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903-509-8855 or toll free 888-TEXHOME
4702 Troup Hwy Tyler, TX 75703
At a time when stock market returns can be negative and interest rates are relatively low...sharp investors recognize the leverage available from investments in new and previously owned homes as rentals.
An overview for investors in Tyler area properties
Tyler is no ordinary Texas city. Bearing no resemblance to the mythical, arid Texas of the movies Tyler has over 40 inches of rain annually. Covered in trees, Tyler reigns over the vast Western end of the Great Southern Hardwood Forest.
Dallas is just 90 miles West of Tyler and Shreveport, Louisiana is only 90 miles East. But unlike either of its metropolitan cousins Tyler is a true Southern town with brick streets and the Southern charm that marks the Bible belt.
Once a best kept secret and weekend escape for Dallasites, the Tyler area now boasts one of the fastest growth rates in all of Texas while still retaining all its charm. In 2002 Forbes ranked Tyler #2 in Best Small Places for business. In addition Forbes states, “Among small metros Tyler is ranked eighth for its high-tech GDP growth. Among all U.S. metros, its growth in GDP per household is ranked ninth.” The boldface is ours but we’re justly proud of Tyler! And we’re still up there today. Forbes
Background (continued)
Tyler is a gem in a setting of black gold. The discovery of oil in East Texas in the 1930’s ensured that the area would breeze through the Great Depression. Indeed thousands flocked to East Texas. Everyone had a job. While the neighboring cities of Kilgore and Longview became the blue collar communities Tyler’s growth was based on money. As the seat for the Federal Court, home to major banks, and the county seat, Tyler drew the white collar crowd and housing in Tyler came to reflect the good times. Oil magnate H.L. Hunt built the family mansion along Tyler’s tree lined brick streets. Others followed suit often competing to build nicer, larger, and more splendid homes. The “Azalea District” as it has come to be called was the first of many neighborhoods to follow in preserving the natural beauty of the rolling, tree covered hills.
In the 40’s nearby Camp Fanin hosted hundreds of thousands of GI’s. Following the second World War many of those soldiers originally from all over the country returned to East Texas to start their families. But no mass market builders invaded Tyler. Sticking to the earlier traditions, Tyler neighborhoods continued to consist of custom homes. Lots in new developments were offered to all builders insuring competitive high quality design and construction. (Still the case today)
With its wealth, Tyler society demanded culture. The city developed a rich character founding theater companies, an orchestra, planetarium, zoo, museums, country clubs, lake resorts, and colleges. Tyler even has its own national media with regional headquarters for ABC, CBS, NBC, and FOX. The medical community is the county’s largest employer. Three major hospital complexes serve the surrounding area’s 900,000 residents. Recent rediscovery of vast untapped natural gas in the area has fueled a new 21st century “oil boom”.
As the major retail center in all of East Texas, Tyler has an abundance of fine restaurants, shops, and specialty stores. Early on industry discovered the multiple advantages of Tyler. Huge manufacturing plants like Tyler Pipe, American Standard, and Carrier Air Conditioning sprang up. They were followed by Brookshires Grocery Co., Target Distribution, Suddenlink Cable Corporate and more recently the specialty high tech sector.
Both public and private education is superior in the Tyler area. Many of the public schools boast “Exemplary” ratings, the state’s highest rating. A number of Christian School systems offer K through 12 with outstanding academic ratings. Tyler Junior College is the largest two year institution in the country serving over 20,000 students and is top ranked in football and tennis. The University of Texas at Tyler has a spectacular campus, a new fine arts center, and graduate schools of nursing, business, engineering and many others.
Within a 20 minute drive are Lake Tyler and Lake Palestine, two huge recreational lakes. Five major golf complexes, a sports stadium, baseball stadium, convention center, and the East Texas Fairgrounds provide Tyler diversions.
