Scott Thomason

BDub,

I think you may need to clarify what you mean. Did you really mean how’s the market in Dallas? Further, are you talking about buying a single family home for you to live in? Do you mean you are interested in investing in single family homes to rent out? Are you looking to flip houses? Are you interested in vacant land? Are you looking to invest in multi-family units? Each on of these scenarios has its own plusses and minuses and each of these is affected not only by the overall market in the DFW Metroplex, but also issues on a more local scale. Thus the overall market in DFW has not been affected nearly to the extent that some markets have in areas such as California and many of the Eastern and Northern cities, but there are vast differences among local communities. For example, some suburbs locally may have seen double digit increases in home prices over the last year, while others have seen an overall decline. This is where it’s important for an investor to work with a real estate pro that knows the market in the area you are looking to invest in. Without this knowledge, you may be in trouble from the start.

Keep in mind that regardless of market conditions, real estate, like any investment, has an element of risk. Sure, the amount of risk is affected by the aforementioned market issues, but even more important is the type of investment. In general, non-income producing investments such as vacant land and flipping houses are the riskiest, followed by renting single family units. Multi family units are generally the safest form of real estate investment in any market (notwithstanding investment clubs, REITs, etc.), due to the mitigation of occupancy issues that single family homes have. In other words, if you invest in a single family home and your renter tears it up or skips town, you’re in trouble. On the other hand, if that happens to one of your units in a multi-family dwelling, you can mitigate that loss across the other units. Indeed, one of the important factors in evaluating the viability of a multi-family unit is the occupancy rate. A common part of the due diligence process is to compare historical occupancy rates for the property in question with local occupancy rates. Any good commercial realtor in a specific area can give you those figures.

By the way, there is a lot more to the due diligence process than just occupancy rates. I simply mentioned that to drive home my point about risk. Overall, the best advice I can give you is to find a good REALTOR that will work with you to meet your investment needs.

Good luck! - Thu Jun 7 2007, 08:38