The North Texas Multifamily Playbook: 2025

Listen, here’s the deal, while everyone’s wringing their hands about cap rates and vacancy, smart operators are positioning themselves for the bounce-back. Let me show you how to spot gold when others see obstacles.

Reading the Texas Market Like a Chess Master

Here’s what’s REALLY happening right now (and why it matters to YOUR wallet):

Look, the construction boom just gave us a gift, temporary softness that creates opportunity. Let me break down what some would call “controlled chaos”:

The DFW Situation (Your Primary Battlefield)

Vacancy’s sitting at 11.3%? This could be fantastic. Here’s why:

Ten-year average was 8.3%, we’re maybe 18 months from normalization
Rents dropped 1.5% last year, but the smart money sees the turn coming
New construction permits are DOWN 40%k the supply flood is ending
Seven of America’s ten fastest-growing cities are RIGHT HERE

The Franklin Play: While amateurs wait for “perfect” conditions, you’re buying at temporary discounts before the herd realizes what happened.

Houston—The Stable Giant

11% vacancy but POSITIVE rent growth trailing twelve months
Most job diversity in Texas (that’s your downside protection)
Value plays everywhere for operators who know what they’re looking for

Austin—The Patience Play

Down 4.3% year-over-year? Everyone else sees disaster. You see discount shopping.

Most oversupplied NOW = biggest upside LATER
Tech sector stabilizing, Tesla and others still hiring
Recovery timeline: 18-24 months (perfect for your 3-5 year hold)

San Antonio—The Sleeper

Flat rents, steady fundamentals, lower acquisition costs. This is your proving ground.

The Numbers That Actually Matter (Not the BS Broker Math)

Let’s talk about what REALLY determines if you’re building wealth or just buying yourself a job:

Net Operating Income (NOI)—Your North Star

REAL Income (not fantasy rents)
+ Other Income (laundry, parking, pet fees—GET CREATIVE)
- ACTUAL Operating Expenses (not what the seller claims)
= NOI

The Ellison Truth: That rent roll the broker sent you? It’s aspirational fiction until YOU verify every number. Trust, but verify—then verify again.

Cap Rate Reality Check

Purchase Price ÷ NOI = Cap Rate

Current Texas ranges (October 2025):

Class A Metro Luxury: ~5.2% (you’re buying for appreciation, not cash flow)
Suburban Class B: ~5.4% (your sweet spot for balanced returns)
Suburban Class C: ~5.8% (higher returns IF you know what you’re doing)
Value-Add: ~6.8% (where the real money lives for operators)

Here’s what matters: Don’t chase cap rates. Chase SUSTAINABLE income in GROWING markets. I’d rather have a 5.5% cap in a path-of-growth submarket than an 8% cap in a declining neighborhood any day.

Cash-on-Cash Return (Your Actual Payday)

Annual Cash Flow ÷ Total Cash Invested = CoC Return

Benchmarks that matter:

8-12% stabilized: You’re in the game
12-15% value-add year 2+: You’re winning
Sub-8%: You better have a damn good appreciation story

Real talk: If you’re not clearing 8% cash-on-cash after year one, you either overpaid or your business plan needs work. Period.

Debt Service Coverage Ratio (The Bank’s Safety Net—And Yours)

NOI ÷ Annual Debt Payments = DSCR

Lenders want 1.20-1.25x minimum. You should want 1.30x+. Why? Because life happens:

AC units die in Texas summer (trust me)
Roofs leak
Tenants skip town
Insurance doubles (happening NOW)

The Buffer Principle: Higher DSCR = you sleep better, banks love you, refinancing is easier.

Due Diligence: Where Amateurs Lose and Pros Win

Listen carefully—this is where 90% of investors screw up. They get emotionally attached or trust the pretty proforma. Don’t be that person.

Financial Forensics (Trust Nothing, Verify Everything)

Demand THREE years minimum:

Monthly P&Ls (watch for seasonal patterns)
Actual rent roll with lease dates (not “projected stabilized”)
Utility bills (Texas summers are expensive—budget accordingly)
Property tax ACTUAL payments (reassessment coming post-sale)
Every CapEx invoice over $500 for three years

The Ellison Question: “What are they NOT showing me?” Always ask it.

Physical Inspection—Your Insurance Policy

Roof and Foundation First (this is Texas—our clay soil moves):

Full structural inspection, no shortcuts
Drainage and grading (water is your enemy)
Foundation issues? Walk away or massive discount required

Mechanicals Reality:

HVAC in Texas = critical infrastructure
Get unit counts, ages, maintenance records
Budget $5,000-8,000 per unit replacement
When’s the last time refrigerant was added? (leak = replacement coming)

Walk Every Unit Type:

Don’t just tour the “show units”
Random unit inspections (with notice)
Document deferred maintenance
Test plumbing, electrical, HVAC in each

Market Intelligence (Five Steps Ahead)

Submarket Deep Dive:

Active construction within 2 miles? (your future competition)
Employment centers and commute patterns
School ratings (even for non-family properties—they matter)
Crime statistics trend (not just current numbers)

Competitive Survey:
Mystery shop your top 5 competitors. What are THEY offering? What are YOU going to do better?

