Investing in Texas for rental purpose

36 Replies

Is investing in Texas good for rental properties ?

Which places should i consider to invest for higher rental incomes? 

What type (houses, apartments, condos, town-homes) of property should it be, if i choose to invest around a million dollar?

The options are limitless in Texas. Houston, Dallas and Austin all have great opportunities from what I've heard. I'd research the cities and see what you like best. They all have different industries and factors driving growth.

@Yeshudas Nair , the most popular cities in Texas are Austin, Houston, Dallas, or San Antonio.

Houston, TX has been very popular with foreign investors from China.  I've been told that some of the investors from China, will put a million dollar to buy rental properties, primary residence, and a small business.  So, their kids can go to school and live off the income from rentals and small business.

If I have a million dollar, I would invest some of it on a smaller apartment complex.

Check out http://www.loopnet.com/ for apartment listing.

I bailed on CA and am 100% Texas outside of Austin area.  I LOVE IT! 

Great returns and no state income tax!

Your dollar will go further in the rural areas outside the major municipalities (suburbs).. Many are moving farther out of town for just that reason and taking the short drive into "town" for the multitude of entertainment venues available.  

Also, long term wise, Texas had more conservative lending practices and overall a more stable economy.  Not nearly as volitile as states such as CA, for example. 

Anyway, good luck!!!

I would definitely consider looking at San Antonio.

We have been contacted by a good number of Chinese investors who are now active in Houston, Dallas and Austin.  Other cities in Texas are not known to these foreign buyers.  While rental income is important, these foreign buyers do evaluate the potential increase in value as well which - they believe - is the best in one of these 3 cities. Another factor is the access to good schools which is very important for Chinese buyers. This could you help you in narrowing your search when you have made the decision on which city to focus on. Good luck!

Truth is you can find good deals in any market. Said differently, there's no market/area that's best for rentals, flips, etc.. If you read through all the BP articles you'll find some people prefer Austin, some Dallas, while others hate Austin and Dallas. 

The real question is what are your goals and what city/area can you own to best get you to where you want to be? 

Always invest with diversified economy, to protect yourself from recession.

Last recessions include... Oil, Finance, Technology. Now compare exposure of cities...

  • Houston (Energy & Health)
  • Dallas (Diversified)
  • Ausitn (Tech & Government)
  • San Antonio (Defence & Oil..) (Please correct me here, i dont know much about San Antonio economy.

I feel anywhere is Texas is good investment. Dallas has good diversification but very hot market. Houston is little cool down because of oil lately... that means you can find good opportunity there..

Hello, I am a physician in Florida. Just about to get started in the single family rental property business in Florida and Texas. Dallas/Fort Worth/McKinney are on my radar. Are you using any turn key companies/wholesalers or are you looking on your own for properties? Any referrals would be great in the TX and or FL area. All the best! Jonathan

All one really has to do is look at the US Census historical growth patterns and you will see the population explosions in the Texas Triangle which consists of San Antonio, Houston, Dallas and Austin on the I35 Corridor. Why are there population explosions? There are many reasons: taxes, climate, ease of doing business, lower costs of living, etc. But if you ask me..well Everything is bigger and better in Texas, haha! 

I think for the buy and hold group I don't think that one can go wrong in any market. For the flippers that want to pay taxes on their gains immediately well the competition is a bit stiffer and the margins are thinner. I have been flipping houses for some time. I know that if I am not actively involved in the remodel/construction process things can get out of control. Getting good contractors is key. With so much work going on in Central Texas one has to pay a premium to get good contractors that will see your job to the completion. If one pays a premium then your margins are even thinner. Thank Goodness that I am a Veteran and can get discounts from many places like Home Depot. Two, since I am a broker then I can get better deals from contractors. Flipping is not easy. 

For the buy and hold group then the most important thing is to find a good property with low maintenance that has historically high appreciation and easy to rent. A good real estate agent broker or an agent can dig all that info up very easily. 

A million dollars can go a very long ways in getting good properties in Texas where the cost of living is considerably less than SF, NYC, LA and elsewhere. 

