I am a first time investor and CPA from California working to start my investing journey by investing in multi-family properties. I am considering out of state investing opportunities, and would like to explore investing opportunities in Texas. My initial strategy is to house-hack with an FHA loan on a duplex/triplex and scale up from there on my second and third properties. What markets in Texas (Austin, Houston, Dallas, San Antonio) would you recommend are the best for multi-family homes (2-4 units) in the $250- 600K range? Thank you in advance for your advice.
@Bryan L. Ramirez Hey Brian! I'm also from Riverside and moved to Dallas to specifically house hack, it gives investors the opportunity to qualify for as low as 3% conventional for first time homebuyers or 3.5% for FHA, as opposed to doing 20% down for a single family or 25% down for multifamily here in Texas. I visited Houston, Dallas, and Austin before making my way to Dallas, it has strong appreciation and some cash flow in certain markets. You'll find some great multifamilies here for high $300k to $500k in Dallas. There's still opportunity, but it is very competitive, so act fast when you see a property that meets your criteria come up. Off market is also a great option as markets are really hot all over Texas.
@Jorge Gonzalez thank you for taking the time to respond to my post and for your advice! Yes, I’ll definitely act fast and will make the best and smart move upon finding the opportunity that fits my criteria. Im willing to move quick start small and scale up to make it happen. I’m currently exploring those markets.. Dallas, Austin, and Houston… but am open to other booming markets in Texas. Despite the competition it appears there is more opportunity than in California. I’d like to connect and add you to my network. Perhaps I can also be a resource to you in the future. Thanks!
Hi @Bryan L. Ramirez . I'm in the DFW area and find the rental market to be very good here. House hacking is awesome and allows you to leverage very well but be cautious when doing the triplex, that can be run into problems with FHA due to the sustainability test - essentially you rental units (at 75% of rental rate) need to meet or exceed your entire monthly debt obligation. Since appraisals are bottle necked right now, this rule can kill a deal late in the process if the appraiser lists your expected rent lower than you planned. You have more flexibility on a quad because of the extra unit.
@Trevor Reed thank you for your advice and for taking the time to reply. Also thank you for the heads up on the potential problem with the triplex and FHA. I'll definitely be cautious on that. It sounds that the Dallas market is great and full of opportunities so I'll definitely explore them. I'd be happy to connect so let's connect! Likewise I'd like to be a resource to you in the future. Thanks!
So are you moving to Texas? FHA is for owner occupied properties only.
Otherwise you'll probably need to look at conventional.
Just be aware too that the podcasts make it sound easy, but the strategy is quite difficult right now. Due to huge runup in sales prices, versus slower rent grown, most multi 2-3-4s we see don't cashflow, unless you put significant money down. Not impossible to find, but difficult to say the least.
For example not unusual in DFW market at least to see $400,000 duplex with $1000/month each side in rent. You can probably use your modeling spreadsheets to see what down payment you will need to make your PITI and reserves for vacancy and capex.
Lots and lots and lots of cash offers for property like that, so seems to be plenty of people with cash they need to park.
The DFW real estate market has exploded over the last 5-7 years. Due to a lack of inventory and low interest rates our market is very competitive. Like most major U.S. markets prices have continued to rise. Everything moves fast. If you've done a few internet searches you have probably realized that DFW does not have a lot of small multifamily properties. Those that are available are generally older and often located on the Fort Worth side of town. Just a heads up one of my clients recently lost a duplex to an all-cash offer that came in $52K over asking.
If you have the option to work from home it won't really matter. However, if you have to commute buy near the office. Traffic here is terrible. Not Los Angeles bad. Just an unnecessary layer of stress when you relocate to a new city. If you prefer North Dallas or the North Dallas suburbs you will find it easier to house hack a single-family and rent by the room. Hope this helps.
@Bruce Lynn thank you for your input. Yes I plan to move to Texas and to live in the property. I appreciate you bringing up the challenges of obtaining properties in the area, but I’ll strive my best to make it work. Thank you for taking the time to provide me input and will take your information and keep that awareness up in my search for properties in Texas. Thanks.
@Rob Lee thank you for taking the time to provide me the advice. It’s not always greener on the other side and am aware this will be a difficult process, but I’m willing to do what it takes to make it work. I’ll explore my options and will take your advice in consideration as I search for properties in Texas in that area. It’s crazy competitive but definitely more potential to start, so I’ll do my best. Thank you for your advice.
@Bryan L. Ramirez hi - one thing I always have to pitch in is to make sure people are aware of higher property taxes in Texas compared to other states. Not sure what it compares to what you are used to in CA, but the trade off for no state personal income tax is the higher taxes on property. It can run $400-500 per month for the size you are looking at, so important to enter into numbers when thinking about Texas. As someone coming from CA, it’s probably still a savings for you….
Hey @Bryan L. Ramirez ! Welcome to Texas and I think you have a great strategy!
Because of how competitive the market is, I would highly recommend going for a conventional loan because sellers will be much more likely to accept your offer. But what you are wanting to do is totally doable and we have some great options for you in DFW! I'd look in the mid-cities areas if I were you! Let me know if you need any help!
@Michael Thorne thank you for the information on the high property taxes. I have seen that, however, in the long run still more cash savings this route. California is getting more expensive to live in overtime, but I’ll take this into consideration in my analysis of properties. Thank you.
@Jessica Harrison thank you for welcome and the follow up and advise. The plan is to move to Texas and work from there. I’ve been advised of the positives as well as the drawbacks. The approach your client took sounds great and I’m open to anything honestly. I do have my initial strategy but if there is another strategy that can work I’d be more than happy to try it out. Let’s connect! Thanks.
Welcome to Texas! Sounds like you got a great plan to start your journey into investing. Keep in mind as well FHA has loan limits that may come into play at the higher end of your range. Conventional may be the way to go as there are a lot less headaches involved. Get in contact with a lender and they can provide you with a plethora of options for you. Good luck!
Welcome, I think its a challenge, but not impossible. If you're willing to fix up units or buy vacant, you can find good deals in less than desirable neighborhoods as well.
@Bryan L. Ramirez I also made the move from CA to Texas (Houston suburbs). If you like the idea of Houston, most all of your opportunities for small multifamily would be closer to downtown vs out in the suburbs. Feel free to reach out if you want to talk about areas of Houston. Good Luck man!
@Nick Marrone thank you for the information! I’ll sure be on the lookout for a lender so if you happen to have any references, could you please share? Thanks!
@Ronald Rohde thank you! I will consider this strategy as is one that I would implement in the future.
I have been looking for multifamily, duplex/ fourplex, they do not meet 1% rule and very old. The properties are very old also.