Californian Speculators Buying Texoma Houses ‘Like Crazy’
The Herald Democrat found some speculators are now buying in north Texas. “There’s nothing like owning a house, that is until the air conditioner goes south or the water heater explodes or the government decides to raise property taxes to beautify the waste disposal plant. For all the benefits of home ownership, some real, others overstated, some people just don’t want the hassle.”
“Pam Harper, office manager and agent with a Sherman realtor estate company, helps newcomers to the area find housing. ‘The rental market must be pretty lucrative, because we have a lot of people, investors buying houses to fix up and use for rentals.’”
“‘Denison doesn’t have a lot of apartments, but there are usually houses for rent. The ones I manage run from $450 to $900 a month. The $450 is a 700 square foot, one-bedroom, one-bath duplex. On the upper end would be a three bedroom, two bath, two car garage, 1,900 square foot house. I see the market peaking in Denison around that range,’ said Norman Gordon.”
“Sharon Broiles, a Sherman Realtor, says she lists properties ranging from $250, for an efficiency duplex, to $1,300 for newer home in a modern subdivision. ‘The hardest thing on the property is the moving in, moving out. That takes a toll on the property. Most of the time, they’ll be responsible for the yard,’ she said.”
“Right now, Broiles says most of her properties in Denison are rented. That’s the result, at least in part, of the arrival of the Ruiz food processing plant.”
“Single family, mid-priced homes are the fastest selling real estate in Texoma according to local Realtors. Mack Broiles, a Sherman Realtor, said he has seen a significant increase in sales in Sherman. ‘People are buying houses like crazy,’ he said.”
“He said people from all over the country are expressing interest in Grayson County. He has had several people from California purchase homes ’sight unseen.’ Joy Jordan, also a Sherman Realtor, confirmed Broiles’ account of interest from investors in California.”
“Both said there is plenty of available housing on the market right now. ‘We have a six month supply of homes,’ Broiles said.”
“For the time being, Texoma is still somewhat insulated from the boom boom energy that drives the rental markets in Dallas and the surrounding areas, but like everything else associated with the big city, those pressures are just down the road and coming fast.”
The Herald Democrat found some speculators are now buying in north Texas. “There’s nothing like owning a house, that is until the air conditioner goes south or the water heater explodes or the government decides to raise property taxes to beautify the waste disposal plant. For all the benefits of home ownership, some real, others overstated, some people just don’t want the hassle.”
Now here is an unpleasant scenario for you:
1) CA investors get stuccoed in Texoma investments.
2) When they learn they cannot sell for a higher price, they decide to hold on by renting until prices head north again.
3) Realizing a new potential revenue source which poses no threat at the local election booth, the local govt decides to raise property taxes.
…they can even make stipulations on whose property taxes gets hiked. Here in Florida they like to increase property taxes on out of state owners (snowbird, investors, etc.) before they make increases on resident occupied properties.
It cannot be “out of state residents”, it needs to be different property taxes on non-primary residents. It will have to impact Texans who own second homes in Texas too.
We are facing the same thing in CA. Prop 13 is a mess (restricting increases in property taxes on all real estate). I’d love (and support) a change in Prop 13 whereby it only applies to primary residents. Right now there is a major free-rider problem. Folks who have owned second homes in CA for a number of years have enjoyed the benefits in appreciating real estate have been paying almost nothing in property taxes. That is not the same for residents–they have been enjoying the benefits of low property taxes, but they have been paying 9.3% state income tax.
I thought I’d heard everything. Californians buying sight unseen in Texoma! FYI, this is north of Dallas, and close enough to Oklahoma to get the name. Not that it’s a hellhole or anything, but the addition of a food processing plant won’t neccesarily make the area an investment mecca. Notice the locals are clueless as to the cause of the trend.
Tell me I’m dreaming and didn’t read this. Please.
Pinch
I think there’s a movie in there somewhere, about some blue state Californicaters coming in to these 99%-George-Bush-voting, cattle-herding, tornado-twisting, bible-thumping, dry-can’t-buy-a- beer-for-200-miles, Friday-night-high-school-football-watching, pickup-driving, sheriff-looks-like-billybob-thornton, still-listening-to-George-Strait towns.
that is classic my friend
“Footloose”
Seems like here in Florida its now obvious speculators created a false demand. Buying up between 30-40% of homes and 70-80% of condos caused a frenzy that came to an end somewhere around August. Now much of Florida is deep in buyers market territory. Even builders and realtors here are admitting speculators are a big issue.