Best of luck!

I am an investor in the Dallas market since 2009.  It is a good market but it is getting over priced and finding a good cash flowing deal is getting harder to find in the product that I specialize in.  ( $120-170K after repair rental homes and C class apartments)

I have seen many people starting to look in smaller tertiary markets.  Sherman, Denison, Abilene, Waco, Corpus Christi , College Station.  There are still people buy in DFW, but if you are buying on fundamentals and not speculation there are fewer deals than in 2011 to 2014.

Hello David, there is a great rental market in Corpus Christi and surrounding areas. the Naval Bases in Corpus and Kingsville, the university in Corpus and Kingsville ,  and now the new and expanding industry in the Port of Corpus Christi and all the way to Ingleside make this a great place to invest.  Im currently flipping and not holding onto rental properties mostly because I'm great at finding smokin deals and passing them on. Contact me if you need help in this area.

Originally posted by @Yeshudas Nair :

Is investing in Texas good for rental properties ?

Which places should i consider to invest for higher rental incomes? 

What type (houses, apartments, condos, town-homes) of property should it be, if i choose to invest around a million dollar?

If you'd like to invest in Austin, Dallas, San Antonio, or Houston and actually cash-flow...You're about 5 years too late.  There are deals in the outskirts that can generate decent cash flow, but newbies will have less of a chance in locating them.  Feel free to take a look at my profile for a description of what I do.  Message me if I can help.

Originally posted by @Rob Harris :

I bailed on CA and am 100% Texas outside of Austin area.  I LOVE IT! 

Great returns and no state income tax!

Your dollar will go further in the rural areas outside the major municipalities (suburbs).. Many are moving farther out of town for just that reason and taking the short drive into "town" for the multitude of entertainment venues available.  

Also, long term wise, Texas had more conservative lending practices and overall a more stable economy.  Not nearly as volitile as states such as CA, for example. 

Anyway, good luck!!!

Rob,

I agree with many of your comments. But property taxes have doubled in many Texas cities, particularly in Dallas since 2014.  Some school ISDs bill you property taxes directly.  You can't challenge them and they have more than doubled since 2014.  I have no doubt that this will continue in other Texas cities...but I'm still bullish on Texas and holding my properties in Austin, Dallas, and San Antonio for the long-term.

I also would have to disagree about your "volatility" comment.  The DFW market is actually very volatile. In this market, they typically overbuild then have big drops in pricing.  This market cycle may be different than in the past, but that's how this market works.  Austin is more steady and San Antonio, underpinned by aerospace and medical industries is the most stable in TX.

Originally posted by @Shital Thakkar :

Always invest with diversified economy, to protect yourself from recession.

Last recessions include... Oil, Finance, Technology. Now compare exposure of cities...

  • Houston (Energy & Health)
  • Dallas (Diversified)
  • Ausitn (Tech & Government)
  • San Antonio (Defence & Oil..) (Please correct me here, i dont know much about San Antonio economy.

I feel anywhere is Texas is good investment. Dallas has good diversification but very hot market. Houston is little cool down because of oil lately... that means you can find good opportunity there..

 Correction....

Houston (Energy, Aerospace, Health)

Dallas (Banking, Telecom)

Austin (Government, Higher Education, Growing Tech)

San Antonio (Military, Healthcare and Aerospace)

Houston has and is getting hit big time... Sales price of million $ homes recently dropped by over 10%.  This is also trickling down through the rest of the economy.

Originally posted by @Shital Thakkar :

Always invest with diversified economy, to protect yourself from recession.

Last recessions include... Oil, Finance, Technology. Now compare exposure of cities...

  • Houston (Energy & Health)
  • Dallas (Diversified)
  • Ausitn (Tech & Government)
  • San Antonio (Defence & Oil..) (Please correct me here, i dont know much about San Antonio economy.

I feel anywhere is Texas is good investment. Dallas has good diversification but very hot market. Houston is little cool down because of oil lately... that means you can find good opportunity there..

 This may be useful to you and others on the board...

