South Houston - Advice on neighborhoods

Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes

I'm looking for SFH in south Houston area. I'm targeting areas within 45mins drive in rush hour to Texas Medical Center. Mid to good schools (particularly elementary). Ideally 1% rule, but a little flexible if other criteria met. Built last 15yrs or so. Spend $140-200k (almost rent ready).

I've seen these areas in blue on image below have done well for appreciation last 5yrs (other colours show quartile of all neighborhoods for respective annualised growth). However some look to be high crime areas.

I've also seen that the REITS Invitation Homes and American Homes 4 Rent are active in some areas which is reassuring. They are also active in Fresno which is outside the 45min commute but perhaps I should consider.

Any input on which neighborhoods to target is much appreciated!!

1 Reply

9 views

Most Popular Reply

Kevin Wood

Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes

@Richard W. stick to the edge along 45 and along 288. There are some pockets of really nice homes in the area. Definitely need to drive it and know what you are looking at. I own 2 properties in the area. One is still up and coming. The other is in a nicer area and is more stabilized. Crime inside the city happens. Sunnyside is worse than third ward imo. I don't own in Sunnyside because of crime, but know folks who do.

I own a 10 and 12 by Lawndale Wayside.

2 Reply

See this reply in the discussion

23 Replies

Jump to latestLatest

Sort by

Ryan Johnson
Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
7y
All these areas are going to Have very hit or miss schools. Many on your list are lower income D to C neighborhoods that are undergoing gentrification due to being so close to the city’s inner core. Renters may be sending their kids to the neighborhood schools but most flips and even new builds we’ve seen lately are selling to younger homebuyers that want a nice place close to Downtown with some future appreciation due to location. Many of the buyers are fha loans.

1 Reply
Account Closed
Houston, TX · Member since 2018 · 41 posts · 11 votes
7y
Hey @Richard W., that's an awesome graph you've put together... how did you do that? Do you a website that spits it out for you or did you have to manually input it all? Great question btw -- hope to some more helpful information come through for ya!

@Ryan Johnson -- very insightful information. How did you gather that information regarding the class of neighborhoods? Is it just from experience or do you have somewhere you can pull that info from?
0 Reply
Ryan Johnson
Rental Property Investor · Houston, TX · Member since 2018 · 174 posts · 100 votes
7y
I live in inner city Houston and am active in a few of those neighborhoods you mentioned.
0 Reply
Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
7y
@Richard W. I really like Third Ward and somewhat the Sunnyside area right now. OST/South Union is also coming up. Greater Heights isn't bad either. Lots of development going on there.
Here is a great study put out by Rice analyzing different areas of the city:

https://kinder.rice.edu/research/neighborhood-gentrification-across-harris-county-1990-2016

2 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Ryan Johnson thanks very much for the insight. I did a bit more data digging which I'll share, basically knocking some out primarily for high crime. Would you be happy to share which you are active in and any thoughts you have on them?

@Account Closed the data was from Zillow link below. I manually coloured by quartile, although I know excel does have a function for that I just dont know it! Once I tidy up my s/s I'll share with a link (if I can work out how to). I've also got rent growth and few other stats on there.

