Texas Investment Property (College town?)

8 Replies

Hi all,
Looking to get a property in Texas for investment purposes and know the demand for college students. Will be living in the home for 6-8 months then plan on making it full rental property. Any ideas on good cities in Texas? Was looking into Dallas, Houston and Austin. 

Arlington, Lubbock, Denton, College Station, Edinburg, Ft. Worth near UNT-HSC....that's where I would look.  Austin is super expensive now.   Denton has suggested shortage of 4000 units right now.

Some of these markets like Arlington, Denton and Edinburg have other demand drivers as a backup plan in case students shift to online or move away from going to college.

There are 8 colleges in Austin and 33 colleges within 100 miles enrolling a total of 397,759 students.  If you are buying it for yourself and then renting, the outskirts of Austin, maybe in San Marcos, near Texas State (bigger than UCLA), would be a great place to buy, leverage, and enjoy some nice appreciation down the road.

I own and manage several hundred SFH in the Lubbock area. In Lubbock you can still find very decent property close to Texas Tech for under $200k. The way things are going I think that door is closing though. I know most investors are buying anything they can get their hands on.

@Travis Hanson I agree with all of that. Lubbock has a low barrier to entry and has several backup economic drivers by being the primary hub (agriculture, financial, healthcare, material goods, transportation, entertainment) for an area the size of most states east of the Mississippi. Only nearby city that rivals it is Amarillo (2.5hr drive north) and it does not have anywhere near the education infrastructure or $$$ inflow Lubbock has (at least not yet) with Texas Tech and associated schools, SPCC, LCU. Growth is generally to the southwest into/towards Wolfforth and some to west towards Levelland (yes, it is named for how flat the area is).

@Matt Moreland and his team at KW are better versed in the analytics in LBB than me though. I'm just an investor in SFR/small MF and the vineyard/wine industry near there.

I agree with just about everything said already, but just to echo some of it: it's all where your entry level and investing goals are.  Those major cities that you mentioned are fantastic options and have TONS of potential tenants/students, but their barrier of entry is much higher than traditional "college towns" like Lubbock or College Station. Austin or Houston will likely appreciate more over time, but those "smaller" towns will likely cash flow much easier and may be easier to come by.

Lubbock is a great town  to invest in.  Properties do not need to be in walking distance of the university to still be in high demand for college students.  Things rent quickly here with or without the college kids factored in.

@Kyle Fairbanks

I'm a fan of Austin. I work in Denver (as well as Colorado Springs), and that city is performing very much like Ausitn. Diversified economy, loads of tech money, coastal migrants moving in who still think it's relatively cheap. Now, if you're main goal is cash flow, then this is likely not your place to go, but if you're open to cash-flow neutral, then you're likely to see some great long-term appreciation.

I've worked with an awesome investment-minded Austin agent when she was buying up in Denver, and she's got rentals in Austin that are doing well, too. 

Whatever you choose, good luck! 

Hey, @Kyle Fairbanks ! Austin, Dallas, and Houston are all incredibly hot right now. Speaking with other agents and friends in those markets, they're seeing investment properties going for far above appraisal value and buyers are having to bring enough cash to the table to cover the difference if they really want it. For your first one, I would consider looking at markets such as Lubbock, San Marcos, and even smaller communities around San Antonio.

I can't speak for the other markets, but here in Lubbock we are seeing a higher sales velocity than we've ever seen before. Although we aren't seeing 40+ offers on single listings like in Austin, we are consistently seeing properties selling for above asking price and receiving 3-8 offers within the first day or two of going live. A lot of it is coming down to finding something before it hits the market through your connections in the local market, or being ready to pay top dollar for the property that you know will cash flow and appreciate at what you paid for it.

There are still deals to be found on market, but they are becoming harder and harder to find and requiring more creativity. Currently working with a Tech student and investor (won't tag him unless he wants to chime in himself) on a short sale deal that is providing him with massive amounts of built-in equity out of the gate since he was able to get it so far below market value. Other buyers were not willing to deal with the sometimes frustrating process of short sales and the associated lienholder approval process, so he was able to come out on top due to his patience and insistence on buying based on the numbers. This is the way to do it, and any investor looking to purchase in the Lubbock market (or any TX market right now) needs to do the same and focus on the numbers rather than hoping things will work out. That being said, if you buy right in Lubbock, things lease up FAST and it is known for being much easier to assemble a portfolio of cash flowing properties here than in many other markets.

If you are willing to wait for the right deal and purchase based on the numbers alone, you can still find deals that will work well for your strategy. Best of luck, Kyle, and don't hesitate to reach out if there's ever anything I can do to help you in your investment journey.