Looking to invest in Dallas and suburbs for STR or LTR.

9 Replies | Dallas, Texas

Hi guys, I'm thinking of relocating to Dallas and buy a primary residence and do an Airbnb during the first year and maybe turn in into a full time STR or LTR when I move out. Whichever one is cash flowing. Will be financing up to $450k. Any recommendations where to start? Investor friend agents? Thanks :)

Welcome to Texas. Be careful with STR here. Lots of regulations and where there aren't regulations, cities thinking about it.

When I see articles like this, I think you have to be aware of the sentiment.

If you do buy a STR just be aware of the city regulations as they are different in every city, know the registration requirements, and probably don't buy in an HOA, no condos, no townhomes as in most HOAs they will have regulations preventing STR. Some even have LTR restrictions.

I always think too that the place you buy to live in might be completely different than what you want to buy as a rental, so keep that in mind as well.   For example you may want a newer, nicer, more expensive place in a neighborhood with good school districts for a primary residence, but for a rental I would probably suggest the most economical place you can find within reason.  This provides a much broader market for renters.  Just some thoughts to consider.

I have been looking at the grand Prairie area for a str house hack. Close proximity to almost everything in dfw, and the city appears to be lenient on STRs. Also there are a bunch of massive older homes there (3000 sqft)
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@Garrett Gruss and @Mora Clark Most cities in N Texas are implementing regulations, especially the larger ones. Like @Bruce Lynn said, you will need to do your homework. Some mid to small sized cities are not currently strict in their regulations because they don't want to foot the bill of litigation. Both AirBnB and VRBO are funding legal battles every time a city tries to enforce STR regulations. Some cities just don't have the funds to compete. This is what happened in the suburb of Grapevine and why STRs are regulated but are allowed in the city.

But more importantly, both of you are looking at a House Hacking situation. If you live the in the property as your primary residence, MOST of the cities' regulations don't apply. This has been upheld in courts across the country. If you were not to be able to do an STR in a home in which you live in, then that would leave some issues for people who have friends come to spend the weekend and buy them dinner or help pay for some utilities. Would that then constitute an STR because they stayed with you and you recieved payment in one form or another? This is why courts have had to allow STRs in residences where the owner resides in the home. Most regulation is for whole home STRs where the owner does not live in that house.

Thanks everyone for your insight. I do plan to run the numbers for both STR and LTR just in case there are changes in regulations as mentioned. However, Dallas is quite big and I'm not so familiar with the area. Do we still have deal that are met 1% rule for LTR? I know in Denver, it's none existent unless you rent by room but appreciation is great. How is the cash flow and appreciation in Dallas?

@Mora Clark

No dog in the fight here, but I wanted to say that if you're considering doing STRs -- as others have indicated -- work with an agent that understands the Airbnb laws. They vary city to city. Like in Denver metro, you could buy in Denver and not be able to do short-term rentals as an investment, but you hop over Sheridan Blvd into Wheat Ridge -- that you'd never know was a different city -- and you can do Airbnb investment properties. 

And the 1% rule is dead in almost any real city now if you're doing long-term rentals. That said, you can definitely achieve it with short-term rentals. I've got a client in Wheat Ridge who's pulling around $9,000/mo gross on a $570,000 house he bought for Airbnb. Same with a client in Arvada -- another Denver area city that allows Airbnb investments.

@Bruce Lynn That proposal here in Colorado to tax Airbnbs at the much higher commercial property rate comes up every year and always gets shot down. I'm not saying it won't happen, but even if it did, it could mean a few thousand extra a year. I'm not downplaying that, but if you're pulling in $150k/yr on an STR, you might be able to absorb it. (And heck, it'd likely still be a lower property tax bill than what you've got in Texas.)

I'd be more worried about cities regulating you out of business, like a lot of the ski areas in Colorado seem to be leaning towards.

Hi @Mora Clark

My advice to you is that real estate market is headed into a major correction soon. This means you do not want to buy anything to hold, because you are at the top of the market. Almost anything you buy will fall in value based on the market correction. Let me know if you need any help.