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Our Analysis 

First-Time Rental Investor: Where to Look?

8/29/2020

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A question came up on the website city-data.com that is frequently asked about real estate investing in the Dallas-Fort Worth area: "Where do I start?"

Everyone has their favorite area to invest, but what if we wanted to be totally objective?

I went into the latest test version of the Locate Alpha system and set some constraints so that the suggestions are solid enough for a first-time investment:
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  • House price <= $180k
  • Cap rate medium to high by DFW standards
  • Historic appreciation in the last 3 yrs >= 5% pa
  • Neighborhood change (edu levels, income, crime) stable to improving
  • Violent crime 4 out of 10 or below relative to DFW metro
  • Economic stress 6 out of 10 or below relative to DFW metro
  • Demand score (job access) medium to high

There are are a few areas like this on the Dallas side, but you will find more on the Fort Worth side. Some examples are shown below. From there, you start monitoring the listings in those areas and seeing how much work you're willing to put into upgrades. If you're looking for something rent-ready, which I recommend for a first investment, there are ones that pop up that have already been fixed up, which after all costs, gets you a lower cap rate but still could achieve 4%+.

For a second or third property you can start to widen the criteria a bit and take on something a little more ambitious.
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​About Spatial Laser

We are building a software-as-a-service offering to help real estate investors discover where to buy rental properties, down to the exact block and individual opportunity. We use machine learning to model investment returns, risk, and market conditions at the hyper-local level using proprietary ranking and scoring. We display this visually in a colorful map-driven system. Investors get recommendations they can act upon immediately.

As we build our product, we are looking for early adopters and test users. Be the first to know about product updates by signing up here: https://mailchi.mp/spatiallaser/prelaunch
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Dallas-Fort Worth Houses Keep Getting Bigger

8/24/2020

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Have you ever noticed all the big houses in the Dallas-Fort Worth suburbs? They are a reflection of changing consumer tastes over time, as well as dramatic growth in high-paying professional jobs. 

Big houses weren't always so common. If we look at the data, a noticeable jump in average home sizes happened in the mid-to-late 1980s. This coincided when everything was getting bigger in Dallas — most of today's high-rise skyline also sprouted up in the '80s.  The size of new homes surged from 2,100 sqft to 2,500 sqft. Sizes have crept up only slightly since then, to about 2,600 sqft on average today.

Even before that, there was a jump in size from the modest homes of the 1940s and 50s, to the larger and more luxurious homes of the '60s. The size of new homes took off in the 1950s, rising from 1,500 sqft on average to 2,000 sqft by 1965.
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Meanwhile, lot sizes for newly built homes seem to be getting smaller.
  • After a peak in 1965, lot sizes have been in decline, with a significant drops in the 1980s and again between 1995 and 2005.
  • New homes tend to be larger and on smaller plots of land.
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  • The number of bedrooms in a typical new house surged between 1940 and 1965, and then again between 1980 and 1990.
  • The typical new house today has one additional full bedroom, on average, compared to houses from the 1940s.
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  • Similarly, the number of bathrooms surged from 1950-1965 an then again from 1985-1990.
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What might the post-COVID future look like if more people work remotely and demand larger homes that can accommodate home offices? We may see another bump in average sizes soon.
About Spatial Laser

We are building a software-as-a-service offering to help real estate investors discover where to buy rental properties, down to the exact block and individual opportunity. We use machine learning to model investment returns, risk, and market conditions at the hyper-local level using proprietary ranking and scoring. We display this visually in a colorful map-driven system. Investors get recommendations they can act upon immediately.

As we build our product, we are looking for early adopters and test users. Be the first to know about product updates by signing up here: https://mailchi.mp/spatiallaser/prelaunch
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Finding the Hot Blocks: Part 2

8/13/2020

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Continuing on our theme of improving neighborhoods in Dallas, we decided to look at the question from another angle: code violations.

What are code violations?

They are things reported to the city's "311" hotline system that affect the quality of neighborhood life. According to the Dallas Open Data website, "The most common are high weeds, litter, junk motor vehicles, and bulky trash."
Looking for improvements

We set out to look for improvements. A neighborhood where code violations are in decline are places that are showing improved levels of upkeep and pride of ownership. We compared the two year period of 2016-18 (the latest available), which had a whopping 266,000 violations across the city of Dallas, with the two-year period of 2014-16.


Several hot spots showed substantial reduction in the number of violations reported per square mile:
  • Areas around Fair Park, especially just east of it
  • Piedmont Addition, an area on the way to Pleasant Grove
  • Winnetka Heights just past the Bishop Arts District
  • Cockrell Hill along Illinois Ave.
  • Wynnewood
  • The area around the VA hospital
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These are all areas that are worthy of a closer look for future investment potential. Taken together with other indicators we have explored, like renovation activity, building permits, and others, we can pinpoint with a good degree of confidence where things are headed.
Code violation categories:
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Source: Fort Worth Code Compliance Division
About Spatial Laser:

We are building a map-driven system and app called Locate Alpha to help investors quickly screen investment locations to avoid making investment mistakes, using advanced mapping techniques. To sign up for updates, please visit our home page www.spatiallaser.com.
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How Heatmaps Help You Find The Hot Blocks

8/7/2020

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How can we identify neighborhoods that are on the up-and-up? Places that are rapidly improving, where money is pouring in to keep houses fresh and up to date?

These are often the type of areas that are going to see significant uplift in price over time.

One way to do that is by changes in economic indicators, but what if we want something that's a little more "up to the minute"? We decided to check MLS listings for the number of times the word "upgrade" or "renovated" is mentioned, and put that on a map.
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In Northwest Dallas, an arc of renovation is clearly pushing westward into areas that were historically cheaper.
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South of I-30, renovation activity is radiating north and west of the Bishop Arts district.
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If the word "renovation" in an MLS listings is telling us that renovation has already happened, that makes it a kind of lagging indicator looking at the recent past. What if we wanted something forward-looking that might tell us a hint of the near-future? Building permits can help. We took building permit data from the Dallas Open Data Initiative and filtered out major public works to identify areas where construction is happening "now."

There are some overlaps but also some important differences. Construction permit data are picking up major redevelopments happening north of I-30. But they also identify some activity happening outside the core Oak Cliff zones, in places further east like Cedar Crest, where home renovation is at an earlier stage and happening at a smaller scale. These changes vary widely from block to block. But this helps us find which blocks might be the hot blocks of the future, and help us hone in on buying opportunities there in order to benefit from the upward trend, whether it's for flipping or a buy-rehab-rent strategy.
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    Author

    Steven McCord

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Spatial Laser, Inc.

5830 Granite Parkway
Ste 100-272
​Plano, TX 75024
​United States
(469) 298-9704

info@locatealpha.com

  • Main Page
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    • Spatial Laser Market Analysis Consulting
  • About Us
  • Blog
  • News
    • Affordability
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