https://www.zillow.com/research/data/

@Kevin Wood cheers for the link, will read! Also for the neighborhood advice.
Overall I'm looking for a buy and hold strategy but with a view to appreciation. i.e. provided I get at least a 5% cap rate (I'm financing at 30yrs @ 4.5%) I'm looking for the best combo of commute times, schools, crime and newer build/little upfront work to be done. I'm focused on commute to Texas Medical to hopefully reduce some of the dependency on oil price/industry (clearly at MSA level its still a very significant factor for Houston)
1 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
Below is a map of location of where the SFR REITS own in South Houston. Blue is American Homes 4 Rent and purple is Invitation Homes. They have tons of data obviously, and have generally been moving away from the cheaper homes across the country as their data shows poorer returns from these parts of their portfolios due to turn and maintenance costs primarily (I believe that's what I read). All the houses they own are pretty well kept and tend to be newer (built last 20yrs).
I've been thinking maybe don't bet against them and their data. So for example the parts of Pearland adjacent to the 288 provide decent commute times, and you can see some of their houses clustered there. Also in Fresno (but over 45min commute). Any thoughts on these areas would be much appreciated?
0 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Kevin Wood I'd actually ruled out Third Ward and Sunnyside due to crime (also Third Ward doesn't quite get the 5% cap I'd like, but that's only on average for the neighborhood, and it's not too far off). How would you describe crime in these areas, sounds like its not bad enough for you to worry about your own personal safety while there? (I only recently moved to the US, nor do I know Houston, so its hard for me to judge the reality on the ground of what maps show to be more dangerous areas!)
0 Reply
Kevin Wood
Investor · Houston, TX · Member since 2013 · 471 posts · 267 votes
7y
@Richard W. stick to the edge along 45 and along 288. There are some pockets of really nice homes in the area. Definitely need to drive it and know what you are looking at. I own 2 properties in the area. One is still up and coming. The other is in a nicer area and is more stabilized. Crime inside the city happens. Sunnyside is worse than third ward imo. I don't own in Sunnyside because of crime, but know folks who do.
I own a 10 and 12 by Lawndale Wayside.
2 Reply
Account Closed
Houston, TX · Member since 2018 · 41 posts · 11 votes
7y
Beautiful -- thanks for that, @Richard W.!
0 Reply
Kevin Bazazzadeh
Rental Property Investor · Houston, TX · Member since 2019 · 102 posts · 113 votes
7y
@Richard W. some of the areas you are considering are in opportunity zones. I don’t know if I would buy specifically for the opportunity zone, but if it is somewhere you are already looking, and you are planning to hold at least 5 years, it makes sense as a bonus because of taxes.

https://www.houstontx.gov/ecodev/opportunity-zones_concept.html
1 Reply
Matthew Thornton
Houston, TX · Member since 2019 · 12 posts · 1 vote
7y
Man, as a firefighter in the area, it's hard to not focus on the worst case scenarios I deal with through the night half's of 24 hour shifts. Kudos to those of you brave enough to be able to look past what seems like impossible markets.
0 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Kevin Bazazzadeh thanks very much, hadn't realized the extent of the opportunity zones in Houston
0 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Account Closed hopefully the google link below works so you have access to the data
https://docs.google.com/spread...
1 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Kevin Bazazzadeh @Kevin Wood @Ryan Johnson I'm looking to build my team in Houston and am looking please for recommendations for:
1) Investor friendly agent (for SFRs, ideally an investor themselves)
2) Property manager
2) Property inspector
If you have people you work with that you'd be happy to share that would be much appreciated!
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Richard W.:
Below is a map of location of where the SFR REITS own in South Houston. Blue is American Homes 4 Rent and purple is Invitation Homes. They have tons of data obviously, and have generally been moving away from the cheaper homes across the country as their data shows poorer returns from these parts of their portfolios due to turn and maintenance costs primarily (I believe that's what I read). All the houses they own are pretty well kept and tend to be newer (built last 20yrs).
I've been thinking maybe don't bet against them and their data. So for example the parts of Pearland adjacent to the 288 provide decent commute times, and you can see some of their houses clustered there. Also in Fresno (but over 45min commute). Any thoughts on these areas would be much appreciated?

I'm an inner-loop snob, so take this for what it's wroth. I don't like investing outside of 610, much less outside of beltway 8. IMO you might as well invest on the moon. It's soooooooo far.
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
If it helps, here is where I'm invested. Lots of stuff clustered close to each other in Montrose makes it seem like less % is there than it actually is. I'd say ~1/2 the montrose stuff has another icon right over it. I wonder if the google map feature that builds these can offset the icon location to take that into account.
1 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Finally, don't be scared by sunnyside. My ~200 unit property there brought in almost HALF of my total NOI last year, and it only represents less than 1/6th of my total units. You're not buying these to live in
1 Reply
Account Closed
Houston, TX · Member since 2018 · 41 posts · 11 votes
7y
Originally posted by @Richard W.:
@Account Closed hopefully the google link below works so you have access to the data
https://docs.google.com/spread...

