Is it a good idea to invest in a modest home in the Frisco / McKinney / Plano area and use it as a rental?

Asked by Kevin, Frisco, TX Thu Feb 12, 2009

I live in Frisco (Creekside at Preston) and have noticed more entry-level homes on the market recently. Are landlords getting a positive cash flow for a standard 3/2/2, 1600-2000 sqft home? I have excellent credit and would like to take advantage of the down economy and low interest rates to get my foot in the door with a rental property. I don't have a ton of money to use as a down payment, but could probably handle $15,000 down.

I was also toying with the idea of buying in a more depressed housing market (Fort Myers, FL) and using a property management service since the housing prices are so low right now. Any suggestions??

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7
Angela Swens…, Home Buyer, Dallas, TX
Sat Oct 30, 2010
I would check out Providence Village for great investment properties. You can get an amazing house for an amazing price and it is very close to Frisco. Also, the community is the best for families with top rated schools. You can find a newer home about 2,400 sqft for about $150,000 or less.
1 vote
Andrea Brooks, Agent, Plano, TX
Thu Feb 12, 2009
Kevin,

Purchasing rental property in our area is an excellent investment strategy. The rental demand has increased considerably because fewer people have the credit scores and down payments that mortgage companies now require. I can't really advise you on speculating in the Florida market, but can tell you as a one-time long distance landlord, the fees eat up all your profit. I own and manage several properties in the Plano area and have consisistently maintained positive cash flow and, of course, good tax write-offs. Feel free to give me a call if you'd like to discuss this further - I'd be happy give you my insights on being a landlord and help you find property that will meet your objectives.

Best regards,

Andrea Brooks
Brooks Team
469-450-326
Web Reference:  http://BrooksTeam.com
1 vote
Dallas Texas, Agent, Dallas, TN
Mon Feb 16, 2009
FYI ` many investors like manage their property in town they live in or have family member. Mgmt companies are great however I have seen lack of follow up destroyed homes on behalf of owners.

I am a realtor, loan officer, investor own rental properties "one stop shopping " there are tips and tricks in order have a net profit per year, receive tax benefits.

CONTACT OUR OFFICE TODAY
972-699-9111
Lynn A. Crosby ~ National Featured Realtor
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0 votes
Bruce Lynn, Agent, Coppell, TX
Thu Feb 12, 2009
Kevin,

I think the trick will be financing. Most lenders require 20% down now for investment properties. With $15,000 for down payment, that would mean finding a home in the $70,000 range. That is pretty tough in McKinney and Frisco areas. Very much fishing, but perhaps you could put together an LOI letter. Go after all the low end homes in the area that are priced around $100,000-$120,000. Spend every night faxing when you get home and do your searches. You might send 1000 faxes before you get a bite, but perhaps someone or some bank will bite for a quick sale. We can show you how to do this if you would like. How are you at rehab? Some of these may require some clean up and rehab.

1st step is getting prequalified with a lender to see exactly what you can do as far as loans go.

For my first property I would go local. It's just much easier to get your feet wet. You can do rent surveys, you can do drive bys, you can line up repairs or do them yourself. You can learn about leases, you can show property, you can do clean outs after tenants move out. You can learn evictions. All these are excellent learning experiences for landlords, even if at some point you PAY and hire a property manager. It's probably good to have a handle on these things before you go long distance.
Web Reference:  http://www.teamlynn.com
0 votes
Terri Hayley, Other Pro, Dallas, TX
Thu Feb 12, 2009
Hi Kevin,

Thanks for your question. We were checking on one of our rental properties that our buyer is looking to sell when you wrote this, so are just getting back to the office.

Frisco and McKinney constantly vie for the fastest growing cities with a population under 100,000 (I think) in the US, so this area is definitely a winner! Lots of jobs in the Frisco and Plano areas and super schools. Many renters want to rent in this area and because of the constriction on credit, they may have money and good jobs, but no credit. It's an excellent time to consider buying an investment home in this market where prices are low and interest rates are at historic lows.

You'll want to be very judicious with your financing. The finance piece is the critical component to make sure you'll cash flow. Depending on the property you choose and your down payment and then the comps for rentals in the area and how your property compares to those that are renting is when it'll cash flow. We have many trusted allies in the business whom we've done hundreds of transactions with who can help you with this part of the equation.

James Gaines, an economist for A&M's Real Estate Center says "The irony is that this year and into next may just turn out to be a once-in-a-lifetime opportunity to buy a home at the best price with the best interest rate."

The just-released "Housing in Crisis: When Will Metro Markets Recover?" predicts that nearly 62 percent of the nation's 381 metro areas will experience double-digit peak-to-trough declines in housing prices. According to Steve Brown at the Dallas Morning News, Those declines will be more than 20 percent in about 100 metro areas, says the forecast by Economy.com and Fiserv Lending Solutions. The report predicts that Dallas-Fort Worth home prices should bottom out in the third quarter of this year and will be a fraction of the losses nationwide. Nationwide, the analysts expect house prices to fall more than 36 percent from their peak in 2006.

In the D/FW area, overall house price declines should be less than 2 percent by the time the market hits bottom in the third quarter, the analysts forecast.

Most major Texas cities -- including D/FW -- went into the home market downturn later than the rest of the country and will level off ahead of the U.S. average, the analysts say. The worst total price declines are -- no surprise -- in California and Florida.

We'd be happy to help if you choose to pursue this avenue. If we can help in any way, please let us know.
0 votes
Patrick Jack…, Agent, McKinney, TX
Thu Feb 12, 2009
Hi Kevin,

Many investors have taken advantage of the more stable market in the North Texas area by transferring their out state investments here. In the last two years we have seen a flood of investors and a corresponding increase in rental properties. Of course supply and demand affects rental rates so we saw reductions in rental prices. Investors were not looking for cash flow as much as they were a safe place to invest. Now many of those investors are facing foreclosure along with individuals because they can't make their payments with the reduced rental rates they accepted. Lately I am seeing a decrease in available rental properties and an increase in rates. I'm also seeing more request for rental properties. There will be many more foreclosures to come and those families who are loosing their homes will still need a place to live. Many of our future tenants may not have the best credit, but there will be lots of applicants to choose from. And Collin County is still one of the fastest growing areas in the country so there will be a constant influx of fresh tenants.

The first thing that you need to look at is down payment requirements for an investment property. This will vary depending on your credit, the balance on your current mortgage, and the investor programs available. Requirements for investment property are even tighter than owner occupied mortgage products. Talk to one of the lenders that are listed on my web site. I trust them to provide you with accurate information.

Real estate is a good investment because the market is down and will turn back up...hopefully sooner rather than later. The market here is not depressed like Florida markets, but I see the stability of the North Texas market as an advantage for investors. You aren't going to get a big increase in value overnight. But you also aren't going to get a big decrease. Slow and steady over the long haul is how you should judge an investment. You shouldn't have any trouble with cash flow on a rental property investment.
0 votes
Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Thu Feb 12, 2009
You will likely need 20% down for investment property.
The right home will cash flow just fine. There are many in the area that cannot buy(or don't want to) so I think you would be able to find renters.
I am not a landlord.... But I have done some investment deals in Plano in the past. A lot of focus by my old clients was for duplexes. Hard to find, but a great rental when you can find one.
0 votes
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