Texas Real Estate Investing: The Best Areas

  • Oct 3, 2016, 2:32 PM

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The Expert Guide to Real Estate Investments

So you are considering Texas real estate? Where does one even begin? It is no secret that Texas real estate has always been a hot market for real estate investing. Real estate is still thriving and continues to be a highly profitable and sought-out investment opportunity.

With1,200 people moving into Texas daily, demand for housing is increasing. Basic economics dictates higher demand leads to increased prices. Houston, Dallas, and Austin are the three most affected cities by this demand.

Texas real estate, as well as many industries are affected by the Millennial generation. Millennials, who make up the majority of the Texan population, are pursuing job opportunities in Texas and are starting to buy and rent property.

We also cannot overlook the fact that this is an election year. And generally speaking, buying and selling property during an election year is difficult. During these times, there is a sense of uncertainty among buyers and sellers due to the anticipated changes, including new proposals and policies regarding things like property tax. As consumer confidence is shaken, Americans nationwide will not want to take risks. You yourself should be cautious and calculated during this period. Beyond the common economic uncertainty, the elections will definitely affect Texas real estate.

We will also be breaking down top neighborhoods in the top 3 cities in Texas. We will tell you about the most optimal investment in each neighborhood and in each city in Texas real estate. You can do this by visiting Mashvisor’s city search page, clicking on the neighborhood in mind, and viewing neighborhood insights.

Houston, Texas Real Estate

Houston is currently ranked the fourth largest city in the nation by population, and the largest in the state of Texas.Houston real estate market has often be described as a healthy and resilient one. It has been able to withstand many difficult circumstances and economic instability. Many real estate experts say that of Texas real estate cities, Houston is the most promising. But is that the case now? Our data shows that now may not be the absolute best time to invest in Houston.

According to Forbes, Houston home prices are overvalued by 18% and home sales decreased by 9% since June 2015, according to the Houston Association of Realtors (HAR).

These numbers can be attributed to several factors – mainly the 2015 oil slump which has negatively affected Houston real estate. Luckily for Houston, it has a diverse economy which has enabled it to endure many of the economy’s downturns this period. Houston is slowly rebounding. At the same time, while demand is increasing for Houston real estate, inventory remains relatively low, which has also been a factor for increasing home prices.

Some areas in Houston are in fact doing well – selling at fair prices. These include Katy Old Towne, Sugar Land West, Spring East, and Stafford Area. At the same time, twice as many areas are doing badly. Staying in the market for longer periods of time and selling for less compared to their value. As an investor in Texas real estate however, you may see this as an opportunity to buy homes at a lower value.

At large, if you are planning to invest in Houston any time soon, make sure to keep an eye out for energy and oil prices as the city is highly dependent on them, and hence, affected by them.

Related: Is It Time to Invest in the Houston Real Estate Market?

Here is a thorough breakdown of Houston’s top 2 neighborhoods.

Medical Center Area

Houston’s Medical Center Area is one of the most densely populated areas in Houston. It has expanded beyond city center as a residential zone.

  • Median Home Price: $614,500
  • Airbnb Occupancy Rate: 31.69%
  • CoC Return
    • Airbnb: 0.47%
    • Traditional: 4.55%
  • Average Rental Income/mo
    • Airbnb: $1,309
    • Traditional: $3,090
  • Optimal investment: 2-Bedroom Apartment, rented Traditionally (vs. Airbnb)

Greater Heights or The Heights

While The Heights reports decreased sales from last year, and has had its properties spend more time in the market, it is still one of the top neighborhoods on Mashvisor.

  • Median Home Price: $475,000
  • Airbnb Occupancy Rate: 33.67%
  • CoC Return
    • Airbnb: 0.81%
    • Traditional:3.57%
  • Average Rental Income/mo
    • Airbnb: $1,288
    • Traditional: $2,488
  • Optimal investment: 4-Bedroom Townhouse, rented Traditionally 

Dallas, Texas Real Estate

The Dallas overall market it very successful. The economy is booming and many job opportunities are being created in the city where equity is building. Of the 1,200 people who move to Texas every day, half go to Dallas–Fort Worth Metroplex – which is the biggest inland metropolitan area in the nation. One week this summer, 2,506 listings turned up for sale in the Metroplex, and 2,305 were sold in that same week. Suitably, there are currently 25,000 single-family homes and 35,000 apartments under construction in Dallas which are selling very quickly due to Dallas’ shortage of inventory. The Dallas real estate market can be described as a seller’s market.