Texas looks appealing to the speculators, cheap homes but Texas is no California or Florida, At least Ca and Fl have the illusion that they are running out of buildable land.
Was visiting Tulsa, OK about a month ago. No-frills middle class neighborhood. TONS of “For Sale” signs–a few with “For Rent” signs planted in the ground beside them. Asking prices in the $80k-$95k range. Wish I had my digital camera–could have captured five or six “For Sale” signs in one photo.
If everyone would start carrying their digital cams around the slideshow would be overflowing! What you saw is the case for north Texas. There will never be a shortage of land, ever. These absentee landlords are about to get a taste of Texas property taxes. Not to mention tenant/storm damage and management fees, with zero appreciation. (Storms in north Texas?)
How much of this do you attribute to Carlton Sheets? He’s still holding seminars on buying with nothing down, and then renting properties out, and his infomercials run constantly.
Well, somebody told these speculators about the area. You couldn’t find it on your own. I was thinking the same thing. Some seminar probably told em, ‘hey, Tyson’s opening a plant in an area where houses cost under $100k.’ Have you ever been downwind from a food processor? Wait until the first hail storm.
Jesus H. Christ on a popsicle stick. Am I going to read next that Clownifornians are buying properties sight unseen in Beaumont and Orange, Texas? How about Alvin? After all, that’s the home of Nolan Ryan! That has to be good for something!
Alvin, Beaumont and Orange are all hurricane-prone. Beaumont and Orange are refining towns, Alvin in a suburb of Houston. Alvin, perhaps. But not the “Golden Triangle”.
Then again there is no use in rationalizing with a Californian who has housing equity caught in a real estate mania.
The out of state investors are blinded by their own greed and think the bubble they witnessed in CA, AZ, etc. will simply repeat itself in all of the lower priced markets. Get a 100K HELOC on my personal home, put 10K down each on 10 100K rental properties and I’m a Millionaire. “I can handle the negative cash flow because these “underpriced” properties are sure to double in a year or two…I’m so smart and savy!” This is idiot math, but they truly believe it.
Not just Texas, but Arkansas too. A California friend of mine took a cash out refi on his San Diego condo and would spend a part of each work day talking to realtors in Arkansas about buying “investment” homes. Doesn’t everyone know that all the baby boomers are going to retire in wonderful Arkansas (you can visit the Clinton Library) and drive the prices sky high!. He was willing to do it sight unseen (these guys are willing to risk 10s and 100s of thousands, but not spend the few hundred to buy a plane ticket and actually check out the property & area. Guess the plane ticket costs “real” money, whereas the house investment money is “funny” money.)
I knew it , the speculators were going to go down to Texas next thinking thats were the next big run up will be . Im telling you , this is like a disease , you can predict were its going to go next .
Flippers bought the lake house down the street, here in Austin. They are from Las Vegas, but bet they are originally from California… their pet pot-bellied pigs run free through the neighborhood. I don’t think they understand their pets might become someone’s BBQ dinner. That, along with their sinking financial fortunes, will be their little “welcome to Texas”.
LOL. Yep…….Don’t mess with Texas .
One thing I’ll say about Texans. They know a sucker when they see one. These clowns won’t know what hit them in a very short time.
Usually, I hate using caps, its impote, but
HAHAHAHAHAHAHAHAHAHAHAHAHAHHA…………….
http://www.craigslist.org/eby/rfs/143169735.html
HAHAHAHAHAHAHA…..
Want to buy half a dozen homes in SF bay area?? You’re in luck, you can buy from this guy
Sorry about the typo, its impolite…. Laughing too hard to type, OK - all the bay area owning more than 2 dozen homes & planning to relocate out of country need to register with BIS.
“Relocate” out of the country?? Is that double speak for ‘I’m so hopelessly in debt that I’ve decided to flee the country to escape my creditors’? This guy has $51,000 per MONTH in mortgage payments!
