First, let me say that your strategy to hold rather than flip is solid. The inventory in the Dallas area is heavy with properties in the $150K price point so there are many equity position opportunities. Also, with the sub-prime collapse, the Buyer pool has decreased and many of the Buyers have entered into the "tenant" pool with aspirations of become Buyers in the future. Bottom line is that there is a good combination of properties and tenants available to investors than can hold property short-term.
As an investor, you know that you are not buying property as much as you are buying cash flow. So properties that are already tenant occupied, Section 8 housing and absentee owner properties would provide the kind of portfolio to choose from that would lend themselves to positive cash flow. I would shy away from foreclosures because of the potential out of pocket expense required to make these habitable. There are enough non-foreclosure properties available to choose from that will provide a low acquisition and operating cost without having to resort to distressed property.
To me, one of the most important factors in determining if a property has potential is the cap rate you need as part of the exit strategy. Typically, my investors feel that a net 10 cap at disposition is acceptable. The issue that will have the most impact on this of course will be your acquisition costs...leveraged or non-leveraged...and your disposition costs - assuming rent / expenses provide a neutral or positive cash flow.
Lancaster has a high transient population so the opportunity for tenants in rental property is good. I did a quick search and found about 130 properties under $150K. I picked these three...click the link below or paste it into your browser...that have a 20% to 25% equity position at List Price which can be negotiated even better.
There are several areas within the Dallas area that are good candidates for supporting rental property. Carrollton and Farmers Branch are areas that my investor clients have had good luck with. And almost anywhere in South Dallas...Lancaster, Duncanville, Cedar Hill, etc.
It has been my experience that I have to review and analyze 100 properties to find 1 that is viable. But the current inventory is high enough so that there are plenty of properties to include. And the local MLS is growing at about 1/2% daily.
Hope this helps. With the right strategy and expectations going in, the Dallas area should provide you with ample opportunity to succeed as an investor...in this market.
Please feel free to call or email if I can help you with your decisions.
Thanks for using Trulia.
Alan Wynn - Realtor
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