Long-Distance Investors Are Underestimating the True Cost of Resale Properties in Texas

Written by:

Heather Hook

Date:

15 Jul 2026

KeyCrew Studio

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The spreadsheet case for buying a discounted resale investment property often looks compelling on paper. The purchase price is lower, the cap rate appears stronger, and the value-add potential seems straightforward. But according to Yitzchak Pierson, a Real Estate Professional with eXp Realty who works extensively with investors in Texas, the real cost comparison between resale and new construction shifts significantly once you account for capital expenditures, contractor coordination, and hidden ongoing expenses that investors consistently underestimate.

For long-distance investors in particular, Pierson says the resale model carries operational risks that rarely show up in initial underwriting.

The Capital Expenditure Problem

Pierson’s concern with resale investment properties is not that they are bad investments – it is that investors routinely underestimate what it costs to own and maintain them over time. He recommends setting aside a capital expenditure reserve of approximately 5% of property value annually for older homes, accounting for eventual replacement of major systems: roof, HVAC, water heater, and, in Texas specifically, foundation.

“You might be able to get that home for a lower price, but then you may have to put quite a bit of money into it to refix it, and then you’re going to have money that you put into it consistently, depending on the age of the house,” Pierson says. The cumulative cost of these expenditures can erode the price advantage that made the resale property attractive in the first place.

For investors who are not local, the problem compounds. Coordinating contractors remotely, vetting their quality, managing timelines, and handling unexpected cost overruns requires either significant personal involvement or a trusted local network that most out-of-market investors lack. “If you’re a long-distance real estate investor trying to find contractors, trying to coordinate all of these things, these moving parts involved in a real estate investment purchase – to then improve that asset and find a long-term renter and a property management company – you’re going to have to factor in more capital expenditures,” Pierson says.

Why New Construction Changes the Risk Profile

Pierson’s argument for new construction as an investment vehicle centers on predictability, not price. Entry-level builder homes from major developers – he cites Lennar, DR Horton, KB Home, and Sentry Communities as examples active in Texas – typically range from the high $100,000s to around $350,000. These properties come with one-year bumper-to-bumper warranties and ten-year structural warranties covering the roof, foundation, and major mechanical systems.

For a long-distance investor, this warranty structure transfers the risk of early capital expenditures back to the builder. The property is immediately rentable, tenant placement can begin at closing, and the investor has reasonable confidence that no major repairs will be required for the first decade of ownership. “With new construction investment for long-term buy and hold, you’re getting more peace of mind, knowing that you shouldn’t have to worry about anything for at least the first 10 years of owning that property,” Pierson says.

He also recommends a third-party inspection at the ten-month mark – within the first year of ownership – to identify any warranty-covered issues before the bumper-to-bumper window closes. This is particularly important for investors who already have a tenant in place, since the inspection must be coordinated around occupancy.

The Hidden Costs Investors Consistently Miss

Beyond purchase price and capital expenditures, Pierson identifies three cost categories that Texas investors routinely underestimate: property taxes, homeowners insurance, and property management fees.

On taxes, Pierson notes that investors do not qualify for the homestead exemption available to primary residents, leaving their assessed values more exposed to increases. Texas also has Municipal Utility Districts and Public Improvement Districts that can add meaningfully to the effective tax rate. “The tax rate can make a big difference in whether there’s a MUD, a municipal utility district, or a PID, a public improvement district,” he says. While Texas currently caps investor property tax increases at 20% annually, Pierson adds that protection is not guaranteed to remain in place.

On insurance, Pierson says rental dwelling policies cost more than owner-occupied coverage, and that the standard $500,000 liability limit carried by many landlord policies may be inadequate. His property management company requires clients to carry $1 million in liability coverage. “If you ever have an incident, that $500,000 gets wiped out fairly quickly,” he says. Investors who do not account for the premium difference between standard and adequate coverage are understating their true carrying costs.

Property management fees – typically around 10% of monthly rent in the Texas markets where Pierson operates – round out the picture. Investors who self-manage initially and later transition to professional management often discover that their cash flow projections were built on an assumption that does not hold at scale.

Upgrades That Attract and Retain Tenants

Pierson’s process with investor clients includes evaluating which builder upgrades are most likely to attract and retain tenants. He specifically recommends prioritizing garage door openers, irrigation systems, ceiling fans, and appliances over generic closing cost assistance. In Texas, he notes, irrigation systems serve a dual purpose: keeping grass green to attract renters and spraying water on the foundation slab to help it last longer in expansive soil conditions. “The renter is going to choose our property, and then they’re typically going to stay longer because it has some of those upgrades,” he says.

For investors weighing resale against new construction, the decision comes down to whether the lower purchase price on a resale property genuinely survives contact with the full cost of ownership, or whether it disappears into contractor bills, higher insurance premiums, and deferred maintenance that accumulates faster than projected.

About Yitzchak Pierson: Yitzchak Pierson is a licensed real estate broker in Texas, serving buyers and sellers across New Braunfels, Canyon Lake, San Marcos, and Seguin. He has been named Best Real Estate Agent in New Braunfels for two consecutive years and was ranked in the Top 100 agents by the San Antonio Business Journal.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.