New property in Prosper ISD questions

17 Replies

Hello All,

I am looking to purchase a brand new house in Light Farms in Celina TX.

Its 4 bed, 3 baths 2200sqf house and Im planning to rent it out.

But there is no rental posts from this community... My agent says that I can easily get $2400.00 for it and that will bring $400/mo cash flow. Is that right?

Is it possible that houses in same school district in McKinney rent out for $1600-$2000, and Ill rent it for $2400?

Whats your thoughts?

Let me add that I live in San Francisco,California and I dont really know Texas market.

Also the price of the same house went up $15,000.00 since I signed documents to start building the house. Of course my price is locked.  Zillow has ridiculous estimate of $600k value and $3500 rent.  on $270k house. Im sooooo confused, im ready to back out of it. Any input will be appreciated.

-Aleksandra

aleksandra I live in Celina.

I live in a community close to light farms. My subdivision is less pricey than light farms. You can look up my subdivision it's called Carter Ranch. I can tell you that my house would rent for about $1700/mo. And my house is a 4bedroom 2 bathroom, about 2400sq ft. Light farms has nicer homes and more amenities. Also, light farms is in Prosper Isd. A very good school district. I do believe prices in houses will rise even more in Celine and Prosper since there is a lot of construction and jerry jones (owner of the Dallas Cowboys) is building a very nice shopping center in prosper. Finally I'll let you be the judge if you could get 2400/mo. In rent. Hope that helped.

@Juan Llamas thank you for your reply! 

This is exactly what my agent was saying- that the owner of Cowboys will pomp money to that area so it is great place to buy a house as it will develop a lot. Which is super exciting.

But I'm loosing sleep over a rent :/ as you said Carter Ranch has the same houses in 1600-1800.  

I still have a month to close construction, so I will be monitoring that area.

I personally feel like $2400 a month Is high. I do agree that it is an excellent appreciation play. So if the rents are low now I would assume they would raise over the next several years but property value appears as though it will raise greatly in the area.

Aleksandra, I just went into the MLS and did some research for you. You're right in that there are no comps in Light Farms but there are comps in Carter Ranch. You probably got comps in Carter Ranch from you agent. You know that Carter Ranch is very close. I would consider the two communities the same because they are so close. There is one active house for lease and there are 6 that are already leased in the last 90 days. Because there are 7 rentals in the last 90 days in a small community, there is some demand there. However, the average CDOM (Cumulative Days On Market) was 32 days, ranging from 14 to 63 days. This isn't very fast for Dallas. Also, the average rent was $0.88/SF and 5 out of 7 houses are smaller than 2,000 SF. In general, smaller than 2,000 SF houses will get better $/SF in rent than 2,200 SF houses. I hope this helps. I couldn't tell you if $2,400 is a good number because I have not seen your house. May be your house will have so much more features and amenities than Carter Ranch. But most tenants have a budget in mind before searching and so if your house is way above than other rental homes, the people will tend to stick to their budget.

I don't want to go too much into what happens if your area gets developed (residential and commercial), but the main thing is supply and demand.  Are there more potential tenants than rental properties?  That's what I would want to know before I buy a rental home.

@George Tak thank you for your reply.

This is exactly what is going through my head. The advantage over Carter ranch would be School district, but the communities are similar and I'm not sure what is important for tenants. The house will be new and will have all cool thinks people might like, also it will be in community with elementary school in the middle of it. 

When I compare it to Carter Ranch this house is terrible deal. When I compare it to Prosper, it's pretty ok.  

Anyway thank you so much for pulling some data for me! It really helped!

@Aleksandra Draws sounds like it may be a "projected rent" issue to me so count on the lowest and hope for the highest. I always give rentometer a quick glance and hover over the currently rented homes to see how much they are pulling and how close they are to my subject property. I don't solely rely on it but it helps to give me an idea. I wish you the best, but go in conservative.

Is this your first rental property purchase? If so, you may want to pause and work out the numbers on the property. Yes, it may be a good appreciation play(increase in market value over time), but will it have positive cash flow immediately. If it does not have positive cash flow you will be loosing money each month, which will offset your appreciation.  Don't rely on the realtor to say you will have positive cash flow, you need to do the number crunching.

@Aleksandra Draws

Disclaimer- I do not know the area but here is how I would evaluate an area I was not familiar with :

-Zillow is basically worthless in Texas as we are a non-disclosure state so sales prices are not published

- George gave you some valuable comps from the MLS. It looks like you may be banking on getting rent at the top end to make the deal work for you. Make sure you crunch the numbers based on renting at the lower end

-Consider placing a Craigslist ad to gage the interest in the area.  Additionally, there may be a local Facebook page that you could try as well

-Start interviewing local property managers now and get a rent valuation from them

-Take into consideration that you will be closing in December which is probably the worst month to have a property available as a lot of people do not want to move during the holidays

-What is your exit strategy ?  Keep in mind if your exit is less than 5 years there might still be new construction going on in the area.  With all the incentives a builder can offer, it can be tough to go head to head with them to sell

Originally posted by @Aleksandra Draws :

... My agent says that I can easily get $2400.00 for it and that will bring $400/mo cash flow. Is that right?

