The Key to Sourcing Inventory
Before properties even reach the market, bypass bidding wars by dealing directly with asset managers, purchasing in bulk and in cash. Developing these relationships is essential because it provides exclusive access to the best deals and the best properties, rather than using sources like MLS listings which are universally accessible.
Characteristics of an Ideal Dallas Investment Property
* Newer builds – Phil concentrates on 2003-2007 model brick and slab construction to withstand the extremes of Texas weather.
* 3-5 bedroom; 1300-1700 sq. ft. – This is the optimal size for the rental market.
* $110-140,000 range, renting at $1175-1600 monthly – This provides an excellent rent-to-value ratio of 1% of purchase price or better.
* Neighborhoods with a minimum of 80% owner-occupied/ maximum 20% renter-occupied ratio.
Phil recommends that you “go in with the investor’s eye”, focusing on factors like school system and crime rate rather than getting the rock-bottom priced property. His property rehab strategy emphasizes “economy of scale”, getting maximum efficiency by purchasing materials in bulk. This translates into savings since with each rehab property all major systems and appliances are replaced.
Special Appeal of the Dallas Market
For investment property, the Dallas-Fort Worth area is tops in terms of rate of return, with high rents and a cost of living well below the national average. With no state income tax, renting is especially appealing since tenants avoid the state’s comparatively high property tax. Of course investors recoup that with higher rents. Moreover, Dallas is a city of big spenders, not necessarily savers. Texas ranks at the bottom in credit scores, but this in turn gives rise to a massive rental market.
Buy & Hold with a minimum of 5 to 10 years investment should be the approach with Texas property, allowing time to offset closing costs. Buy down financing – paying 1 to 3 points up front in order to secure a lower 30 year rate – is equivalent to pre-paying interest. This method yields savings within just a couple years of the loan.
This third largest, cosmopolitan North Texas city is among the top spots for entrepreneurs with appeal to diverse domestic and international businesses. Unemployment in Dallas is under 5% and the city is second in the US in job growth. Housing is priced 23% below the national average, with a robust 90% apartment occupancy rate, translating into excellent prospects for long-term appreciation of investment property.