Related: Is It a Buyer’s Market or a Seller’s Market?

As the Dallas real estate market is expanding, property prices are expected to continue to rise, and construction is also expected to increase.

With the above in mind, one can note that it is a good time to be a landlord in Dallas. The number of people moving into the city is remarkable, to say the least. Plus, our data is very appealing; Dallas’ average city rental income is $1,860 for traditional properties and $2,607 for Airbnb rentals. These numbers are excellent when compared to property prices.

Related: Everything to Know About Dallas Real Estate Investing

Take a look at Dallas’ top 2 neighborhoods.

Near East

Close to many of the cities amenities, Near East is considered an ideal neighborhood. Our data shows promising investment opportunities, specifically for traditional investment.

  • Median Home Price: $237,000
  • Airbnb Occupancy Rate: 45.42%
  • CoC Return
    • Airbnb: 2.92%
    • Traditional: 10.19%
  • Average Rental Income/mo
    • Airbnb: $1,633
    • Traditional: $3,200
  • Optimal investment: 2-Bedroom Townhouse, rented Traditionally 

North Dallas

North Dallas consists of numerous communities and smaller neighborhoods that are considered the wealthiest parts of Dallas. It is said to be among the top areas for investment in rental property.

  • Median Home Price: $804,950
  • Airbnb Occupancy Rate: 22.125%
  • CoC Return
    • Airbnb:4.81%
    • Traditional:3.49%
  • Average Rental Income/mo
    • Airbnb:$3,802
    • Traditional: $3,252
  • Optimal investment: 4-Bedroom Single-Family, rented Traditionally 

Austin, Texas Real Estate

Boy is it the time to invest in Austin! The city is booming in every direction! Millions of dollars are getting pumped in and thousands of job opportunities are being created as the city expands in different sectors. Much like Houston’s economy, Austin’s is very diverse. From tourism, to art, to government and technology – there is definitely a place for everyone. Because of this, demand for housing is increasing momentously. And in spite of the mass construction and development in Austin real estate, inventory remains low. Homes are being snatched off of the market as soon as they are listed. The average number of days a property spends on the market in Austin is only 42.A recent report from August shows that since summer of 2015, single-family property sales increased by 5.3%, at the same time the median home price in Austin rose by 9.4%. According to Forbes, Austin properties are overvalued by 19%.

Good news though, do not let these numbers intimidate you. It is not a sign of inflation, only a steady increasing demand. You do not have to worry about the Austin housing bubble popping because it’s not in a housing bubble The Austin real estate market is as solid as it could be. What’s also ideal about Austin is that is not as dependent on the oil and gas market as other cities in Texas, so it is less affected by economic downturns.

Related: 4 Reasons to Buy Airbnb Investment Property in Austin

Enough pep talk, let’s take a look at Austin’s top 2 neighborhoods.

West University

Located in central Austin, West University is known for its proximity to the University of Texas at Austin. Demand for this neighborhood is very high due to the large number of students residing there. So if you are considering Austin, this is definitely a place to start.

  • Median Home Price: $239,700
  • Airbnb Occupancy Rate: 37.15%
  • CoC Return
    • Airbnb: 11.01%
    • Traditional: 3.98%
  • Average Rental Income/mo
    • Airbnb: $2,987
    • Traditional: $1,659
  • Optimal investment: 6-Bedroom Single-Family, rented Traditionally

Downtown

Downtown is among the most affordable and most prevalent Austin neighborhoods. It is known as the neighborhood that doesn’t slow down – a business hub by day and a nightlife delight by night.

  • Median Home Price: $379,900
  • Airbnb Occupancy Rate: 48.53%
  • CoC Return
    • Airbnb: 7.65%
    • Traditional: 2.95%
  • Average Rental Income/mo
    • Airbnb: $4,035
    • Traditional: $2,345
  • Optimal investment: 3-Bedroom Apartment, rented on Airbnb

We hope this breakdown Texas real estate guides you through your investment endeavor. As you can see, Texas real estate is among the top markets nationwide. Do not forget to use Mashvisor’s tools such as our investment property calculator and the site’s features. We will help you further understand where best to invest using information such as property listings, rental income, cash on cash return, cap rate, and much more.

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