Tyler has always drawn interest from retirees and the trend is continuing. Issues that concern retirees are proximity to medical services, recreation, cultural and continuing educational opportunities, safe neighborhoods, low cost of living, charity volunteer opportunities, moderate climate, churches and other supportive fellowships, low housing costs, and ultimately home resale prospects for heirs. All of these criteria are met and exceeded in the Tyler area.
Tyler Housing Prospects
Tyler enjoys an extremely low unemployment rate (currently under 6%, one of the lowest in the state). The steady growth in family income brings pressure for larger housing units. House rentals of any kind are hard to find. New homes as rentals were previously unheard of.
Mid sized houses 1300 - 2000 square feet are the most sought after in both the existing and new home markets. Little unsold inventory exists in that size range.
The challenge for us at Home TeamReal Estate
For many years we have been active with the Tyler Area Builders Association. We have long experience in listing new properties for local builders and are use our long standing relationships with area builders to offer special properties to investors looking for investment rental homes in the Tyler area. These properties appear unexpectedly and sell quickly to prepared investors.
Sometimes we run across nearly new existing homes or builder trade-ins, strategically close to the University or Tyler’s huge medical complexes that can have exceptional positive returns. We can also offer pre-sales of custom built homes in selected new developments. (These properties will require you wait for construction.)
How to decide... Appreciation + Tax benefit + Income (or minus any cash flow negative)
First consider appreciation... The best investment decisions deserve some research and we’ve done part of it for you! If you are considering investing in new homes as rental properties or relocation for your own retirementwe have some great news for you. Appreciation rates in Tyler are well above average. To assist our investor clients we have found some comparison statistics between Tyler and many of the other popular areas of the country offering new home investments. Click on the links below to compare new home costs and appreciation rates.
The tax benefits of rental income properties have been designed into the tax codes to promote investment and the upgrading of America’s housing. The income derived is not subject to certain taxes but consult your tax professional for specifics.
Now let’s consider income (cash flow)... Here is a typical breakdown for a new or nearly new Tyler area home as a rental investment.
Property Description: 3 or 4 bedroom, 2 baths, 1200 - 1800 sq. ft., variety of floor plans, fully landscaped front and back yards, sprinkler system, fenced yards, blinds, dishwasher, microwave, and garage opener.
Here is a sample of a typical cash flow analysis that we will provide on specific properties. Because there are literally hundreds of possibilities please narrow your choices to one or two properties before requesting a cash flow.
Example:
Purchase Price
$100,000
Down Payment*
5%
$5,000
Closing Costs
$3,000
Management Setup Fee (1/2 month rent)
$700
Loan Amount
$95,000
Interest Rate *
7.375%
Estimated Total Cash Out of Pocket
$8,700
Estimated Monthly Cash Flow
Principal and Interest ‡
$656.14
Property Tax
$120.00
Insurance
$60.00
Association Dues
N/A
PMI
N/A
Estimated Monthly Expense (before Management Fee)
$836.14
Income/Expense Range
Low
High
Estimated Rental
$950.00
$1,050.00
Monthly Management Fee
10%
$95.00
$105.00
Estimated Monthly Total Expense
$931.14
$941.14
Estimated Monthly Net Cash Flow †
$18.86
$108.86
* Interest rates and required down payments vary with market conditions and borrower’s credit worthiness.
‡ Principal and interest payment assumes a 30 year fully amortized fixed rate mortgage. PMI, interest rate, and loan terms vary by lender. Cash flow may be increased with ARM loans.
† Cash flow is before consideration of tax and depreciation benefits.
The examples provided are to assist in comparing alternative residential investments. The information provided is based on reliable information but accuracy is not guaranteed. The figures used are matters of opinion and should not be relied upon as fact. No specific properties are quoted and the numbers will vary depending upon market conditions. Additional expenses due to vacancy factors, repairs, and extraordinary promotional effort should be anticipated. Taxes, insurance, association fees, closing costs are estimated based upon typical properties. The broker does not guarantee any rents or costs associated with this or similar investments. Buyers are to do their own research to verify data for specific investments. Buyers assume all risk of loss of value or rentability.
