Show notes
Fred McDaniel is a native Texan and has been involved in many aspects of the Texas real estate industry since 2001. He is a part of the Roofstock Certified Agent Network and focuses on investors the Houston market. In this episode, Fred tells us about the neighborhoods, the prices ranges, geography-specific issues that investors should be on the lookout for, how taxes are assessed, and more. Fred McDaniels contacts: fred@fredmcdaniel.com 713-321-9161 --- Transcripts Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor Podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals. Hey, everyone, Michael: Welcome to another episode of The Remote Real Estate Investor. I'm Michael Albaum. And today we have with us Fred McDaniel, our certified agent out in the Houston market. And Fred is going to be talking to us today about the market what we need to know as investors and what the price point and returns look like for some of the properties out there that he's seen. So let's get into it. Fred, well, thanks so much for taking the time out of your busy schedule to hang out with us today and talk to us about the Houston market. Really appreciate you coming on. Fred: Yeah, thanks for having me. Michael: So for anyone that's not familiar with you, as an agent, give us a quick elevator pitch on who you are, where you're coming from, and what agency you're with out in the Houston market. Fred: So I was born in El Paso, Texas, so as far west as you can get in this state, and about 850 miles away from where I am now. Born and raised there, moved around a little bit, went to move to went to high school in Jacksonville, Texas, which is in Far East Texas. And then I went to college at Sam Houston State University in Huntsville, Texas, which is about 45 minutes north of downtown Houston. And since then I kind of fell in love with Houston area stayed in and around here went back and forth between Tyler and in Houston. And then I ended up back in the spring in The Woodlands area. Been here for about 13 years, but on and off for the last 20. So I I work for Realty One Group Iconic. Great, and I am a broker associate. So you know, I do have the opportunity to mentor newer agents when I bring them on. But you know, I'm not the broker for the agency. But you know, with my experience, I mean, it actually helps me sometimes mentor newer agents because it brings up things that you forget when you've been in the business for a while. So it helps me to educate myself. Michael: And it seems like Houston is on fire right now. Have you seen it the Houston market shift over the last couple months? Fred: And I've seen it, I've seen it shift over the last, well, 18 months. Now, I've never seen anything like this and I've been in the business in some capacity. For the last 20 years, I've talked to people that have been in the business for twiice as long as I have never seen anything like this in the Houston market. You know, really, you know, once once the pandemic started, is really when our market just lit on fire. It was crazy how things work out. And you know, one of those things that, you know, in our economy that became a little bit more needed was real estate. And, you know, we had a we had an issue with historic rates being historically low rates, and historically low inventory all at the same time. So that's a perfect storm for increase in prices. You know, so, though I, it's, it's been wild, it's been fun. And I've seen the inventory go down to such a low level that I think at one point this summer, we were under one month inventory. I think we're back to 1.8 right now, last year, this time was around two and a half months. So theoretically, if no houses were going on the market today, in 1.8 months, there will be no houses left on the market. But you know, it's it is there's still a lot of opportunity, though, Michael: That's wild. And what would you call a healthy market? Fred: I would say a healthy market is between two to three months inventory, probably our norm about two half months, on average. Mark: Yeah, Michael, it's usually about three months. And you know, interesting enough, Fred's backgrounds really interesting, I'd love to see or hear you know, what the background is there because he does come from a single family rental background, when the market was much different, right back in the days when you could probably find properties a little more freely, and he was picking up properties for institutions. So maybe Fred, give us a little background there because I think they'll help connect the dots. Fred: I'll start back a little bit further. I actually started the mortgage business as a mortgage banker, I still have a mortgage license active, you know, when the economy kind of turned a little bit in 2008 to 10 And you know, backed by the mortgage industry. I started doing a lot of work on foreclosures, you know, selling foreclosures, you you have to pivot yourself and, you know, you've got to evolve sometimes in your own career, you know, selling houses just wasn't necessarily working out great for me at the time to just regular people. So I got into working with the, with the foreclosures in By doing that, I met a lot of investors, and all these investors were looking to pick up properties to rent, you know, we used to work with a lot of flippers and you know, the market just turned in, when the prices go up, the flips just don't make sense. So, you know, it made me go educate myself and start to learn a lot, I asked a lot of questions from these people. And I picked up some clients that are basically lifetime clients that whenever they see something, they want it, I send them properties regularly to look at and, you know, just kind of becomes a little bit more second nature to you, when you're looking for rental properties. So sometimes it's hard to, you know, describe what exactly I'm looking for, because I know when I see it kind of thing, you know. Doing that in and learning from them from their own businesses, and how they, how they rent their properties, and what they do. And I also, you know, got in with a couple of other kind of property managers to kind of learn from them as well, Michael: That's really cool. Fred: I worked with a company out of Irvine called home union, kind of did similar what Roofstock was doing, I worked as their agent for Houston, and, you know, they, they provided the leads online and their, their clients, and we ran the numbers for them. And we found them houses here, in Houston for rentals, very similar to what Roofstock is doing. Right now. So, you know, my background in that is, is, you know, finding the properties, running the numbers, making sure they were, you know, putting them into, you know, quote, unquote, their portal, showing them to the clients and then talking to the clients and walking through the process. Some of those, you know, we ended up with some institutional buyers in that, from that point to, you know, mostly the individuals. Michael: Cool. So it sounds like for you, we're very well positioned to identify investment property opportunities out in the Houston market. So I'd love if you can share with everybody, you know, what is it that you look for, before you post a property to Roofstock, that makes a great investment property? Fred: So what I'm looking for in Houston, I'm typically looking for a house that's new, or when I say newer, built 2000 or later, I'm looking at all the price ranges, honestly, because, you know, the market is so huge, you know, we were