First rental house - Houston or small town

[Jason Zidek]

Hi all,

I'm looking to purchase a rental property sometime in the near future. I plan to purchase a single family house in the $80k - $150k, bank financed. This will me my first venture into real estate investing. 

I currently live in Houston, TX but am originally from a small central Texas town (~1000 people). I'm contemplating which market to get into initially. There are multiple similar small towns close to my hometown I would consider as well. 

For the small town, the benefits are I can get a lot more house for a lot less money. I've got family who are carpenters and plumbers in the area to serve maintenance. Several classmates in the area are currently in the real estate market so I have some good resources for advice. Knowing a lot of people in a small area helps with vetting potential tenants. One of the clear drawbacks is managing a property from several hours away. Also, the turnover of homes is much lower due to the low population

A benefit of Houston is there's a lot more of everything close by - available real estate and all types of people to service the house. Meeting anyone related to the house is much easier since it's local. There are also many more options, from price to neighborhood. 

Looking for any thoughts or opinions on which may be better for a beginner real estate investor. Thanks in advance. 

[Greg H.]

I will take the contrarian view. I invest in many small towns all over Texas .  The returns can be much much higher with very little competition.  I am selective about the town itself but here are some benefits of small town Texas investing:

-Low price point.  Many areas have all in rentals under $30,000 that bring rents from $600-900 per month.  These are not run down class C-D properties. Many of mine are brick homes with central air

-Zero marketing costs. Just join the towns local Facebook page and a quality property will be marketed by members in the town. Most of mine are teachers, police and the like

-No need for high end finishes.  While people in Austin would laugh at tile counter tops and the $3 backsplash from Home Depot, those in small town love it!  Fresh and clean properties are very much appreciated