Galveston, Texas - What do you think?

Question

I happen to be in Galveston, Texas on other business this weekend. I'm enjoying my time here. It got me wondering.

What kind of market (I know - very open-ended question) do you consider Galveston to be? Generally, does it cash flow? How would you rate its appreciation potential?

I appreciate your help!

Sandra Gibson · Answer

Just for curiosity i looked on zillow and seen 70 rentals listed. I think it would be risky due to the fact that Texas is in a booming economy and Galveston is still lacking any job growth. Why not look at the multi million dollar corporate expansion in other areas and invest there?

Kristy Farmer · Answer

@Belinda Lopez:   Thanks for a better representation of our lovely island.  I would only add to your description that we really do have almost a year round weekend vacation rental spot.  I have lived here since 1998 and love the island, including all of the charm you mentioned.  It is certainly a harsh climate for homes...but this spring, my door is open and my birds nests in my shutters are singing!  We are truly blessed with this spring weather and our beautiful island!

Having said that, I would also include that if it's not tied down it grows legs around Galveston.  As long as it's put up and out of sight it may stay.  That goes for most any property here as I rented 9 times during college in different locations, or rather streets.

I work with FEMA mapping and our recent hurricane has increased flood insurance and windstorm costs by at least 15 or 20%.  It can still be a money-maker here on the island but mostly vacation rentals would generate those larger increased profits.

UTMB is not the only major employer on the island.  We have a Coast Guard base (housing allowance) and the Army Corps of Engineers (good income) that employs over 340 people.   Some of these workers are transient and rentals may have a turn over.  Other workers may live off of the island.   I used to list my home on airbnb.com and did well myself.  I am not close to the seawall,  but located approximately 1 mile from it.  It's a sand bar with a close proximity to downtown strand area and seawall for the Gulf of Mexico.

Ryson Realty seems to have the market on vacation rental management although I have never contacted them.  Also, my friend works for Better Homes and Gardens.  She has stated that a 20% management fee includes linen service as well.

I am extremely new and just starting out with real estate investing.  I hope to transition away from my career in environmental science for my passion in real estate!

Belinda Lopez · Answer

I live in Galveston and can give you a local, experienced investor viewpoint.  It's all over the place!  High end and low end are still selling.  BUT it's street by street, area by area and you really need to know your market and business plan.  For general rentals  ($150k and under)- you'll get better prices off the Island and the insurance won't kill your cashflow.  There is only 1 large employer, UTMB, so rentals in that area are prime.  If your business model is tourist related; vacation rentals, then there is a huge demand.  Several of my neighbors make $90k+ per 3-2 and above rentals. Your costs and property management are much higher, around 20%, b/c of turnover and hotel taxes you are supposed to collect.  It's a very different business model than SFH or apartments.

Also, ask me about maintenance!  Saltwater is a terrible, terrible environment for homes.  Even marine grade outdoor fixtures will rust, everything rusts!  Sun is harsh, wind is constant, so plan on much more upkeep than standard homes.

For those of us lucky enough to live on the Island it's b/c we love the lifestyle.  Best fishing in the world (imho), I can garden year round, running on an empty beach is awesome, sunrise and sunset views and everyone is soooo much more relaxed than on the mainland.  Don't expect contractors to show up if the water is green and the fish are biting.  Mainland contractors will charge more, locals are great but don't plan any work around the flounder run times.

The vacation and resort market is and has always been strong b/c of its proximity to Houston.  When gas prices rise, Galveston is close; when the economy is bad, Galveston is still affordable. When things are booming, then even those on moderate to low incomes can afford a weekend here.  There is so much to do and so many events, we do "staycations" all the time and I've still never been to half the tourist places or restaurants.

I'm in the process of buying two vacation rentals and also considering turning my primary home into a part-time rental for the hot summer months so I can spend the summer in the mountains.  We let the tourist have the Island from June - August.

Timothy Church · Answer

Galveston is definitely an interesting market. I currently own three properties here (2 rentals and 1 personal) and am getting my start practicing real estate here. The island as a whole is getting better than it was prior to Ike but still has room to grow. There are jobs coming down here but most are on the other side of the bridge such as a new BMW factory. There are several distressed houses here that could make good investments if you have the capital to do the work. If anyone would like to discuss this market here, feel free to message me!

@Rick Alvi if you ever need to see a house or simply discuss the island feel free to message me

Rick Alvi · Answer

thanks @Fred Heller your always such a great help! I'm considering purchasing my first real estate (primary residence) in Galveston...I don't want to pay retail Houston prices at this time. This is soley a primary residence decision and not a real estate business or investor decision.

Pat L. · Answer

Sandra, Jane, Roy, Michael and Fred,

First off sorry for taking so long to respond, but I did read your responses while on vacation in August, but I never thanked you, so thank you!

My minimal research supports what you all wrote. I thought that maybe some of the distressed properties might present some good opportunities. But I didn't see anything that presented a potential uptick in economic activity. Roy's quote "it's too hot in the summer and the water's too shallow" definitely rang true.

I decided, as an out-of-stater without much local knowledge, to not research this further. But I did have a great time in Galveston!

Thanks again,

Pat

Fred Heller · Answer

affordable galveston houses

Michael O'Byrne · Answer

I live in Houston and have also visited Galveston on occasion over the years.  We also used to live in Beaumont and would make the trip along Crystal Beach and cross over on the Port Bolivar ferry.  My opinion is that development will continue to be slow.  Galveston seems to be very closely tied to Houston's economically.  It is not a stand-alone tourist destination and will likely not ever become one - it's a typical Texas beach on the gulf with brown water, rocky bottom, and multiple oil spills over the years.  It's a decent enough place for Houstonians to get away for the weekend once or twice a year and have a good time, but it's lacking really great restaurants, 4-5 star hotels, and recreational activities.  So as far as appreciation potential I would say Galveston is like Houston in general - moderate but steady growth currently, with the potential to ramp up quickly if the energy economy starts booming again.

Roy Oliphant · Answer

@Pat L.

As a Texan who has visited Galveston irregularly, I've always thought it was too industrial to be the coastal spot it should be.  It's too hot in the summer and the water is too shallow.  And its in the middle of the hurricane lane (the 1900 hurricane in Galveston is still reported as America's deadliest natural disaster).

While it has long been the weekend getaway from Houston and thus mainly small, older generationally owned properties, there is some current discussion that the Galveston / Port Bolivar area is being rebuilt to be much nicer since the last hurricane destroyed many of these properties and building codes prevent their rebuilding.

But please understand, these are the opinions of someone who doesn't live there.

Galveston, Texas - What do you think?

Most Popular Reply