Investing in Houston

12 Replies

I’m looking to purchase 4-6 single family homes (or a small multi family) in Houston, probably for mid to long term holds. As I am from out of state (Orange County, CA) and have been studying the overall market, I’m interested if anyone has opinions on good submarkets for renters. I’ve been looking in the energy corridor to the west, Spring near Exxon, and to the south in good school districts and near the Medical Center.

My main concerns are buying where there is saturated supply (I’ve steered clear of Houston proper) and buying somewhere in which people generally buy homes that lacks a good renter pool. I’d say I’m looking for properties all along the “B” class spectrum that will attract some middle class families and perhaps white collar millenials who haven’t saved enough to buy.

Any thoughts are appreciated. Thanks. 

@Brian Burke    Houston is not a big multifamily (4-6 units) market except in the areas that you are trying to avoid. Those kinds of properties are found within the core Houston area.

There are properties like that in suburban areas but they tend to be few and far between. I just sold a 4-plex in Humble. I'm also looking at a 4-plex in the Cypress area and another one in the Champions area.

Millenials generally want to live inside the 610 loop. Many don't like to drive and they want to have access to everything. They want to be able to Uber, bike, walk, or ride the Metro rail to places where things are happening. Also, they tend to be more open minded about living in historically socio-demographicially disadvantaged areas in order to have better access to the city. Of course, I'm only speaking from what I know of the Millenials in my family and friends circle. None of them are "white collar," per-se.

One of my investing goals is to improve living conditions in parts of inner city Houston by re-positioning some of our cool old 1930s housing stock to accommodate class-B tenants, particularly Millenials and retiring Boomers. 

I have been considering looking more closely into getting a SFH near one of the the University locations south of the city and renting it by the room. I have family in the suburbs south of Houston whom I visit frequently and I know the region very well.

When you refer to a Medical Center to the south, are you eyeing Pearland or Bay Area/Clear Lake? 

I'm going to send you a Colleague Request. @Brian Burke

@Elizabeth A Johnson I’m probably initially in the market for SFRs, and from what I’ve seen so far the City of Houston itself is a case of extremes in term of prices. I’m sure that’s entirely true, just what I’ve found so far. I’m certainly open to Houston though I’m not sure a major down to the studs rehab is something I want to do out of state on my first deal. 

The things which attracted me to Houston are the employment centers with all of the Fortune 500 companies based here, Texas Medical Center, and the port. As such I’ve been scattered all over various suburbs where I see employment centers and good schools, such as Katy, Sugar Land, Cypress, Pearland (I meant Pearland), and Friendswood. I’ve been trying to zero in on where I might get closest (if not actually hitting) that 1% rent price rule, and where the supply of SFRs isn’t such that it’ll take 120 days to lease. 

@Brian Burke , that's very reasonable and I agree with you. I suggest you also have a look around Bay Area/Clear Lake. There is a good medical center there, (bigger and nicer than Pearland,) and Baybrook Mall has just finished a stunning remodel/expansion, with valet parking and all that jazz. The U of H Clear Lake campus recently became a 4 year school, (previously they only accepted upperclassmen.) HEB (Texas' most awesome grocery store) has been building new stores out there, and a shiny new expanse of suburban sprawl, I mean neighborhood, is going up near El Dorado and Clear Lake City Blvd. It's definitely booming lately and has good access to the coast. Kemah is a hotspot for fishing, boating, restaurants, and a little laid-back coastal nightlife (very different from the city.) Kemah itself is a bit too far for a reasonable commute to a downtown job, but Clear Lake is just about right for lots of white-collar folks who like spending time in their cars, and it's a short drive to Kemah from Clear Lake, which is great for weekend family outings. The actual lake called Clear Lake does have a coastal outlet and a yacht club, and Armand Bayou Nature Center is a delightful park with multiple playgrounds, wooded paths, and a sizable dog park. The biggest downside, IMO, is that since it's close to the coast, the hurricane danger is magnified and consequently so is the cost of insurance. Homes there must carry additional insurance for wind damage. Also, since a developer out there just turned an enormous amount of previously spongy, wooded land, with lots of tall absorbent grasses into a big fancy neighborhood, I suspect the flood danger has increased for the whole area and it will likely flood worse than before. My family members out there are accustomed to getting water right up to the door during the worst downpours, but very rarely does flood water get into the houses. Tearing up and paving the woods and grasslands compromises the natural systems that rapidly return water to the atmosphere, increasing the likelihood of future floods for miles around. I did note, however, that the new development does have lots of ponds and drainage areas. It looks like they are adhering to the regulations and best practices, much better than some developers on the west side did.

@Brian Burke

Pearland is nice. It has great access to Houston proper from 288. Lots of people who work in the big medical center downtown settle in Pearland for that reason. Pearland also has a U of H campus. Just avoid Brio Superfund Site and anything downstream from it. Also, be aware that a little way north of Pearland, along 288, are both of the Houston  neighborhoods that consistently make the FBI's list of "most dangerous neighborhoods in the U.S." Namely, Sunnyside and 3rd Ward. If you get a place in Pearland, definitely make sure that the front is well lit and has it some basic security measures like a fenced in back yard, etc. It's not a crime hotspot, because Pearland cops are very no-nonsense. Just don't be the easiest-looking target on the block, and you shouldn't have any trouble. 

Also, The Woodlands (north or Houston) is gorgeous and has a medical center, but I think it's mostly homeowners. I'm not sure how strong the rental market is there, and it's a bit lacking in variety for entertainment and restaurants. Woodlands folks sometimes drive all the way into Houston just to have a nice dinner. That market is seriously under-served. There is certainly opportunity there, too.


@Elizabeth A Johnson

This is excellent information, thanks. One area in Houston I’ve been researching that appears to have good price to rent ratios is along the 10 Freeway in the energy corridor, not yet to Katy, south of Cypress. I think it’s Bear Creek? Cy-Fair school district, prices per sq. foot around $80, rent per foot around $0.80 rough range. 

@Brian Burke what sort of returns are you looking for? Is your primary goal cash flow or appreciation long term? I am from the UK originally but also reside in Orange County so have been looking to invest out of state. I have identified a couple of decent markets over the past few months. Send me a PM if you are interested in connecting!

I own a real estate brokerage and invest in the katy/west Houston energy corridor area myself. If you have any specific questions In regards to our area feel free to reach out or ask.

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