This guy probably HELOC’ed all the equity and more out of all these homes and lived like a king for the past few years. Now he’s looking for some suckers to pick up his tab.
Let him rot.
I’m sure he’s good for it!!
And, they are all Ghetto prosperities. You get a choice of a free AK-47 or an M-16 rifle needed to collect the rent! LOL
our oakland buddy is obviously some kind of fb legend. they speak of him in hushed tones at chris szabo seminars.
i must return to that website to stare some more.
Good luck on ‘taking over’ mtg and payments. Not since Wellencamp was overturned. When lenders find out and ‘call’ the notes and TDs, new F’d borrower is created. Creative financing at its best. What say the bretheren , ‘Satisfactory?’
If Pam Anderson did it, it must be ok.
http://tinyurl.com/zeao2
The developer probably sold the unit to her for $1 plus the free PR.
Uh Oh, ben is trying to shed his heliben tag
http://www.bloomberg.com/apps/news?pid=10000087&sid=a4W5p24W4NFw&refer=top_world_news
“If spending depends on long-term interest rates,” Bernanke said, and special factors lower those rates, then overall demand will be stimulated and “a higher short-term rate is required.”
Owes on six houses and planning to leave the country. The financial institutions in this country are so screwed it isn’t funny.
Again, my comments about the heavy participation in this bubble by noncitizens who will vanish. It’s getting boring to see everything I was expecting happen so quickly.
I’m surprised it took so long. RE is really cheap in TX/OK compared to other places. Will come to a quick end though I suspect.
Funny, I lived in Texas for 20 years and never heard the term “Texoma” before. Makes sense I guess.
Lake Texoma is right on the border of Oklahoma and Texas. Yes RE is cheaper in Texas. I can hear the speculators now: “Those dumb old Texans don’t even know what their property is worth”. LOL
It’s where the rednecks and Dallas lawyers go to shoot ducks and geese in the fall and winter. A more desolate, crappy town I cannot imagine.
Coleman?
I visited the place when I was stationed at Sheppard AFB in the late 80s. The area was desolate but we stayed drunk almost the entire weekend so we hardly noticed.
My favorite quote….
“Pam Harper, office manager and agent with a Sherman realtor estate company, helps newcomers to the area find housing. ‘The rental market must be pretty lucrative, because we have a lot of people, investors buying houses to fix up and use for rentals.’”
Um…she is a realtor in this market and “thinks” that the rental market must be lucrative?? At what point do you think it might occur to her that since this is her paid profession, she may be actually EXPECTED to know a thing or two about the local market??
Hey, the people that hire her don’t seem to mind. Sight unseen, indeed. .
OT
Hey SoCal,
Just got my April issue of Money and was not surprised to see your blog mentioned in the article “Blogs from the Financial Front” page 44.
FLmtgbroker, How is business?…Are you still doing refis?
Actually, I own three rent houses in the Pulte subdivision in Sherman. Two rent for $1,100 and one rents for $1,195; each cost about 105k total (that included “discounts” of about 15k plus 6% off since I have a real estate licence); I put 20% down on two (30 year fixed) and 10% down on one (15 year fixed) and they cash flow as a group even allowing for the 10% of gross rent I pay the property management company (unlike in Dallas, they do not charge extra for finding a tenant which helps).
It concerns me that out of state investors have discovered Sherman, but it is a much better deal for rent houses than many of the other areas that have already been discovered; North Fort Worth, etc.
I doubt you bought sight-unseen. If Arizona is any model, your rent houses will be competing with negative cash-flow speculators for months to come. I really feel for the regular landlords here, who must put their older properties up against brand new, tricked out $700k homes.
It’s the bankruptcy capital of Texas as you will soon find out.
You make $1100/mo. rent on a 100k house in Sherman, TX?
Bull corn!
That’s what I was going to say but I’m quickly developing a reputation as someone hostile to “investors.” LOL. Didja notice? Always a lot of bragging and yet all these masters of the universe have time to post of message boards instead of lolling on the beach in the Caribbean.
Good point…very rough figures would have P&I for a 100K home about $600 (6%, 30yr, fixed), taxes about 270 month (guessing 3.2% rate), and prop insurance about $60 month. That only totals up to $930 gross. Maybe I’m missing something but $1100 rent sounds a little off. Sly_Ace has a good deal going.
