All Forum Posts by: Mark S.

@Leland Barrow are you talking about credit unions and smaller banks?  The only way the bank would have the kind of discretion regarding the loan is if they held it in house as a portfolio loan.  If the loan is going to be resold on the secondary market the bank will have to comply with the investor guidelines for the loan.  

I agree with what you are saying regarding the ability of smaller banks to work with their customers though. Portfolio loans can be much more flexible and easier to qualify for, although the rates tend to be higher and you have to be local. Some local banks will also give you an LOC with a higher draw amount than the value of the portfolio, it just depends on your relationship with the against the portfolio which can be greater than the assets you have in the portfolio.

Have you found any good local banks to work with in TX.  My favorite so far has been TX CU.

@Jany Lee you should be able to do a cash out refinance for the investment properties.  That being said the amount of money you will be able to pull out can be limited by the guidelines for the loan.  As @Tom V. mentioned many banks will offer them but there are additional restrictions in Texas and with different loan programs.  

@Michael Lee mentioned HELOCs are a last resort for his investment strategy.  That is a critical distinction to me, you always need to make sure your financing fits your strategy; always be careful when leveraging your money.  That being said, I think HELOCs provide great short term financing which can be used quickly to make "cash" purchases you can later refinance.  Your financing should be strategic based on your goals and what will work best, as always it is best to speak to a professional to make sure you are making the right moves.  

I guess my question to this is what is the state doing with these huge increases in revenue each year....  A 50% increase in the primary revenue stream over 5 years is a lot of money....

@Stan Hill @Leland Barrow

I agree the property tax monthly payment keeps the home prices lower, but it doesn't mean the monthly cost of owning a home will be any lower.  When the homeowners qualify for a mortgage the monthly due for their property tax must be included in their debt to income ratio.  Ultimately it will decrease the purchasing power of a borrower because it is a monthly liability which must be factored into their qualification.  Borrowers will qualify based on the monthly payment regardless of how the money is spent and where it goes, if you spend more on property tax it just means you have less to spend on principal and interest.

@Stan Hill

Thanks for commenting.  It is crazy how little attention the assessments get from the public.  The people I know pay attention to the tax rate but the affect of the assessments far outweighs the small property tax increases I have seen recently.  Honestly, I am surprised more people are not upset about their bills.  I guess homeowners are only upset in June or July when they get the property tax bill in the mail....  So far I have had no luck contesting the assessment so there really is not much you can do.

I completely agree about selling your primary residence.  The increase in home prices is likely to be great in the next 5 years and I am sure I will want to sell once my house has double, or tripled in value.  When I first moved here (also from CA... see what I mean) I purchased a home in McKinney, I sold in March (2.5 years later) for $80k above what I paid....  I cant complain about that.  My new home in Plano also was assessed for $35k over the purchase price.  

While I agree with selling and your "sell signal" my question is where am I going to go?  People are going to have to start moving pretty far out to see the prices drop enough to make a difference.

I am also curious about the multi family appreciation. Given how much out of state and international investors we have seen I think the MF market may equalize more quickly than the residential market. I cant imagine we will see a huge increase in values as the CAP rates continue to decline. I am having a hard time finding MF deals in the metroplex at a CAP rate I would be interested in.

As you mentioned the property tax rate increases are not keeping pace with rents, most likely because no one is getting a 8-9% pay raise each year, the only thing increasing at that rate are home prices and property tax assessments. Your conclusion about how the assessments will effect the ROI on the MF seems spot on to me. This is going to be a serious problem given how low the CAP rates already are, at some point even the out of state investors are going to want to cash flow on the properties.... One factor I have seen driving the MF prices is international investors. At the Tuesday CC Auction there were several overseas investors paying way too much for 3/2s in Allen. The international investors purchased about 60% of the properties. I don't the international investors care as much about ROI or CAP rates but are more interested in parking money in the US economy.

Personally I am having a hard time finding properties in Collin and Dallas counties I would be interested in.  My properties are in Grayson County, in Sherman.  It seems you have to go further out of the metroplex to see good returns in the current market.

Have you seen a similar increase in your property tax assessments on your multis?

