Seeking first investment property in Houston area. Thoughts on markets?

Question

Hello all, I'm new here. I'm seeking my first property, which I'll be living in for 1-2 years, in and around the Houston area. So far I've toured about 10-12 properties and I've considered some properties in Cypress, Pearland, and a couple townhomes within the loop. My budget is anywhere from $220-$260. Yet, I'm finding it really hard to find something that sits in a relatively nice neighborhood. Most properties I've walked to with this budget are iffy areas. Another concern is that I'm finding it hard to find something that will cash flow positively, for example, Cypress rent growth is bleak. Hence, the need to post here to get your insights. Which areas or markets would you suggest I look in? Any off-market opportunities you've heard of that you can share?

Luciano A. · Answer

@Amna Khan

Welcome to Houston. Houston has become a more difficult market to cashflow with traditional long-term rentals in the last few years. The interest rate, property taxes, and insurance can break a deal. Renting out a room while living there is one way to get into a property that would not otherwise cashflow. I am currently building duplexes with many bedrooms and their own bathrooms to attract MTR rental market. The area of 77026 Kashmere Garden may flood so check for any flood zones if you can help it. If you go into an area that is a little rough, drive around to see how much new construction is in the area--that will be a good indication there are still opportunities for growth there. Also, check crime statistics or drive-through when the weather is sunny on a given Saturday afternoon to get an idea of what's going on in the neighborhood.

Suburbs like Cypress and Katy are safe, but they are also saturated with rental properties. The school districts are great, so you're going to pay more in taxes, and renters who live in your properties might want to buy a home of their own someday soon. If you haven't signed a buyer's representation agreement, I would suggest getting in touch with as many agents as possible. Ask them if they work with investors, if they themselves own rentals, and if they understand what you're trying to accomplish with this investment property.

Hope this helps

Best of luck

Kevin Bazazzadeh · Answer

Those are great points @Luciano A. and I completely agree.

@Amna Khan The choice of a suburban area vs a possibly gentrifying neighborhood is up to you and both have pros and cons. If I was making the choice and I had to live there, I wouldn't live in Kashmere Gardens or any other area with a higher level of crime. My own preference for my properties is 1) Not in a flood zone, 2) Good schools (I use great schools and want to see nothing below a 4 rating. Avg. Price ~$225-250K and Avg. rents at $2K. I have properties in Katy and NW Houston outside the beltway. If you have any specific questions, feel free to DM me happy to chat further. Also I am hosting a meetup group in the Heights on March 1st - if you are in the area you should come to hang out and learn more.

Kevin Bazazzadeh · Answer

Hi @Amna Khan is it more so that you can't find a house in a nice neighborhood with that budget, or you can't find a house in a nice neighborhood that meets a certain investment criteria you have? I think you can get help finding an area that is nice with that budget. Now, depending on what your targeting for your cash flow or COC that area may not work.

Kevin Bazazzadeh · Answer

Gotcha. Since you are new to the area and new to investing it is likely that you either aren’t giving your agent specific enough criteria as to what you want, or a property with your criteria isn’t on the market. Can I ask what criteria you gave your agent to look for?

Amna Khan · Answer

Hi Kevin, it’s the latter. There are some houses in areas that seem nice but they’re in the suburbs and outside the loop where market rent is not as strong, hence doesn’t meet the COC goals. Trying to figure out how to analyze deals considering that it may be possible that when rates come down that COC could improve after refinancing. I also want to try house hacking and rent a room out while I live there. I’m not from Houston so I’ve been touring to find something that’s the right match. I’m already working with a realtor. Would you recommend working with multiple realtors or is that not considered…. ethical? Haha

Seeking first investment property in Houston area. Thoughts on markets?

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