WHERE to buy cash-flowing rental properties (Houston area)

18 Replies

I'm looking to start picking up single-family rentals in the Houston area, and am curious as to the types of areas in a given city that yield the best prospects for cash-flowing SF homes.

What should I be looking for in terms of demographics that may represent better prospects for cash-flowing properties?

Should I be looking in areas where the "working class"/blue-collar workers represent a large proportion of the population?

It depends on a lot of things:

1. Your price range per house?

2. The return you want ? For Houston I'm happy with any property that gets me more then 1%+ per month if it is less don't buy it. Also make sure you do not buy in flood zone and keep an eye on taxes. 

3. Are you going to manage the properties? (Dd you have a full time job? If so you may want to get into area closer to your house.)

If it was me I would get into area that will allow cash flow and appreciate with time. So look into areas like Katy, Spring Branch, Areas around Heights or if you have a lot of $ look into it. Anything in the 610 loop on the North and West side of Houston are good areas but expensive. You may want to expand to the Beltway but keep into the North and West maybe South parts. Basically, if the numbers work and it meets your personal requirements It is a good buy. Reach out to some investor friendly real estate agents they should be able to help you. Make sure you check everything before executing. DO NOT TRUST ANYBODY. 

Good Luck 

I would think if you took a chance on gentrification in the Houston rental market it would  be an opportunity that would pay out. Location, location, location, secure a property, rent it till the property increases and cash out.??? Could be a lot of work  could pay off in the long run.

I'm not saying this is right, but here is the approach I am taking.

I use Redfin, Zillow and HAR to look at what is for sale in the type of SFR I am looking for. I also look at the rents. Then do a % calculation and document it on a map. I also run these by a Relitor so she can confirm with the MLS. But so far ,HAR has been right on.

Areas like the Woodlands, and Glennlock are about 1%-ish. Areas like Memorial and Montrose are 0.5%-ish. There are better %'s in Houston, even getting in the 1.5% - 1.75%-ish levels, but some are not the best neighborhoods.

You will need to do this for 3/2's and 4/2's separately.

Then find a compromise between cash flow and class of neighborhood that makes you happy.

You might want to take a look at historical data. (hint hint) We are in a very hot market, so buyer beware.

The general rule of thumb is 1%.  Houston market is hot right now. Your out in Katy.  Look in Williamsburg Colony Area.  Its between Mason and 99 on Franz Rd. Most of those house in that area are priced between 108k to 140k+. Most of the area will rent for 1200 to 1500+ a month. We have a rental in there right now that we are selling. Asking 135k  and it will rent for $1400 a month easy. If you are interested message me and I will send you the link and video.

@Jordan Decuir

A realtor can tell you by neighborhood what the % of owner occupied to rentals there are, white vs. blue collar, and household income, although that data can lag. 

I prefer to see a fairly even mix of rentals to o/o's, which means people like renting there, but my resale won't strictly be limited to investors down the road when I want to sell. I also like h/h income above the median, for obvious reasons. 

@Jordan Decuir Hey Jordan, the simplest rule of thumb is to look for properties within solid school zones / districts. Families will typically pay a premium for better schools. HISD is very much hit or miss depending on the specific schools, but the surrounding suburban districts tend to have a better reputation overall: Katy, Cy-Fair, Klein, Spring (most) Ft. Bend (most), Deer Park, etc.

You should be targeting areas that you're comfortable owning property in. You can earn higher returns in "worse" areas, but there's a trade-off when taking on additional "risk."

How much cash flow are you looking to generate per month? How are you planning to buy these properties? Are you willing to do rehabs and make-readies or are you looking for turn-key properties? Will you self-manage or hire a property manager? These are some of the questions you'll need to answer first. The answer to these questions will help guide you to the areas that fit your criteria and budget.

Best of luck!

@Greg F. I'm curious about this Williamsburg Colony area, do you still have rental properties there? What made it a good area to invest? I like the good schools and home prices, they seem to be considerably less than surrounding areas.

I have a property in the Houston area that I would like to sell. Being a landlord is not working out for me. Please let me know if you are interested

Originally posted by @Denise Johnson :

I have a property in the Houston area that I would like to sell. Being a landlord is not working out for me. Please let me know if you are interested

 What area is your property?

area code 77014, Cranbrook Subdivision

Originally posted by @Denise Johnson :

area code 77014, Cranbrook Subdivision

Sorry, too far for me. I am looking around Southbelt/Ellington. Thank you.

Buying off the auction block, along with doing your due diligence is your best chance of optimizing your cash flow. Going through the MLS forces you to deal with too many factors that will cut your equity and cash flow to almost "0" or less because of the hot market generating bidding wars.

Does anyone know if Missouri city has a good flow of renters? Any thoughts?

Just bought a property in Quail Valley Missouri City, pretty decent positive cash flow. Not sure how much the home value will actually go up though? What kind of homes and where exactly are you looking to invest?

@Greg F. do you mind if I ask WHY you wanted to sell your property? I am looking to buy in that area and am wondering if you saw red flags or had issues there?

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