Niche for northside Inner Looper seeking rentals (paying cash)?

Question

Houston RE professional community,

I just moved from Dallas to Houston. When I left Dallas I sold my first investment property, a solid base hit. I made a fair profit, left the property better off than I found it, and had a great tenant. I had good relationships with my Realtor, insurance broker, and contractor. A great experience for everybody on the team -- really very personally satisfying and loved the team experience. But now I'm hungry for a repeat -- I want to acquire a reasonable rental or duplex/triplex, make it nice, and rent it to a decent tenant. But I'm totally floored by the price to rent ratio I'm seeing within a 15 minute drive of my 77009 zip code (Woodland Heights / Near Northside). I'm punching numbers into my spreadsheet and getting 5% "yields". I can't accept a 5% yield -- I'd just assume pay off my own mortgage than invest in a 5% yield rental. Interest rates are rising but yields are not!? Crazy. Long story short, what is the right niche for a cash-paying, real-estate-is-my-hobby-not-my-job, investor too lazy to budge more than 15 minutes from the north side of the Inner Loop? Rentals in the Near Northside? Condos in the Heights? A duplex or triplex (to avoid competing with owner-occupiers) in Washington Heights or Sawyer? Vacant land in Independence Heights? Want to pick one niche, pick a farm area, and network in that niche and farm area. Happy to hear your thoughts and just network (will need a good team again).

Cody L. · Answer

Here are sort of where my properties are (I don't have all of them in here, just most that are in the loop or near it. I don't normally share this so I hope it helps. The big circle is the 610 loop. I'd say that's where 80% of my stuff is. Within that circle I have stuff in midtown/montrose, downtown, 3rd ward, 5th ward, and SE inner loop. But I also have some stuff just south of inner loop (called "South Park" on here but I don't call it that), and some stuff east (Gulfton). All of these areas, with the exception of the very center stuff -- midtown/montrose/downtown, can be found with great returns. Even the midtown/montrose stuff can give you great returns if you can pay cash and buy right.

Cody L. · Answer

They're cash flowing tremendously.  I think you might have something mixed up but without knowing what, I don't know how to help.

Best to think simple to grasp concepts.  Think about a single family.  One "door".   What would it be like if you paid $40k for a home (even if you had a loan for 100% of the price) and it rented for $750/month.   A 100 unit apartment is just like 100 of those. Sure they don't cash flow as much as if I had a loan for 20-40% of it's value, but with all my equity out, I'm free to go and keep buying another, and another, I'd rather have 10,000 units that cash flow $50/door then 100 units that cash flow at even $500/door

Owen Hehmeyer · Answer

Wow, BP Community, you all really responded. I investigated your ideas on the web. I'm going to start tomorrow. I am going to look at a turnkey duplex in the near Northside near the Metro Rail, exactly what Brandi Dunbar suggested. I already know the yield is too low based on the MLS price, but it has been sitting. . . I'll check out the neighborhood and see the vibe that Brandi and Daniel are talking about. Concept here is to take a look at duplexes and triplexes, trying to avoid competing with owner-occupiers. Plus I just love the Mexican food east of 45 and I need an excuse to get over there.

Cody L. · Answer

Okay I see where your confusion is.  So when I said "60x rent" or $80x" rent, if you're comparing that against how they are presenting info, the deals I'm talking about would be like buying a house that rents for $1000 for $60k-$80k.  i.e., the deals I'm talking about are better than even the lowest price ('best ratio') deals on that site.It's just I'm not buying a $60k (per unit) place that rents for $1000.   I'm buying a bunch of $35k (per unit) places that rent for $700.

Daniel Schiller · Answer

Welcome to Houston!  Near Northside and Eastwood are both competing to be the next Montrose.   I’d avoid Garden Oaks and Oak Forest unless you are a builder; look to Indepenence Heights for similar deals to a decade ago, maybe.   EaDo has been the next hot thing for over a decade and it’s never transpired - but it still has true believers; mostly hipsters who can’t afford Montrose.

Something to consider with MF inside the loop: tons of those older C to B properties sold between 2013-4 and are coming up on refi or adjusting for investors with 5/15 ARMs.   So there are off-market deals to be found.

Markus C. · Answer

For multifamily youd probably want to go the 3rd ward or Eastwood. For vacant land you want to go on the other side of Elysian in that part of the 5th ward boxed in roughly by Quitman, Elysian, 59, and 1-10. I just worked out a contract on a lot there we're selling. But there's still some upside. They're just starting to build in that little area.

My family did well with vacant land.. just as an example we bought a lot on Europa st for 18k and sold it a little over a year later for 40k ... just bought and sold that one on mls. You should have moved here 5 years ago, it was a magical time :)

RE market has since become a little overheated. But Houston is still growing like crazy

Lucia Rushton · Answer

@Owen Hehmeyer. Hi Owen I am sending you a PM to assist with building your Houston team. Cheers

Will Parker · Answer

@Owen Hehmeyer Congrats on your success with your first property! It sounds like you created a really solid team in Dallas. Would you be willing to make an introduction to your contractor and your realtor?

Brandi Dunbar · Answer

Hi, welcome to Houston! A couple months ago I bought a duplex in the Northside area off of the Main St Metro Rail (convenient 5 min transport to downtown). We are living in one of the units and renting out the other. It is a new build in the Hardy Yards area. It is an up and coming neighborhood to look into. Apartment complexes going up; plans for restaurants and shopping. There are abandoned warehouses nearby and there is a plan already to turn one into a brewery, so I think the value of the area will continue to increase over the next few years.

There are a lot of older homes that could be renovated in the area. Hopefully that gives you an idea of part of Northside!

Ryan Goff · Answer

@Cody L - at those ratios are the deals cash flowing well? Looking at the link below that rent ratio seems quite high. Seems like your debt service would really be cutting into your profits. Can you help me understand?

https://smartasset.com/mortgage/price-to-rent-rati...

Niche for northside Inner Looper seeking rentals (paying cash)?

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