Richard, you're a legend! Thanks so much.
0 Reply
Account Closed
Houston, TX · Member since 2018 · 41 posts · 11 votes
7y
Originally posted by @Cody L.:
Finally, don't be scared by sunnyside. My ~200 unit property there brought in almost HALF of my total NOI last year, and it only represents less than 1/6th of my total units. You're not buying these to live in

Cody, that's super interesting as I've heard some talk about staying away from sunnyside. I'm assuming you must have an awesome property management company you're partnering with being that you're out of state... has this been a pretty big key to your success? I'm just thinking there must be a lot of issues that come up with 200 unit in sunnyside... it seems like having a great property management company would be a big key to success. Realizing as I write this, do you even work with property management companies for a 200 unit? Now that I'm thinking about I imagine it may all be done in house?
Anyways, it would be cool to hear about the team you have managing the property... how you put it together, what it's been like managing them out-of-state, and anything you've learned from the property management side of things... specifically with this sunnyside complex.

0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Account Closed:
Originally posted by @Cody L.:
Finally, don't be scared by sunnyside. My ~200 unit property there brought in almost HALF of my total NOI last year, and it only represents less than 1/6th of my total units. You're not buying these to live in

Cody, that's super interesting as I've heard some talk about staying away from sunnyside. I'm assuming you must have an awesome property management company you're partnering with being that you're out of state... has this been a pretty big key to your success? I'm just thinking there must be a lot of issues that come up with 200 unit in sunnyside... it seems like having a great property management company would be a big key to success. Realizing as I write this, do you even work with property management companies for a 200 unit? Now that I'm thinking about I imagine it may all be done in house?
Anyways, it would be cool to hear about the team you have managing the property... how you put it together, what it's been like managing them out-of-state, and anything you've learned from the property management side of things... specifically with this sunnyside complex.

I have a management company I own to manage my properties. When I bought the 200 unit, it couldn't have been easier. There was already an onsite manager. My main operations person just got her trained up on our systems. The property stays 90+% full. If someone doesn't pay, we evict. It's really not that hard.
For those people that throw up their hands and grumble "ble ble sunnyside!" Tell them "Hey I know a guy that'll buy all your properties, for a fair price, cash, close tomorrow".
2 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
@Cody L. thanks very much for the input, very helpful to have your perspective on strategy and also on Sunnyside. I think for my first property I'll likely stick with a lower risk/return neighborhood, but the fact you've had good success with the 200 unit speaks for itself.
I'd be interested to know if you're happy to share:
1) Are you investing solely on your own account or do you work alongside other investors, syndicate deals etc? You've clearly built a strong and focused business.
2) Does it take long to get your head around planning/zoning rules in Houston. I ask as I've seen that there's no citywide zoning rules. Instead there are certain restrictions on number of parking places and set-backs etc etc. My initial feeling was that this was a negative for multi-family in Houston long run as there's fewer restrictions to prevent future development. However perhaps its the opposite that the lack of central zoning and transparency means its harder for outside developers to enter the Houston multi-family space?
cheers!
0 Reply
Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ votes
7y
Originally posted by @Richard W.:
@Cody L. thanks very much for the input, very helpful to have your perspective on strategy and also on Sunnyside. I think for my first property I'll likely stick with a lower risk/return neighborhood, but the fact you've had good success with the 200 unit speaks for itself.
I'd be interested to know if you're happy to share:
1) Are you investing solely on your own account or do you work alongside other investors, syndicate deals etc? You've clearly built a strong and focused business.
2) Does it take long to get your head around planning/zoning rules in Houston. I ask as I've seen that there's no citywide zoning rules. Instead there are certain restrictions on number of parking places and set-backs etc etc. My initial feeling was that this was a negative for multi-family in Houston long run as there's fewer restrictions to prevent future development. However perhaps its the opposite that the lack of central zoning and transparency means its harder for outside developers to enter the Houston multi-family space?

1) I invest on my own. It would be impossible, with my temperament, to have equity investors. Though I'm not opposed to debt investors.

2) I pay this issue zero mind

0 Reply
Richard W.
OP
Rental Property Investor · Los Angeles · Member since 2015 · 32 posts · 8 votes
7y
ok thank you, helpful to know
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.