talking earlier about the size of the Houston metro areas, it's the size of like I said, the state of Connecticut 7.1 million people. So we have everything, and some of those higher end markets actually makes it, you know, four or five $600,000 houses that can rent for 3000 bucks a month may actually work. But I'm going to be looking for a newer home, generally, or a home that's been renovated, if it's a little bit older, you know, I'm looking for, when I'm looking at these houses, I'm looking to make sure you know, they don't have purple and orange and pink rooms and things like that. Or if they do if it's just one room, if that can be, you know, remedied easily. You know, maybe that makes sense. But uh, you know, I'm looking to make sure that, you know, a lot of things here, because they're newer, a lot of the older homes are renovated, I'm looking for a more modern look on the inside, you know, a little bit less carpet maybe. And then I'm looking at, after I look at those individual houses, I'm looking to make sure that the rent prices are pretty steady in that neighborhood. One thing that's key about Houston or the Houston area is there, there's no zoning. So we do have neighborhoods where there's 200,000 range homes right next to a neighborhood that might have four or 500,000 range homes. So when we do our rental comps and we're looking to see what the rents are, we're getting very hyper local, we're getting neighborhood specific, sometimes street specific, you know, we don't want to pull a cop from a, you know, a three bedroom, two bath 2000 square foot house right next to the street over where there could be one that's five bedroom, four baths, that's a 3500 square foot. So you have to be very careful with the cost. But you know, I am looking for, like I said, I'm looking for a little bit newer, a little bit more modern, maybe less work to be done. Because, you know, in Texas, as you know, our taxes are a little bit higher. So, you know, for the most part, we're not going to get huge cash flow properties here. They might cashflow a little bit, they might breakeven, but you're looking for appreciation, for the most part, Michael: Okay. Fred: So I want to make sure that when we do have those that they are, they do have the opportunity to appreciate. Michael: That's great to know and I think it's so important for everyone to keep in mind that if you are a cash flow heavy investor, that Houston might not be the best place for you because of that fact because the where the price point and where the taxes are. So we're gonna bring up a map here, Fred, and I'm wondering if you can give everyone watching this a rundown of where some neighborhoods that are interesting, interesting investment opportunities that you're seeing. Fred: Okay, so just looking at the map for people that have never been here or, you know, maybe somebody that doesn't isn't really familiar with Houston. The really cool thing about Houston, one of the things that I like about it is that the roads are right laid out in a radial pattern. So you see that there you see the city of Houston. And there's loop number one, loop number two, and then on the outside loop number three, which, when complete, will actually be the largest loop in the United States. It's called the Grand Parkway. So generally, I'll tell you where I'm located, Michael: It's like a tire. Spokes. Fred: Yeah, looks, the cool thing about it is if you get off on the wrong exit, you can just turn around, you'll get right back on somewhere pretty easily, to get back to where you need to go. But if you're looking at Houston itself, so central Houston, the city of Houston, good do north on Interstate 45, that's where it says Spring in The Woodlands, that's where I'm located my office in my home or in those areas. So obviously, you know, by living in that area, and knowing that area the most, I'm gonna start there, and I kind of radiate out myself, when I start looking at properties. You know, and I'll tell you, you know, the neighborhood I live in, they're probably 100 realtors that live in my neighborhood. So if you want to know where to where the best places to live, are gonna follow all the realtors. And but you know, we go because we see so many houses, you know, we know, we know the best places to live. But General, in general, if you're looking around, like the city of Houston, and really what we're doing is we're looking at most of the suburbs, because the suburban areas are where we're going to get most of our properties all the way from the north side over to the west side, you know, interstate 45 up and over West on Interstate 10, you're going to have your best opportunities for your rental properties in these areas. And this is where the growth is. The cool thing about Houston is there, there's just a lot of room to move a lot of room to grow, there's still a lot of land, the developers and builders are building like crazy. So you know, I'm going to follow that you know what like, like that outer loop, that third outer loop that I call the grand Parkway, I'm going to follow that around, for the most part to start looking for my property. So I'm going to Spring I'm going to Tomball going to Cypress and I'm going to Katie, it and I'll go out to the east a little bit as well. But you know, those are going to be my main areas where I'm looking for properties, and we're going to find those, you know, those that are in the sweet spot in you know, now we're talking about the sweet spot, what used to be the sweet spot, or the breadbox would be, you know, under 200,000. Nowadays, those are becoming less than less available. You know, even in Houston, the prices have increased to the point where, you know, the sweet spot for a rental property, you know, might be a three or four bedroom, two bath home, anywhere from 1800 to 2400 square feet. And they're gonna be in that 250, 200 to 250 range. And generally those are going to rent probably around like anywhere from 1800 to 2000 a month. Michael: Okay. All right. Fred: But yeah, I mean, if we're looking at Houston itself, though, I mean, mostly, I'm gonna stay on the outer outer rim of Houston area for properties. Michael: Okay. Great to know. And do you know, Fred, would you say 7.1 million people in Houston. That's the population. Fred: Yeah, that's the Houston metro area. So the map you're looking at is basically the Houston metro area. You know, you could even go a little bit further north to fourth, fourth largest city in the nation, I think they've estimated next year for the population to grow. Somewhere around 100,000. I ran some numbers on that. And what I was looking at, and I was looking at some census data as well, the number of people that move to the Houston area per year, it averages out around somewhere around 122 people a day. So that's a huge number. People are coming from all over the world, they're coming from every state, in their being brought in not just like, by oil and gas is what we used to be, you know, used to be what we're known for here, and they still are, that's that's the basic, you know, economic driver here. But you’d be surprise, the medical industry is actually the number one employer that there are the largest medical center in the world here. A lot of people come from other countries to get treated for cancer at our medical center. So it's really strange that, you know, that's what used to that's what used to drive our economy. And now that's not ev…
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