You can look at the papers rentals here. Some excerpts:
Out of 50, this is the only one I saw over $1,000:
Luxury executive home, pool, hot tub, large 3/3/2, stained glass distinctive floors, $1600
4/2/2 brick, 1.3 acres, 1700 sq. ft. Home located on Hwy. 56 East, Blue Creek Estates, Sherman. $1000/mo. $900/dep.
House for sale or rent.
3/2/2 on 1 acre,
$900/mo. $900/dep.
For sale $110,000 or make offer. Owner must sell or rent ASAP
So then why doesn’t Sly_Ace buy that 110K house also since he has so many great renters? Heck, I bet he could buy the whole town and put it on a good, positive cash flow basis. Imagine, the whole town working to pay for old Sly_Ace’s easy living. The owner sounds desperate. Maybe the guy with the 110k house is Sly_Ace, wouldn’t that be a hoot?
“It concerns me that out of state investors have discovered Sherman, but it is a much better deal for rent houses than many of the other areas that have already been discovered; North Fort Worth, etc.”
Sly Ace, just wondering if you would mind sharing your prospecting methods for discovering fertile rent house areas. Must be hard to find places where house values have not caught up with rents yet. What happens if you take the plunge on a property, and other investors come in behind you and undercut the rents?
You treat your current renter like gold, and *request* that they sign a shiny new 1 year (or 2 year, or 3 year) lease to lock in your current rental income before the specuvestors’ ever increasing rental inventory pushes rents down.
Sounds a lot like people chasing returns. This is going to be ugly.
San Diego County ziprealty inventory just passed the 18,000 milestone tonight.
Txchick57, yes last year one of my tenants called on the last day of the month and said they were moving out. A few weeks later I received their notice of bankruptcy. Actually, I was lucky they called and moved out voluntarily instead of making me evict them. I was also lucky that this happened in the summer so finding another tenant happened fairly quickly.
Ben, yes, most properties in Sherman rent for less than $1k. Thanks for the link. I may have just been lucky.
Mort/Txchick, believe it or not, it is true. The houses are probably “worth” in the 115k-120k range (that is what they appraised for). Pulte will offer “discounts” every so often to move inventory in selected subdivisions and last year they paid a 6% commission once one purchased three houses. I have also had my share of mistakes; e.g., one house in Crowley sat vacant for 6 months and another in Little Elm that cost 140k (even after a 40k “discount” — the appraisal suggests it was really only 15k) only rents for $1,295. The reason I bought 3 in Sherman is because the cost is less than DFW and the rent is about the same. I think the house in Little Elm has more appreciation potential than the Sherman houses, but I thought when I bought it that I would get at least $1,500 in rent — live and learn.
Brad, here is my methodology: (1) I only buy new construction. (2) I get in the car and drive around the subdivision to see if there are lots of “for rent” signs. Most of the time, any subdivision in my price point (130k or less), there will be lots of houses for rent. In some places in Ft. Worth, there are 2-3 houses for rent on each street. (3) I go talk to the sales guys in person during the week when they are not busy. They are bored and love to talk and I get ideas on where to look from them. Also, they will tell me when they expect management to offer discounts to move inventory. (4) I ask my property management company what they think I can get in rent. As for what happens if other investors come behind me and undercut the rent: I guess I will find out in Sherman.
Mort, why so hostile? I am a big believer in the housing bubble (I have been short the HBs since August). It is not like I am buying in Vegas or Phoenix and hoping to get 20% appreciation per year. I am buying in North Texas with 10-20% down using 15 and 30 year fixed hoping to get 3% appreciation per year.
If you’re really hoping for 3% appreciation per year, why not just save the cash for 5% interest CD or I bond?
LEVERAGED 3%, and all that it implies…
really? you’ll lend me $1 million at 5% so I can invest it at 3%? where do I sign?
Tax benefits, depreciation, claiming your car and mileage as business expenses then add 3% appreciation and it looks pretty good. A combination of OPM and tax avoidance can work.
goleta,
This answer is argumentative, not bullish. However…. you’re making an error in your 3% calculation. 3% appreciation on 100k is 15% appreciation on a 20k down payment. If you have positive cash flow, depreciation, tax deductions, etc. then your ROI is greater.
