Best Areas to Invest in Dallas & Denton County under 200K 1% Rent

32 Replies

I recently got my RE license and looking to buy and rent single family property in Dallas or Denton county. I am looking under 200K with 20% down, rents easily at about 1% of sale price and good potential for home appreciation.  Would like something that does not need any work and can be rented as-is. What areas do you recommend I focus on for my search? 

@Ajay Prabhu

Denton and Collin county are best to invest for long term. It is very hard to get 1% rent now a days.

You can check Rockwall County or Fortworth area for 1% rent.

@Shital Thakkar

Thanks for your response! So, should I stay away from Dallas County? What is your thought process on that?

What areas in Denton and Collin would you recommend? 

@Ajay Prabhu ,

For 200K range... Little Elm, Wiley, Princeton, Melissa, Denton. Again it is very hard to get 1% rent.

I have seen some 1% SFH in Plano, Carrollton, Rockwall, Farmers Branch and of course Arlington and Irving but they are not pretty and not in the best areas. Just depends on what you are comfortable investing in.

@Ajay Prabhu

Just depends on what areas of these cities you are looking in. Every area/city has its good/better & best. For 200K you can do a lot!

Arlington is a great area as well as Mansfield, Burleson & Crowley. Burleson has tons of new homes being built. I've found a few foreclosures or short sells in these newer highly desired neighborhoods. It appears that these foreclosures are new homeowners whom get in over their heads and only last a few years then need to move. Sometimes you can find them prior to foreclosure when they are needing an escape.  95K-125K for 1,200sqft+ that rents for $1,300+ works for most.

If you are looking for a property that only needs minor cosmetics such as new interior pain and carpet these newer properties are great. The 1%+ properties are still out there. Keep looking and expand your search area.    

@Sean Ray

Thanks for that info! What do you think of areas in Dallas county like Garland, Mesquite, Fair Park etc.?

Also what about Mckinney, Lewisville and Colony in Collin and Denton? Are they good options?

@Michael Clevenger

Thanks for that info! The areas that you mention are too far for me but like you said I might have to expand my search to make the numbers work. 

@Ajay Prabhu Garland and Mesquite are always in demand but make sure you leave a little room ($$ cushion) because both of those cities have Rental CO programs that are NOTORIOUS for driving landlord costs up with required rental inspections. 

Not sure why but those two cities always have  HIGH demand for rentals. My listings over there always go super fast and I get top dollar because we make sure the houses are updated and move-in ready. If I can help let me know!

The ones you mentioned in Dallas county will get you the 1% rule but I would never want a family member living in those areas. 

Collin is great and if you can find the numbers that meet your goals but good luck with that. 

@Courtney King

Courtney,  Any chance you can share more with regards to the landlord costs you mention.  I suppose further insight and/or estimated figures would be great !

Thanks in advance,

Dean

@Dean Muriby - some cities require a "rental inspection" or "certificate of occupancy" (CO as Courtney put it).  As part of these rental inspections, they may identify additional rehab/repairs that you may need to do.  They may also charge for these inspections.  I do not have rentals in Garland or Mesquite, but friends do and those cities are well-known for being tough.  Go to the city websites and look under building inspections or do a search for rental inspection or the like to find a check list.  I do know that Mesquite is cracking down on garage conversions, and even if an un-permitted conversion existed when you bought it, they will now require you to pay to get it permitted before it can be occupied.

If you have seen the news lately there has been a lot of hullabaloo around the new requirements in the city of Dallas.  They did not have rental inspections on SFRs before, but do now.  One large landlord is shutting down his operations in response (slumlord of sorts from what I gather, and too costly to bring his rentals up to code).

We are invested in a few other cities that have the inspections: Lewisville, Farmers Branch and Hurst; but none of them are too tough, or have not been for us to date. Some cities require the inspection before tenants move in (Lewisville and Hurst). Farmers Branch wants the tenants to schedule it after they move in - which is a pain if you have to do repairs. None of these three charge for the CO, but Farmers Branch charges $120 a year per SFR for a license. And each city is different with regards to their targets: for example Farmers Branch and Hurst require hard-wired, interconnected smoke detectors; Lewisville does not. All of this stuff is manageable, but it is best to talk to the building inspectors when you buy.

Andy

@Andy W.

Thank you Andy for the details !  

Dean 

@Dean Muriby It's nothing scary but you just need to expect some things that will likely be flagged by the city. Here's a few that come across A LOT.

  • If you've replaced a HWH and did it without a permit, they WILL require that you get a permit (and possibly have to bring it up to code)
  • If you have a driveway or sidewalks with cracks or areas that are a little uneven (even just slightly) they WILL require you to float it
  • Both cities require foundation permits on any foundation repairs
  • Then there are the standard items...required keyless locking devices, peepholes on doors that lead outside or lead to garage, smoke detectors in all bedrooms AND hallways, etc.

I don't think I can put a dollar figure on it as every house is different but if you or someone you know is considering buying or renting in those areas, I'm happy to walk through and tell you what you'll need to do. I've been doing it long enough so it's not as painful and it is possible to get the green tag on the 1st inspections.

All this negativity. The deals are out there. Can even still be found on the MLS. Mesquite, Dallas, Garland, Fort Worth, Arlington, Little Elm, Frisco, Forney. Agents, set up alerts on the MLS to announce to you when there is an undervalued property going live. Non-Agents in the DFW area can use MLSDEALFINDER for this as well.

Don't buy from just the perspective of home appreciation, the market is a cycle.  Things go up, and come down, we are currently headed,it seems to me based on many factors and conversations with bank investors toward another housing crash.  Home appreciation vs cash flow, I feel that cash flow is more important.  Second, "All maps lie"; meaning rules like 1% are good reference points, especially for the first time, however, the 1% rule is not an absolute thing.  There are plenty of properties that make good cash flow without the 1% rule.  Some mortgage payments are less than 1%.  However, this is exactly the problem, not in Texas where I am from, but throughout the country, mortgages are more than rent, and rent is falling in a lot of places. As long as you meet mortgage payment and "then some" you are good. To get cash flow you will have to put down 20% or more.

Also, if repair work needs to be done, you would rather get a property that needs exterior type of work done, interior work will cost more in general.    Interior jobs are a hassle compared to exterior also.  You can read on my blog more about this.  

When rent gets less than mortgage payments, of course, we all are headed for trouble.  

@Ajay Prabhu You are going to have better luck finding 1% rentals in the $100-150k range. As others have mentioned, inner ring suburbs of Dallas or most of Tarrant County would be a good place to start.

I have sold dozens of wholesale SFH in fair park, oak cliff and south dallas and they do get 1% rent. Usually needs considerable work though. And are usually 50k< purchase price.

Originally posted by @Diana M. :
@Courtney King

what is rental co programs? thanks

 Rental CO means Certificate of Occupancy. Some cities require city inspections before a tenant can occupy. It's not a big deal you just need to know what they are looking for. I've got a great relationship with Mesquite and Garland but new investors need to be aware of these requirements as some of the expenses can add up if you're not aware. If you're looking to buy a home in these areas, during the inspection of the home it's good for you to know what items will need to be addressed per city requirements so that you know what to negotiate in terms of repairs or a concession in lieu of repairs.

@Courtney King I just hopped on BP and am eating up all of your advice! I am from Mesquite and would love to invest along 30. Short drive into Dallas. Thoughts?

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