r2i forum

Hi,

I live in the Bay Area and its too damn expensive to buy anything here.
I'm thinking of investing in a condo/multiplex in Texas (austin/dallas/san antonio area). Any thoughts on the pros and cons ?

I understand I have to hire a property manager to look after maintainance.

The point is, will the rent be sufficient to offset the maintainance+real estate taxes+mortgage AND build equity ?

Is Austin area a good palce to try this, or are there are other decent places ?

Has this worked out for anyone on this list ?

Thanks in advance for your time & suggestions.
DHT

Unless you purchase the properties at rock bottom prices, the rents are hardly enough to pay for mortgage, maintenance, property tax. Texas is one of the states having high property taxes as they have to make up the lost income as they have no state income tax.

i live in dallas, tx. If you buy a property inside the dallas area (not the burbs), you will easily find renters, as there are plenty of hispanics who do not have credit to afford a house.
Easilly get a 3 bed 2 bath for 150k. If you put 20% down and get a 30 yr loan your monthly payment would be $900 add $300 for property tax.currently rent for a for 3 bed 2 bath is approx $1600.
So if you pay some guy $150 to manage property costs you would make $250, which as you can see is not that profitable for the effort.
Only way to make money is to either make a high down payment/find a cheaper rental.
Also a friend of mine owns a duplex, in which he rents out each property for $1200.
In dallas area avg property value increases 10%
Let me know if u have any questions

I'm some what familiar w/ the S.F Bay area RE scene and will make a few observation. It may or may not apply to other cities...

If I were buying a primary residence w/ the intention of saving on taxes, building equity instead of simply shelling out rent, experience the pleasure/pride of owning a home and cash out the appreciating RE mkt, I would:

1) Buy in a good school district - High cost of living encourages folks to consider good public schools for their kids.

2) Buy in a mixed race neighborhood w/ a tilt towards Asian race - Schools w/ heavier Asian population are performing very well in the API scores

3) Buy in a newer/developing areas. One can expect to see a spike in their equity.

4) One may want to consider the off season for buying. One may have limited choice, but those who are selling in the off season typically "need" to sell asap and would price their property accordingly.

5) Buy the smaller or mid sized home plan instead of the larger sized home in the neighborhood. This way when two or more homes come up on the mkt at the same time, every other home in that neighborhood will be priced higher than yours! Your home will have a psychological edge!

If I were buying a secondary residence w/ the intention of generating rental income I would buy a condo or a smallish townhouse close to the business district in a not too upscale neighborhood. I might even consider buying a fixer upper close to universities.

Ultimate payoff will be in the equity appreciation. I would not buy simply banking on the rents... In most cases, rents may just help one offset the mortgage/tax/maintenance expense, if one bought in a good location.

Thanks folks. This is for investment only.
Bay area is just too expensive for me to try this.
Also, I currently rent in the Bay area. So, I dont have many deductions and end up paying in my highest tax bracket + AMT and such.

So, I'm thinking of investing outside the bayarea. That way, I can get some mortgage deduction to reduce my AGI + hopefully build some equity in RE.

I have a few questions w.r.t rentals though
1) Is the rental income offset by depreciation most of the time ?
2) Any recommendations on places other than texas with a good rent/mortgage ratio ?
3) How big a pain is the maintainance ? I understand that the 10% fee to the property manage for maintanance does not include the cost of replacing something that is broken. Its only for them to sortof be the first line of defense if something happens + collect rent etc. Is that correct ?

I'm just thinking out loud here. Any inputs appreciated.

Thanks
DHT