Having said that, investing in anything based on a hope it will appreciate is simply gambling, not investing.
Your investing methodology is sound and it certainly sounds like you’ve done your homework. Good Luck on all your properties. You are taking the risk, so you deserve the potential rewards. I shy from these kinds of deals because of the property management fees cutting into cash flow and the high risk of vacancies or poor tents damaging the property. A few units empty for several months or property damage can kill several years worth of any positive cash flow or appreciation in a slow market. Again, Good Luck.
oops, Tenants (not “tents”)
I am not hostile, if you are making money, that is great, I just thought those rents seemed high. I am curious, how long have you been running this business? Since it sounds like you are highly leveraged I am wondering if you have ever tried renting during a downturn in the local economy. Most of the landlords I have known over the years deal on a cash basis and have little/no debt on their rental properties. I do however wish you luck with your business.
Texoma soon to be referred to by F@cked Borrowers as “Carcinoma”…
I’ve been watching the condo/townhouse inventory on realtor.com in Loudoun County (northern VA). Here’s what I’ve seen: Last summer, the inventory reached a high point of approx 900 units and then gradually dropped to around 675. Then it started climbing again early this year and it’s now back to 889 units. To put that in perspective, a buyer looking for a townhouse has 89 pages of listings to browse through in realtor.com — just in sleepy Loudoun County! Some of these units have been on the market since last summer, as evidenced by the leafy green trees in the photos. Here’s the kicker — almost 300 of those are priced above $500K. How many folks do you think there are that make $200K plus that are out shopping for a $600-700K townhouse next to a strip mall an hour away from DC? As these sellers are soon to discover, the only market that ever existed for townhouses at that price was the pool of other flippers.
Forgot to add: we rent one of these $635,000 townhouses for $2300/mo, includes HOA, cable, local phone, broadband, and trash. According to realtor.com calculator, the payment @ 6.25% interest and $0 down (you can’t use a dp in a rent|own comparison) would be $3910/mo. Factor in taxes and everything else and you’re looking at $4500/mo minimum — almost double what we pay. Who the hell would buy a place that they could live in for half the price?
I guess everything is relative, but I do not consider 10-20% down to be highly leveraged. I have been doing this for less than 3 years so I am certainly no expert with respect to what happens when the economy turns south (though my guess is that it is no fun). As for management fees, vacancies, etc. cutting into cash flow, this is certainly true, but there is no way I would do this if I had to manage the properties myself.
While there certainly is some recent out of state investor interest in North Texas that is skewing the market, this area is radically different than much of the country with respect to the bubble: lots of land, high property taxes and insurance, and other factors have kept prices from getting too far ahead of rents, though it is happening to an extent here as well.
They keep property taxes purposely high in Texas to prevent rampant speculation, that, combined with almost unlimited land keeps prices in check. As long as people keep buying, they will keep building. I am glad that you are cash-flow positive (and that is the tricky part long-term). I wish you all the success in the future.
As long as the rental market is decent in your market and you have an emergency fund if tenant move out, it look like a good deal. I would pound on these kind of rental number if it is available in my area. Look most people in this blog seems to dead set about owning real estate. But my take is that as long as price is right or the finance is right, there is a price for every piece of real estate that will make us money. It is just that in most area, we are not there yet. But if your number come out right then by all means enjoy the life of a landlord.
i’m in santa rosa ca,and last year we had a loan broker in petaluma,giving seminars using a book called “missed fortune” advising people to do a cash out refi to buy investment sfrs out of state.he had 30 loans in the pipe in one month! mostly older folks with lots of equity and good credit….then he did the purchase loans,all option arms through world,between three and five for each original refi(these were i/o loans,5 year balloons)and steered these folks to hot real estate markets,like phoenix,where he happened to know a realtor with a positive attitude.harry is now in the santa rosa office,still has a positive attitude,but i wonder how those investors feel? my wife has the carlton sheets crap and has been pestering me for 2 1/2 years to buy….i just run a rent to buy,show it to her and she stops pouting after a few days.