Legal/Regulatory (The Boring Stuff That Saves Your Ass)

Texas-Specific Must-Haves:

Zoning verification (can you add units? Storage? Covered parking?)
Environmental Phase I (always)
Survey (especially on older properties—easements matter)
Code violations search (city and county)
Any open lawsuits? (huge red flag)

Texas-Specific Rules of the Game

Property Taxes—The Hidden Wealth Killer

Here’s the brutal truth: Texas has no state income tax, so property taxes HURT.

Ellis County average: ~1.80% of assessed value
Dallas County: Often 2.0%+

The Post-Sale Tax Bomb:
You buy for $2M with taxes based on $1.5M assessment? Expect reassessment to $2M+ within 12 months. Budget for it NOW, not when the surprise bill arrives.

Protest Strategy:

Hire a tax consultant (they work on contingency)
Protest EVERY year
Document every property issue for your case
Know your comparable sales

Landlord-Tenant Law (Play by the Rules)

Security Deposits:

No state cap, but 30-day return required
Document EVERYTHING with photos
Itemized deduction list or you’re giving it all back

Habitability Requirements:

Working AC (this is Texas—it’s not optional)
Hot water, electricity, plumbing
Weatherproofing and structural soundness
Response time matters (24-48 hours for emergencies)

Eviction Reality:

Strictly follow Texas Property Code
No self-help (changing locks, turning off utilities)
Court process only—$100-200 filing, 3-4 weeks typical
Budget 5% for legal/eviction costs annually

Insurance—The Rising Cost Nobody Talks About

Current reality (October 2025):

$150-650 per unit annually (huge range based on location/age)
Coastal/hail-prone areas: expect HIGH end
Older properties: higher premiums
Some areas: coverage hard to find at ANY price

Coverage Requirements:

Property (replacement cost preferred)
Liability ($1-2M minimum)
Loss of rents (your cash flow protection)
Umbrella policy (protect personal assets)

The Hard Conversation: Your insurance quote might DOUBLE at renewal. Build that possibility into your underwriting or you’re gambling.

Financing: How to Structure Deals That Work

Conventional Bank Loans (20-25% Down)

Best for:

Small properties (4-20 units)
Established operators with strong financials
Quick closes needed

Watch out for:

Recourse provisions (they want YOUR personal guarantee)
Balloon payments (usually 5-7 years)
Prepayment penalties

Agency Loans (Fannie/Freddie)—The Professional’s Choice

Why they’re phenomenal:

80% LTV (less cash needed)
Non-recourse (limited personal liability)
Long amortization (30 years = better cash flow)
Rate locks available

“Small loan” programs (under $7-9M):

Streamlined process
60-90 day close
Competitive rates

Requirements:

25+ units typically
Strong property cash flow
Experienced operator or strong team

HUD/FHA—The Patient Person’s Gold Mine

The Good:

Up to 83.3% LTV (least cash down)
35-40 year fixed rates
Lowest rates available
Non-recourse

The Bad:

6-9 month process (seriously)
Mountains of paperwork
Property must meet strict standards

Best for: Large stabilized properties or major value-add with experienced developers

The Value-Add Playbook (Where Real Money is Made)

Here’s the Ellison mindset: You’re not buying apartments—you’re buying TRANSFORMATION opportunities.

Unit Interior Strategy

The $8,000-15,000 Per Unit Formula:

Kitchen: New countertops, backsplash, hardware ($2,500-4,000)
Bathroom: Vanity, fixtures, tile work ($1,500-3,000)
Flooring: Luxury vinyl plank throughout ($2,000-3,500)
Paint: Fresh, neutral, modern ($500-800)
Lighting: Modern fixtures ($300-500)
Hardware: New throughout ($200-400)

Expected Rent Increase: $100-250/month ($1,200-3,000/year)
Payback: 3-5 years (then pure profit)

Amenity Addition (The Differentiator)

High-ROI Additions:

Package lockers ($10K-15K—tenants LOVE this)
Dog park/pet station ($5K-10K—pet rent = $25-50/month)
Fitness center ($15K-30K—$20-40/month premium justified)
Smart home tech ($500-800/unit—$30-50/month rent increase)

Operational Excellence (The Hidden Value)

Management Upgrades:

Professional leasing (reducing 2-week vacancy = massive value)
Online rent payment (reduces delinquency 30-40%)
Preventive maintenance (avoids emergency premiums)
Tenant screening (better tenants = better NOI)

Expense Reduction:

LED lighting conversion ($50K investment = $8K/year savings)
Smart thermostats in common areas
Water submetering (tenants pay their usage)
Solar where viable (Texas has programs)

Mistakes That Will Destroy Your Returns

Listen to me—I’ve seen these kill deals:

1. The Proforma Fantasy

The Mistake: Believing broker math without verification
The Reality: Brokers sell hope. You invest in facts.
The Fix: Verify EVERY number. Call current tenants if possible. Mystery shop the property.