Did this agent, when calulating the "cash flow" include things like maintenance, property management and capital expenses? Although a new home, one should arguably allow for these, even if at smaller percentages. Also, given that this is a newer community, is there a HOA to which fees are paid? How about utilities... what is the custom in your area?

As @mike freeman stated, work out the numbers, don't rely on the agent's.

Good luck to you!

Aleksandra,

I live in Prosper.  It is growing like a weed here and I have seen a 100K appreciation on my house in last two years.  Jerry Jones owns the four corners at Preston and the 380 which they just broke ground on a new Walmart.  He also owns the land at Dallas Parkway and Prosper Trail.  Will be building a high end community called Stargate or something like that.  Lightfarms is a significant upgrade over Carter Ranch and that Propser ISD is significantly better rated than Celina ISD.  I would say Stanford compared to San Jose State.  Who is the builder on your house as there are 7-8 in the community?

Mark

Thank you For all the helpful replies!

@Jake E. I agree, I want to compare it with other rents, but there is nothing to rent in that community. Communities next to mine has or different school district (Celina ISD) - whats big deal there, or waaaay larger homes (Prosper). This is the reason I am asking on the forum, because Im ballparking it, but I dont feel comfortable doing it.

I signed contract for this home, when I though that the best can happen is building equity and appreciation, and this house is in perfect place. Then I found BiggerPockets and I learned about all these cool things, and once I calculated everything it seems like there is possibility that Ill have to pay out of pocket monthly $50-$150 if the rent wont be as high as I wish (and no comp doesnt make it better).

So now when I learned these things, I might back out and looke $2000, but not be stuck with the house, and but fixer upper and rent it and get equity and cash flow for next deal.

@Mike Freeman you got me :) Yes this is my first rental property...  I know it is good place, and I love it, but I don't want this investment to lower my ability to save money for next deal, because I need to pay out of pocket. Exactly as you say :)

@Greg 

@Greg H. Thank you for your post.

I did post the add on Craigslist 4 days ago. No replies. Scary!

Thank you for bringing it to my attention that December is really terrible time to move. Didnt think about that at all..

The builder incentive are really good, you are right, I was on market for used home, but new houses were 10K more expensive with all fancy staff, so I went for it.

Definitely I will call agents in the area!

@Account Closed  You live there so you see, how people talk about Prosper and its schools, Its crazy. Im from SF and I could compare to Hillsbruogh. People think, its better place.

My builder is Horizon Homes, house is in Light Farms 50'

Again I really appreciate ALL replies! Learned a lot!

@Aleksandra

I am in California right now but moving to Prosper next month. When house shopping in the North Dallas area we looked at Light Farms and was inpressed. We ended up buying a new home in Prosper (Highland Homes) that will be finished in a few weeks. I am also looking at investing in a rental property and have been looking in Celina as well.  I am waiting till I move and get settled before buying in the North Dallas area.

Does your agent manage property? Are you planning on using a property manager? Since you are out of state, you should have a property manager handle your rental. Anyways, if I was you, I would find a very good property manager in the area and get his or hers feedback on potential rents.  

Best, 

@Aleksandra Draws

Wow, the internet is awesome.  You can come on the site, tell some strangers what you're doing, ask for advice and now you're getting the whole picture.  Unfortunately many traditional residential agents have never had investment property, don't know how to run the numbers for cash flow and can steer you in the wrong direction.  Glad you reached out and best of luck to you!

Originally posted by @Aleksandra Draws :

Hello All,

I am looking to purchase a brand new house in Light Farms in Celina TX.

Its 4 bed, 3 baths 2200sqf house and Im planning to rent it out.

But there is no rental posts from this community... My agent says that I can easily get $2400.00 for it and that will bring $400/mo cash flow. Is that right?

Is it possible that houses in same school district in McKinney rent out for $1600-$2000, and Ill rent it for $2400?

Whats your thoughts?

Let me add that I live in San Francisco,California and I dont really know Texas market.

Also the price of the same house went up $15,000.00 since I signed documents to start building the house. Of course my price is locked.  Zillow has ridiculous estimate of $600k value and $3500 rent.  on $270k house. Im sooooo confused, im ready to back out of it. Any input will be appreciated.

-Aleksandra

 I Live in Prosper, I'm curious on an update to your original post, did you end up renting, etc?