I started looking because of my own time there years ago (and occasional trips back for games and such).  Sadly, it is now pretty over priced and if a deal comes up, you have to move in hours to get it.  Fortunately, there are many other areas that I'm finding good options in.  The medical center area, pockets of South Overton and others.  There are actually some interesting deals popping up a ways out from campus.  In fact, we just submitted an offer on a place outside the loop that could be a college rental, but could just as easily be a family home.  We'll see, but the price was too good to pass up for its area and it cash flows pretty well.  

    Compared to San Antonio (where I live and was going to start investing), the Lubbock market is much calmer, and overall, more fairly priced.  It's not the same sleepy town it was 20 years ago with respect to home prices though - at least in key areas.  There are plenty of active investors in the city (and many more like me elsewhere with boots on the ground).  If nothing else, it's been a fun process to learn.  I'd definitely recommend Lubbock as a place for investors to check out - and that's not just because I have a soft spot in my heart for the city :)

    1Reply
  • Matthew Ries
    Investor · Lubbock, TX · Member since 2017 · 43 posts · 18 votes
    9y

    Just to give you some perspective on the city's growth.

    2005/2006 - I came to school at TTU and west of Loop 289, and South of 82nd street were very undeveloped.  Milwaukee was just a newly constructed road with no businesses.

    Fast forward to present day - the city is well developed out past 130th St.  Milwaukee is a N/S running street with ~50k cars/day of traffic and lined with businesses.  A new Loop 88 is to be built connecting US-84 -> 130th St -> to Hwy 179 (Wolfforth) -> Shallowater

    Lubbock Cooper is the 2nd fastest growing school district in the state of Texas (this might be a stat from 2016)

    There is new construction going up straight S of town from University all the way to Milwaukee.

    You can find new builds ~$96-105/sqft, but the numbers are really thin given the higher taxes in Cooper and Frenship.

    Tech Terrance is expensive, and rented almost entirely to students, but if you go just outside Tech Terrance you can find great prices and still fill them with students.  Student rentals can be great, I think they bring balance to our market.  You have 2 hospitals, multiple universities, a law school and a medical/health sciences school bringing in quality tenants.

    I tend to try to stay west of University and south of 4th St. - I don't have any intention to slum lord east of I-27 or deal with some of the large duplex neighborhoods off of Erskine St - that's just my personal opinion.

    Let me know if you ever need anything in town.  Good luck!

    2Reply
  • Matthew Ries
    Investor · Lubbock, TX · Member since 2017 · 43 posts · 18 votes
    9y

    I forgot to mention - everything in Lubbock is pretty easy to get to within 10-15 minutes.  Don't limit yourself to just inside the loop.  I use to commute to campus from 82nd/Milwaukee because my rent was cheaper than living within walking distance to campus.  My thought was - if I was going to have to drive and park, living at 50th St was not much different than being out at 82nd St.

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  • Matt Van Winkle
    Investor · San Antonio, TX · Member since 2017 · 9 posts · 5 votes
    9y

    indeed @Matthew Ries - my wife and I often lament how nice it was to get around up there compared to South Texas where the roads wind all over and such.  And good logic.  We have an accepted offer on a house out by Shadow Hills golf course.  It will likely appeal to families, but it could very easily be a student rental too.  Someone can just hop on 4th and zip on in to campus.

    1Reply
  • Matthew Ries
    Investor · Lubbock, TX · Member since 2017 · 43 posts · 18 votes
    9y
    Originally posted by @Matt Van Winkle:

    indeed @Matthew Ries - my wife and I often lament how nice it was to get around up there compared to South Texas where the roads wind all over and such.  And good logic.  We have an accepted offer on a house out by Shadow Hills golf course.  It will likely appeal to families, but it could very easily be a student rental too.  Someone can just hop on 4th and zip on in to campus.

     Exactly.  That is a nice neighborhood - great location to LCU/TTU/SPC/and medical.  I have a friend who bought a rental in the same area.   Good luck! 

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  • Matt Van Winkle
    Investor · San Antonio, TX · Member since 2017 · 9 posts · 5 votes
    9y

    So - Just because I brought it up, I thought I'd post that the inspection came back and nothing was too scary.  A few things to go fix, but over all, nothing major and nothing hidden.  We were scared of the later because it's priced way below market.  We are going up for the game this weekend, so we get to see it while we are there.  Fingers crossed - this could turn out to be a great deal...

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  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y

    @Jeff Gonzales Best of luck to you on your search my friend!!!

    0Reply
  • Jared Robert Steele
    Real Estate Agent · Arlington, VA · Member since 2017 · 11 posts · 7 votes
    9y

    Hi all,

    Just graduated from Texas Tech a few weeks ago and here's something to consider;

    1) Student housing complexes are HOT. Capstone cottages, 1819, and many others are flying up - this threatens residential investors. This is essentially what Blackstone has done throughout the country.

    This is concerning as you will find places East of University with WAY too much inventory... it makes me wonder how long it will be until Tech Terrace will be at mercy to the fully furnished, cheaper rent, all bills paid student housing options. If you haven't seen some of them, just check them out - some are like a luxury resort. 

    2) While Tech Terrace is hot, consider other parts as well. I stayed at a humble spot for my senior year - near 40th & Ave Q. It was a rougher spot, but the owner bought it for $50K, and was getting about $350/room (3br). That's over 2%. Not a war zone by any means, just very blue collar spot (I would recommend not to go East of Ave. Q though).

    3) Many students do rent from places south of 50th. It's nicer, quieter neighborhoods. Many grad students prefer this. You will be able to attract student + non-student renters this method. Not many non-students want to live on a street where frat party pre-games are held weekly.

    Best of luck and let us know how we can help!

    0Reply
  • Ryan Todd
    Rental Property Investor · Lubbock, TX · Member since 2016 · 24 posts · 8 votes
    9y

    I am buying a handful a year right now in Lubbock and have had zero issue getting them rented to students or families. I understand the student housing complexes, but enrollment at TTU is growing at 3% and won't slow down anytime soon. 

    1Reply
  • Julie Cordero
    Lubbock · Member since 2018 · 5 posts · 0 votes
    8y

    Looking to purchase 3-5 single family rental properties in Lubbock. These would be our first (husband and me). If you have just a couple of hours to make a decision as to whether or not to purchase a house, what numbers do you run to make a fast assessment/decision?

    0Reply
  • Account Closed
    Member since 2018 · 3 posts · 0 votes
    8y

    @Julie Cordero I own quite a few houses in Lubbock and they stay occupied 98% of a given year. When I look into buying new houses, I drive a 2-3 block radius and see how much rent is going for. I then assume I can get a bit more ($100) if it's larger, or a bit less ($100) if it's smaller. I put in an offer based on that

    0Reply
  • Julie Cordero
    Lubbock · Member since 2018 · 5 posts · 0 votes
    8y

    Thanks for the info. It's appreciated.

    0Reply
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