Originally posted by @Jonathan Dunn :

Hello, I am a physician in Florida. Just about to get started in the single family rental property business in Florida and Texas. Dallas/Fort Worth/McKinney are on my radar. Are you using any turn key companies/wholesalers or are you looking on your own for properties? Any referrals would be great in the TX and or FL area. All the best! Jonathan

 Based on your investment criteria and interest in learning RE investment, turnkey may not be best for you.  I might be able to help. Message me.

Originally posted by @Cameron Tope :

Truth is you can find good deals in any market. Said differently, there's no market/area that's best for rentals, flips, etc.. If you read through all the BP articles you'll find some people prefer Austin, some Dallas, while others hate Austin and Dallas. 

The real question is what are your goals and what city/area can you own to best get you to where you want to be? 

 Half true! I agree, all investment activity should start and be focused on achieving your investment goals.  There are markets that are better for achieving different types of investment goals (ex. cash flow vs appreciation, or a mix)...Looking for a cash flowing deal in a high-priced market is much more difficult....like beating a dead horse. Better to pick a market with more attractive price-to-rent ratios.

@Jon S. - the info/research I've read showed overall much less overall volatility in the states of Texas as a whole. I'm no expert, but even lenders I've worked with have started the same in tx.  

Agreed on the property tax aspect..... Luckily, where I am focused (about an hour outside Austin)  I'm not paying as high of Tax rates.....

I do agree concerning the major municipalities you've quoted as being definitely more volitile concerning the Texas market. I specialize in primarily rural development. I'm making GREAT spreads as a land developer and builder. Turning the proceeds into long term rental properties I'm building myself. Getting ready to start a 49 unit apt development in an area that will provide me serious cash flow / long term passive income. Awesome price to rent ratios.... Looking at it from a per door perspective, I'll clear $200+... MINIMAL CAP EX... Full Brick Exteriors, Minimal Maintenance....

Gotta build and design right from the start! 

Thanks for your comments!! 

Originally posted by @Rob Harris :

@Jon S. - the info/research I've read showed overall much less overall volatility in the states of Texas as a whole. I'm no expert, but even lenders I've worked with have started the same in tx.  

Agreed on the property tax aspect..... Luckily, where I am focused (about an hour outside Austin)  I'm not paying as high of Tax rates.....

I do agree concerning the major municipalities you've quoted as being definitely more volitile concerning the Texas market. I specialize in primarily rural development. I'm making GREAT spreads as a land developer and builder. Turning the proceeds into long term rental properties I'm building myself. Getting ready to start a 49 unit apt development in an area that will provide me serious cash flow / long term passive income. Awesome price to rent ratios.... Looking at it from a per door perspective, I'll clear $200+... MINIMAL CAP EX... Full Brick Exteriors, Minimal Maintenance....

Gotta build and design right from the start! 

Thanks for your comments!! 

Yes, sounds like a good opportunity for a builder...so long as price and rent growth continues.  Short term I believe it won't.  Long term I believe it will..  so...make sure you're sufficiently capitalized to weather the upcoming storm.

We're now heading into "hypersupply" and "recession" periods of the market cycle, so many who paid too much, didn't add value, etc...will likely be shaken out...

what are you guys talking about? there are still plenty of properties available on the market, just off MLS, in DFW area, to easily get positive cash flow.

Yes, it's possible to find some, but I would not use the term "easily". To locate a deal that will generate a 10%+ COC is not easy in DFW.

@Jon S. - thanks and totally agree. I'm definitely not getting out there to be over leveraged. 

The area where I am is def lower on supply and spent much time doing needs assessment to make sure was a solid move! Also because Imma cheap MO-FO and deal hunter.... I buy cheeeeeeeap! Rarely do I even pay close to even 55-60% market WITH value adds. I'm buying 100% of my dreams of market from private parties. 

Watching those major markets is very important.!! Folks looking at Texas now are waaaaaay behind the current power curve. Real retail market deals for the areas you mentioned above are a seriously rare now....

Join the Largest Real Estate Investing Community

Basic membership is free, forever.