2. Expense Underestimation

The Mistake: Using seller’s expense numbers
The Reality: They’re lowballing, always
The Fix: Budget 45-55% of gross income for expenses (higher for older properties)

3. The Property Tax Surprise

The Mistake: Using current tax bill for projections
The Reality: Reassessment coming post-sale
The Fix: Budget for 20-40% increase in taxes after purchase

4. Insufficient Reserves

The Mistake: “We’ll figure it out” mentality
The Reality: Roofs, HVAC, foundations don’t care about your cash flow
The Fix: $250-500/unit in reserves MINIMUM

5. Management Neglect

The Mistake: Passive oversight
The Reality: Bad management kills good properties
The Fix: Weekly reports, monthly visits, quarterly deep reviews

6. Chasing Cap Rates

The Mistake: “10% cap rate!” in a declining neighborhood
The Reality: High cap rates often mean high problems
The Fix: Buy for fundamentals and growth, not just yield

Exit Strategies (Start with the End in Mind)

The Buy & Hold Play

Timeline: 5-10+ years
Best for: Stable cash flow, generational wealth building
Benefit: Compound returns, mortgage paydown, appreciation
Watch: Property condition degradation, market shifts

The 1031 Exchange (Tax Deferral Magic)

Strategy: Sell property, defer capital gains, buy bigger/better
Timeline: 45 days to identify, 180 days to close replacement
Power Move: Trade up in property quality or market every 5-7 years
Caution: Strict rules—use experienced intermediary

Cash-Out Refinance (Have Your Cake, Eat It Too)

When: Property stabilized, value increased 20%+
Benefit: Pull equity, keep cash-flowing asset
Use: Deploy capital into next deal
Warning: Don’t over-leverage—keep 1.30+ DSCR

Value-Add Flip (The 3-5 Year Wealth Builder)

Strategy: Buy underperforming, renovate, stabilize, sell
Target: 18-24% IRR (15% minimum)
Exit: Sell to institutional buyer or 1031 into bigger deal
Timing: When you’ve maximized NOI and market is strong

Ellis County & Waxahachie Focus (Your Home Field Advantage)

Here’s why this is YOUR opportunity:

The DFW Growth Corridor Advantage

35 minutes from Dallas (commutable)
Land costs 50-70% less than Dallas proper
New development bringing infrastructure
School districts improving (critical for family tenants)

Target Property Types

Sweet Spot: 8-24 unit properties ($800K-$3M)

Easier to finance than huge complexes
Still achieve economies of scale
You can personally manage or actively oversee
Less institutional competition

Submarket Intelligence

Watch these trends:

New commercial development (brings jobs)
School rating changes (drives family renters)
Transportation improvements (35E expansion impacts)
Corporate relocations to Ellis County

The Ellison Move: Know about developments 6-12 months before they’re public. That’s YOUR edge.

Your 90-Day Multifamily Launch Plan

Days 1-30: Education & Network Building

[ ] Read this guide completely (you’re doing it—good)
[ ] Tour 10 properties (just to learn, not necessarily buy)
[ ] Meet 3 commercial lenders (understand their criteria)
[ ] Connect with 2 property management companies
[ ] Join local multifamily investment group

Days 31-60: Market Analysis & Deal Flow

[ ] Identify your target submarkets (2-3 specific areas)
[ ] Set up LoopNet, CoStar, and local broker relationships
[ ] Analyze 20 deals (practice your underwriting)
[ ] Drive your target areas weekly
[ ] Build your investment criteria document

Days 61-90: Active Acquisition Mode

[ ] Make offers on 3-5 properties (yes, multiple)
[ ] Get financing pre-approved
[ ] Assemble your team (inspector, attorney, CPA)
[ ] Negotiate your first deal
[ ] Execute LOI and start due diligence

The Ellison Final Word

Listen—here’s what separates winners from wannabes in multifamily:

It’s not about having perfect timing. It’s about having perfect preparation when opportunity shows up.

Right now? October 2025? The market’s giving you a gift:

Softness creating discounts
Overleveraged sellers motivated to deal
Supply pipeline slowing down
Fundamentals strong long-term

The question isn’t “Is it a good time to invest?”
The question is “Are YOU ready to capitalize when opportunity knocks?”

This guide gives you the framework. Your job is execution.

Three rules I want you to remember:

Trust your numbers, not your emotions

If the deal doesn’t cash flow conservatively, walk away
There’s always another property

Build relationships before you need them

Lenders, property managers, contractors—know them NOW
When you find the deal, you execute fast

Start smaller than you think you should

8-unit property teaches you everything a 100-unit does
But mistakes cost 90% less

Now get out there. Drive your market. Talk to brokers. Underwrite deals. Make offers.

Because while everyone else is waiting for “perfect conditions,” YOU’RE going to be the one who positioned perfectly for the bounce-back.

That’s how you win in real estate.

That’s how you build wealth.

That’s how you become the multifamily operator everyone else wishes they were.

Now stop reading and start executing.

Bobby Franklin – REALTOR® | Multifamily Investor
Legacy Realty Group – Leslie Majors Team
Text 214-228-0003
“While others wait, winners position.”