Texas market for multifamily investing

Member since 2025 · 3 posts · 1 vote

Hello -

I am a real estate investor with multiple long term rentals (SFH) and some STR. I am looking for multifamily (either 3-4 units or commercial 5+ units). Exploring the Texas markets at the moment where I currently have no presence. Looking for tips on high cash flow and possibly appreciation markets. Tips?

Thank you!

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Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

Quote from @Geeta Bihari:

Hello -

Thank you!

I’ve lived in Texas and invested in Texas since 1978…..
Here’s the thing , Texas has NO income tax, so education and other services are financed thru property taxes. As a result, non homestead property pays about 3% of MARKET value annually in property tax. BUT, county appraisals are often grossly overstating real value. An example is a retail center we owned that we purchased for $1,200,000 and put $200,000 into improvements. We could probably sell it for $1,600,000. When the new tax appraisal came out, it was “valued” at $2,300,000. Although we were able to get the value reduced to $1,850,000, our property taxes were $54,000 per year. Unfortunately the previous landlord had signed tenant leases that obligated the landlord to pay property taxes.

Similarly, property insurance is sky high due to hurricanes and storms. As a result the “usual” quick metrics doesn’t work in Texas. There are many cases where a county, especially smaller counties, have value property very low. When the property sells to an “outsider”, revaluation is brutal, doubling, tripling, or even quadrupling the tax valuation.

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Demont CampbellBusiness Member
Real Estate Agent · Dallas, TX · Member since 2025 · 6 posts · 2 votes
1y
Geeta, thanks for the post. It is generally hard to find any type of property that is both an appreciating assets and cash flowing. Most times in real estate investing it is one or the other but rarely is it both. Secondary markets are usually where you will see cash flowing properties. Cities such as Dallas is known for its appreciation, but low cash flow starting off. Hope that helps.
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Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
1y
Quote from @Geeta Bihari:

Hello -

I am a real estate investor with multiple long term rentals (SFH) and some STR. I am looking for multifamily (either 3-4 units or commercial 5+ units). Exploring the Texas markets at the moment where I currently have no presence. Looking for tips on high cash flow and possibly appreciation markets. Tips?

Thank you!
I’ve lived in Texas and invested in Texas since 1978…..
Here’s the thing , Texas has NO income tax, so education and other services are financed thru property taxes. As a result, non homestead property pays about 3% of MARKET value annually in property tax. BUT, county appraisals are often grossly overstating real value. An example is a retail center we owned that we purchased for $1,200,000 and put $200,000 into improvements. We could probably sell it for $1,600,000. When the new tax appraisal came out, it was “valued” at $2,300,000. Although we were able to get the value reduced to $1,850,000, our property taxes were $54,000 per year. Unfortunately the previous landlord had signed tenant leases that obligated the landlord to pay property taxes.

Similarly, property insurance is sky high due to hurricanes and storms. As a result the “usual” quick metrics doesn’t work in Texas. There are many cases where a county, especially smaller counties, have value property very low. When the property sells to an “outsider”, revaluation is brutal, doubling, tripling, or even quadrupling the tax valuation.
Private Mortgage Financing Partners, LLC
Website View Page
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Geeta Bihari
OP
Member since 2025 · 3 posts · 1 vote
1y
Thanks all. I plan to put down 35% downpayment so there is cash flow. I see a lot of up and coming neighborhoods likely to appreciate over the next 7-10 yrs. This is was the primary reason I was considering as home prices are still affordable here though the property taxes are sky high. I was lookin around Dallas suburbs. I don't mind buy and hold except I do want to understand if rents are softening and vacancy rates are high. I will continue to research this market.
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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
1y
We dont see a lot of 4 plex or even duplex in up and coming neighborhoods, but we do find some about 10 years old or older. There of course could be exceptions. Most of the newer builds will be single family in HOA neighborhoods that prohibit investors. Again there are some exceptions. Rare to find around DFW 2-3-4 units in HOA neighborhoods and that is normally a good thing for investors.
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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
1y
Quote from @Geeta Bihari:

Cash flow will be a function of how much money you put down/amount of leverage you use. The less leverage you use the higher the cash flow will be.
Remember 4 units or less you can use conventional financing. 5 units or more you will have to go to commercial financing likely with more stringent lending requirements. One thing you might do is explore both. Get prequalified so you know your buying power and lending requirements.
Don't trust anyone on quoting you appreciation numbers. I think the next 4-5 years on MF in DFW will be good as we see the large number of apartment deliveries come to an end for a while. When the existing vacancies get filled up, rents should start to improve. However just so many factors involved, no one has an accurate crystal ball. Wars, economy, tariffs, the FED, immigration and so many other factors can bump or kill appreciation.
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Tiffanie Figueroa
Member since 2022 · 75 posts · 42 votes
1y
Have you looked into the San Antonio market? A lot of my clients buy here because of the appreciation
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