Rental Investment burbs around Dallas? (Fort Worth, Arlington: low income, for sale, real estate)

[rambo999]

Can someone suggest good rental investment burbs that have potential to grow over the next decade? How far is too far to manage by yourself from where you live? How do I evaluate if it is good investment or not, any tools/common sense methods? In most burbs, I see most new ones are selling at $300K with rental income of $1800 (<1% of your investment). How do these properties makes any sense as rental unless I make a down payment of $120K.

[some1livesinamerica]

Can someone suggest good rental investment burbs that have potential to grow over the next decade?
*DFW has been growing in the west and north direction for a long time. If you buy a sfh west of 287 or somewhere in Sherman, 10 years? from now on, you will see good appreciation on your investment. Today's Melissa is yesterday's McKinney.

How far is too far to manage by yourself from where you live?
*This is kinda subjective. Some people think 30min away from home is too far, others think 2 hours drive is no big deal if the deal is right. Personally, within an hour of drive one way.

How do I evaluate if it is good investment or not, any tools/common sense methods? In most burbs, I see most new ones are selling at $300K with rental income of $1800 (<1% of your investment). How do these properties makes any sense as rental unless I make a down payment of $120K.
*The ultimate goal of investing in real estate is to make money and build wealth, but how to get there, i think different people have different opinions on this. I know a person that does real estate investing full time, he once told me cash flow is king when it comes real estate investment, so he focuses mainly on houses under 150k.
A few years ago, before covid happened, and house price in dfw started increasing at almost an exponential rate, rule of thumb is don't buy a rental property thats over 300k. I am not sure right now is a good time to buy investment property, the house price/rent doesn't make too much sense imo. However, based on my personal experience, 5 years ago, you can buy a sfh for around 250k, put 20-25% down, rent is about $1800 a month. For a 15 years mortgage, after paying the mortgage, property tax and other expenses, cash flow isn't great, barely break even if not in the red, but the same house that you paid 250k 5 years ago now is worth around $350k, plus the principal that you have paid off over the years. Unless you want to get into flipping houses, if you only want to buy and hold, it will take time, patience and short term sacrifice to see a good return on your investment in the long term.

[rambo999]

Thank you. Valuable insights. Right now, it makes sense buy and hold for long term and hope that it will go up. May be refinance when interest rates go down with 15 years...With 30 year mortgage, it is seller and mortgage company sit and making all the money, unless you come up with a huge cash down payment (50%). Even interest going up this and next year, not a good sign either. How do I evaluate a particular area? Any data I can look at? About Sherman/Melissa, etc. how exactly it is growing. Any new industry coming up? It is still far from Dallas, only I-75 access long commutes and traffic congestions. Any other areas (East, Ft worth, etc.) around I can consider...

[Lz_2022]

You could probably consider a time machine. That’s about the only thing reliable.

The ROI on a $300K rental property is just not there right now if you’re carrying a mortgage.

[TurtleCreek80]

Originally Posted by rambo999

Can someone suggest good rental investment burbs that have potential to grow over the next decade? How far is too far to manage by yourself from where you live? How do I evaluate if it is good investment or not, any tools/common sense methods? In most burbs, I see most new ones are selling at $300K with rental income of $1800 (<1% of your investment). How do these properties makes any sense as rental unless I make a down payment of $120K.

I know three people who do this full time with some different strategies:

1. Owns quite a few homes and duplexes in the Park Cities and Oak Lawn…places they’ve owned and self-managed for decades. I know they have some homes in Highland Park they paid like $75k for 40+ years ago. Those are all worth over $1.2M now and cash flow well even with lower rents. This would be your “buy & hold” strategy where you pick an area that is going to be desirable long term, not a “hot now” burb, even if you lose money on rent / maintained the first decade or two.

2. Owns a ton of places in low income places where tenants will never be buyers, even owns a trailer park. Most of his properties rent for like $600-1200/mo and are south of I-30, except the trailer park I think is in east Texas maybe? This is an all cash flow business. The properties won’t appreciate but he owns so many they can be sold as a package to an investor someday.

3. Owns in a college town- houses and duplexes or small apartment buildings. I think they own about 25 properties. College towns tend to be lower rent and always in demand. Again, it’s a cash flow play as the appreciation probably won’t be huge. This was their retirement plan - they will self manage until they are too old to do it & then they’ll sell them all.

[Rakin]

I'd hate to be an "Investor" in this market. We are swamped with Investors calls looking for homes.

You probably will not get any homes in the North, I would look down around Burleson or Mansfield. Both have decent schools and not out of sight home pricing.

[TeamLynn]

Draw a big circle around DFW and invest on the outside of the circle is my normal response.
I like north the best of all those options...so places like Melissa, Anna, Van Alystene, Sherman, Dension, Gainesville, maybe Denton, Aubrey....but there are plenty of other options.

#1 buying new is tough...unless you go to one of the remote cities. Most production builders don't sell to investors closer in. Unless you want to buy the whole subdivision...and there are investors doing that.

#2 You're right...the traditional numbers like the 1% rule probably don't hold any more. Is that a good or bad thing? Tough to know. Would you rather leave your money in cash and have it eaten by inflation? Good news is both rent and prices have gone up pretty fast the last 2-3 years....so $1800 today might be $2200 on renewal next year, and $2500 in year 3. Most areas on the nicer homes and nicer areas have seen 10-14% rent growth. There was also perhaps a 12-18 month time where not much new multi was started, so there will be a gap probably next year, so expect to see more rent bumps.

#3 some areas like Sherman which is pretty far north saw prices increases probably in 20-25% range for many homes. Not sure how long that lasts, but for sure a shortage of homes for sale.

How long does the party last?.....tough to tell.....My guess is at least 3-4 more years without any major crises like wars or killer CovidX.

You would not believe the lines out the door and around the block for builders of $1mil-$2mil homes here...and some of these won't even be semi-custom any more....builder picks the lot, the floor plan, the elevation, etc....and you might get to pick paint and floors.

[TheProtege]

Would either go for the lesser know outer burbs like others are mentioning (Oak Leaf, Forney, Royse City, Joshua, Anna, Audrey, Sanger, Avondale) where new home communities tend to still be reasonably priced and remote works are fine with living or going the opposite and picking up older cheapish homes in larger cities (Arlington, Grand Prairie, Irving, FW, Dallas) especially in areas that aren't the best but renters either don't care since it temporary, haven't put enough research in, or it's all they could afford while being in this area.

[WorldKlas]

I think Irving is a good investment due to location. Lots of small, older homes so still some pricing is reasonable. Tends to attract fewer families with kids due to not great schools. I like rentals that don’t attract families with kids. My best advise for an individual investor in rental real estate is to learn to manage your properties by yourself and have properties within 30 minutes of your own residence. If you live in a far flung burb, that’s fine. But if you live in North Dallas, don’t obtain property in Burleson!

I believe that Fort Worth is a huge growth area.

Agree with Rakin on Mansfield and also southwest Arlington.

[Kenro911]

Buy in Little elm non HOA neighborhood and put it up on Airbnb for $400 a night. People actually rent those in droves.