Rental Property Investor · Dallas, TX (dallas tx) · Member since 2019 · 10 posts · 3 votes
Hey guys,
I wanted some advice. I’m deciding on putting an offer down on a luxury property that is priced at 250k in the local dallas market. The only problem is that this house is in a neighborhood that has some crackheads and prostitutes one street away and a line of houses that are torn down and boarded up. The crime map shows that no serious crime have happened in the last two years. Other than that it’s a new build 2020 and is a super modern 3 bed 3 bath two story home 1900 square feet. It’s 5 minutes away from downtown and 3 minutes away from the Dallas Zoo and about 6 minutes away from a bustling new business district. Is this a good investment. I’m hoping to hold onto it for about 3-5 years and hoping it appreciates once the nearby highway deck park (think klyde warren park) is built in the neighborhood. What do you guys think? This would be the first house in the neighborhood that sells for above 150k. It already has 3 offers.
TLDR: buying a luxury house in a bad neighborhood should I invest in the property and hope it appreciates in the near future once developments have finished?
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
I always try to buy the worst property on the best street I can afford, not the opposite. But I don't know this submarket specifically, sounds like maybe it's an up and comer. Depends on how confident you are in the new development and the area transitioning within 3-5 I guess.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6y
I always try to buy the worst property on the best street I can afford, not the opposite. But I don't know this submarket specifically, sounds like maybe it's an up and comer. Depends on how confident you are in the new development and the area transitioning within 3-5 I guess.
Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
6y
If you are buying it for speculation and rental, no. The tenants will wear down all its fancy luxury features, and paying higher than anything around for speculation on appreciation reasons is just gambling. Plus if you aren't getting much cash flow, dealing with the area's problems (and tenant base) will just drive you nuts.
If you just like the house and want to live there, different answer.
Rental Property Investor · Dallas, TX (dallas tx) · Member since 2019 · 10 posts · 3 votes
6y
@Nicky Reader hey Nicky I was planning on living here. No way I would rent this one out unless it was above 2K a month. Unfortunately I absolutely do not think someone will find the neighborhood worth 2K a month even though the house is beautiful and plenty of space.
Rental Property Investor · Dallas, TX (dallas tx) · Member since 2019 · 10 posts · 3 votes
6y
@Steve K. Interesting why do you always buy the worst house in the best neighborhood would love your take on this. Yes the development has already started its estimated competition date is late 2021.
@Steve K. Interesting why do you always buy the worst house in the best neighborhood would love your take on this. Yes the development has already started its estimated competition date is late 2021.
I like to buy the worst house on the best block I can afford because fixing it up to the standard of the surrounding properties is much easier than moving it to a better location.
@Leo Lopez. It sounds like the area is ready for some regentrifying.
I question a new “luxury” build for $250K. While the cost of land varies in different part of DFW, the cost of build does not.
I hope a builder on BP can confirm or deny my thought process above.
I would hate to see you move in and see the workmanship is not all that “luxury”.
Or maybe I should be asking what is luxury ? Are the counter tops 1 in granite or 2 inch granite ( luxury).
Plus how much land ?
Just asking alternative questions to help you think through this.
Since you already said that you aren't buying it initially for a rental investment property, I think Lucia has great input here on buying this home for yourself.
In addition to her comments, I would ask myself if this neighborhood looks like it's going to greatly improve over the next 5 years. Or if it is going to be much of the same that it is now? In Dallas and Fort Worth, some neighborhoods are moving quickly to create more upscale appeal. While some neighborhoods throughout DFW are working at a snails pace or aren't moving the needle at all when it comes to improvements. It's hard to say without getting more details on the specific neighborhood you're moving to. I've seen some areas in North Texas start looking great after a couple years while some look even worse, and the only difference in location is one street over from the other.
Even if 20% of the homes in that area get a remodel or torn down for a new home in the next year or two, what other percent of them do you think are habitable right now for a professional of any age? I would just be weary of even after 5 years of time, is this going to be a neighborhood you'd want to stay in? That should be your "exit strategy" question because it will tell you three things:
1. If you like your commute, area, etc. would you stay?
2: If you are looking to sell after 3-5 years, is your overall neighborhood going to be able to justify a buyer wanting to move to that home at the price point you are going to want to ask?
3. If you are looking to use it as a rental home, is your overall neighborhood going to be able to justify a renter wanting to move to that home at the price point you are going to want to ask?
Just my two cents. And great question! Really got the juices flowing for me for further investment properties.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
6y
How would this house appraise? I doubt any comparable sales would exist in that neighborhood. You may not even get the loan. And in general its a bad idea to buy a Class A house in a Class B/C neighborhood. You do the opposite. Then the appreciation is in your control.
Rental Property Investor · Dallas, TX (dallas tx) · Member since 2019 · 10 posts · 3 votes
6y
@Lucia Rushton yes that makes a lot of sense I love your perspective and thought process. Your first point I was actually curious about as well. So I looked up the land and it looks like the builder purchased from the local school district for about 10k. It’s not a big piece of land. So I assume they had more room in the budget to build the home. Yeah maybe it’s not Luxury it does have granite countertops in all the areas not 2inch thick. least I didn’t measure it.