Good luck on the Tarrant county property tax protest, I have not had luck in the past but I am crossing my fingers for you.  That level of assessment increase is ridiculous....

Hi,

I was wondering if I can see how many people have read or viewed a post I put up or a discussion I started.

Thx!

As an active investor in the DFW area, mostly Collin, Dallas, and Grayson counties I am often asked if we are in a bubble. My answer is no, at least at the moment. The reason I say this is my day job is a mortgage lender in Addison and so many of the people moving to Texas are from California and the East Coast. These transplants are used to property values with a price per square for of over $375 (OC CA) and when they see what $117 (Collin TX) per square foot buys you in Texas they are amazed.

Until we have an equalization of the property values, or the monthly payments homeowners are making, we will not see a slowdown for areas which are doing well and continuing to develop (I know this is a broad statement but I am still expecting people to make good decisions and buy good deals in good areas, there are definitely bad areas in Collin County and it is hard to find good deals).

My main concern in this equation is we are leaving out is the property tax rates and assessments. More than the property tax rate itself it is the assessment which is having the greatest impact on homeowners in the metroplex. The assessment rates also seems to be barely noticed by the population as a whole. While areas such as Garland see a valuation of 30% of the sales price other areas like Plano are being assessed above the sales price of the home.

People moving to Texas are increasingly alarmed by the property taxes we have and they add a significant amount to the monthly mortgage payment transplants are paying when they move to Texas. Granted the assessments are still less than many areas on the coasts but we are being taxed at 1.97%-3.43%. When you combine this with the huge increases we are seeing in property tax assessments it adds up to a very large monthly bill.

I understand the cities are not necessarily increasing their property tax rate, some of them are, but by continuing to increase the assessments at rates of 8-10% each year the cities are in effect growing their largest revenue stream exponentially. My current home is taxed at more than what I purchased it for 3 months ago (I am going to fight this). Even with the Homestead Exemption the assessment is only 12% under my purchase price.

My current home in Plano has increased an average of 7% each year for the last five years. My home in McKinney went up 9% the last five years as well.

I don’t think anyone, myself included, would argue the property is over assessed for its value, but that doesn’t change the fact of the huge increases the property tax assessments means huge increases in property tax revenues. Personally, it makes me wonder where all this money is going given that the cities expenses are not keeping up with their increase in property tax assessments. Cities such as Frisco, Plano, Allen, McKinney, Carrolton and many others will continue to grow and I can only imagine the property tax assessments will continue to climb.

But all politics aside the increase in these property tax assessments will eventually slow down the growth in DFW if it remains unchecked. For example on my old McKinney house the principal and interest payment would come out to $1540 per month and the monthly property tax payment would be $685. Not only does the property tax bill equal 45% of the entire mortgage payment but the homeowner can likely expect this payment to increase by 8-9% each year….

I am interested to hear if anyone else has similar feelings about the property tax rates here or how it will affect the growth of DFW.

@Joshua Hall, I have not done any self storage facilities myself but the market certainly seems to be getting pretty saturated.  From what I have heard it can be challenging to be profitable unless you have a pretty low vacancy rate and given the number of facilities in the metro-plex right now this may be challenging.  

I would be interested to hear if anyone else has experience with starting a storage facility in Plano, McKinney, Frisco, Allen or any of the other surrounding cities.  All of the storage facilities I see popping up are locations from large corporations....

Also given our current real estate appreciation it seems you may be missing out on some of this potential growth with a MF.  

I would be interested to know how the property tax for the self storage facilities is assessed. This could make a big difference as well for your ROI calculation given that the property tax rate for Frisco is 2.23%.

HI @Mindy Jensen thx for your help.... again! :)

@Chai Jonn the price ranges are very neighborhood specific.  I was looking at a house in Allen yesterday and it was listed around $150k, the same house a couple miles away was over $200k.  The schools were similar in ratings and properties pretty much identical.  All of those cities have large prices ranges between neighborhoods.  I think it is more a matter of how much you want to spend and what you are looking for.  

Just so you know, the market is very hot for 3/2 starter homes.  It is probably the most competitive market in DFW right now, there is not a ton of inventory below $200k.  You will be up against some steep competition to purchase these homes. 

How are you planning on financing it?