DFW area condo/townhome or SFH - need advise

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DFW area condo/townhome or SFH - need advise

Shyam Sundar
Member since 2021 · 8 posts · 5 votes

Hi - Just stumbled upon this forum and kicking myself for not having found you folks sooner! I am finding a wealth of information and knowledge from people who have walked the path I am trying to now. I am unfortunately several years late but better late then never!  

I live in my NJ condo and looking to diversify and build a decent RE portfolio starting with DFW area, as there is a huge chance I might relocate in next 2 years. I am working with a realtor and bid on a few SFH in usual high bid towns (Frisco, Allen and even FW) with no luck. The one I managed to win paying big premium, had massive issues with inspection and had to back out given the cost math didn't work out. Back to the drawing board now.

My strategy is to buy and hold 5-10 years for appreciation and I am ok with +ve small cash flow monthly ($100 or more). Current budget is 300K, can go up to 350K if I can swing the cash flow math.

I have a couple of questions that I hope folks here can advise:

1. Should I change my strategy for looking at condo/TH in Frisco, Allen areas if the cash flow math works even though HoA is higher. My current NJ condo if I rent should get me 300$ cash flow even with a $250 HoA, so I am wondering if I should try and replicate in DFW? 

OR

2. Should I just forget condos and look at SFH in DFW area - if yes, where to focus? Even McKinney seems super hot now which is where I am going to try and make offers. I saw threads about Sherman and up north but do not find decent inventory there. Are towns like Little Elm, Wylie, Corinth worth considering?

Appreciate any thoughts/suggestions as I find my way around REI!

Thanks

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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
5y

@Shyam Sundar   In Frisco there are a lot of tech workers who bought their homes 10 years ago for $200,000 or so.  They've moved up to bigger homes, but kept the original as they have some attachment to their first home.  So now they're worth $400,000, but they rent them for $2000 and there are lots and lots and lots of these.  Even in this case the investment case probably doesn't make sense, but the numbers work for them.  That makes it tough for new investors at the 1/2% rule...probably doesn't make sense for most people....unless you're just trying to park money and get some minimal return.

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  • Account Closed
    Real Estate Broker · Frisco, TX · Member since 2016 · 25 posts · 16 votes
    5y

    I have lived and worked as a real estate broker in Frisco for 21 years.  We have very few condos and not many townhouses.  People want to move to Frisco for the school district so it's in high demand. I have eight buyers all looking in Frisco at the moment.  We went $30k over on our last offer and lost. There are areas south of Frisco such as Plano, Carrollton, Addison and North Dallas (75252 zip) that have a lot more condos and townhomes.  Plano also has a good school district and you can be as far south as Frankford Road and still be in Plano ISD. This might give you some more options to achieve your investment goals.  Good luck!

    1Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    There are virtually no condos/TH in Frisco and Allen. I can only think of one condo development in Frisco and normally the numbers don't pencil out well. Most condo/TH here don't work work well for investments due to high HOA dues, that just kill the returns. I can only think of about 5 condos in Dallas that 1/2 way make sense normally for investment....and part of that working is that they are in high growth areas, they're normally not the nicest places and I think have potential to be bought out by a developer for the dirt.

    Lots of investors looking at Sherman now, because the numbers make a lot more sense.  Some positive economic development seems to be happening there.  The other cities you are considering in my opinion are good pics.  Frisco is a great place to live, but investment is very tough...very unique dynamics there where rent is often like 1/2% rule vs 1% rule, so probably negative cash flow for the normal investor.

    2Reply
  • Account Closed
    Frisco, TX · Member since 2021 · 36 posts · 11 votes
    5y

    @Bruce Lynn are they developing in Sherman? Can you shed some light on what possible economic developments would be in Sherman?

    0Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    https://shermantx.org/news/app...

    Plenty of power, water, land and it seems sentiment for industrial development that other cities don't like.   Also a pretty good airport I keep thinking someone like amazon could take over to use for distribution but that part may be big dreaming.

    0Reply
  • Shyam Sundar
    OP
    Member since 2021 · 8 posts · 5 votes
    5y

    Thanks all for the useful info. Yes, I am not finding any good condo/townhomes that work north of Plano, so I have to go to Plano or south. 

    @Bruce Lynn what did you mean by 1/2% and 1% rent dynamics - could you pls elaborate. Ratio of rent to purchase price?

    0Reply
  • Jason Howell
    Rental Property Investor · Fort Worth, TX · Member since 2021 · 47 posts · 40 votes
    5y

    Copied from Investopedia:

    What Is the One Percent Rule?

    The one percent rule, sometimes stylized as the "1% rule," is used to determine if the monthly rent earned from a piece of investment property will exceed that property's monthly mortgage payment. The goal of the rule is to ensure that the rent will be greater than or—at worst—equal to the mortgage payment, so the investor at least breaks even on the property.

    KEY TAKEAWAYS:

    • The rent charged should be equal to or greater than the investor's mortgage payment to ensure that they at least break even on the property.
    • Multiply the purchase price of the property plus any necessary repairs by 1% to determine a base level of monthly rent.
    • Ideally, an investor should seek a mortgage loan with monthly payments of less than the 1% figure.

    The one percent rule can provide a baseline for establishing the level of rent that commercial property owners charge on real estate space. This rent level can apply to all types of tenants in both residential and commercial real estate properties.

    Purchasing a piece of property for investment requires a thorough analysis of numerous factors. The one percent rule is just one measurement tool that can help an investor gauge the risk and potential gain that might be achieved by investing in a property.

    1Reply
  • Shyam Sundar
    OP
    Member since 2021 · 8 posts · 5 votes
    5y

    @Jason Howell Thank you, yes that makes.

    0Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    @Shyam Sundar   In Frisco there are a lot of tech workers who bought their homes 10 years ago for $200,000 or so.  They've moved up to bigger homes, but kept the original as they have some attachment to their first home.  So now they're worth $400,000, but they rent them for $2000 and there are lots and lots and lots of these.  Even in this case the investment case probably doesn't make sense, but the numbers work for them.  That makes it tough for new investors at the 1/2% rule...probably doesn't make sense for most people....unless you're just trying to park money and get some minimal return.

    2Reply
  • Account Closed
    Frisco, TX · Member since 2021 · 36 posts · 11 votes
    5y

    @Bruce Lynn you’re a wealthy do knowledge, thank you.

    1Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y

    @Account Closed    Thanks for the encouragement....I see you are in Frisco, so you know the pain for investors....or you're riding the wave of the growth and enjoying prosperity.

    0Reply
  • Account Closed
    Frisco, TX · Member since 2021 · 36 posts · 11 votes
    5y

    @Bruce Lynn Unfortunately, the pain of an investor currently. I came across a property in downtown Frisco off main. Its got a dual drive way and I looked up zoning it could be converted because its in OTC. The owner has had it vacated for years and I'm sending them a letter tomorrow so hopefully it works out lol

    1Reply
  • Gonzalo Gaston
    Rental Property Investor · DFW · Member since 2019 · 30 posts · 14 votes
    5y

    Condo in an upcoming area in dfw? 75254 a multi billion development on its way that has been cooking for years (midtown Dallas), new big boys apt complexes being built with apt rents between 2 and 2.8k. 

    You are welcome.

    0Reply
  • Lucia Rushton
    Realtor · Dallas - Fort Worth Metroplex, TX · Member since 2016 · 1k+ posts · 925 votes
    5y

    @Ross Barrera what was your results of making contact with the owners ?

    0Reply
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