Best Rental Markets in Texas: 2023 Guide

Finding the best short term rental markets in Texas can be challenging. If you’re looking to invest in Texas in 2023, you should read this blog.

Table of Contents

A Closer Look at the Texas Real Estate Market
The Top Texas Rental Markets for Investors

As the country’s second-largest state by land area and population, Texas is home to hundreds of cities and towns from which real estate investors can choose. But when it comes to profitability, you must know the best rental markets in Texas to ensure the best possible returns.

To say there is an abundance of investment properties in Texas is a huge understatement. When it comes to the Lone Star State, it’s not a matter of supply. There is enough supply to meet the growing real estate demand in Texas. As far as the state is concerned, it’s all about finding the best locations for rental property investment.

The question investors are asking is this: What are the best rental markets in Texas?

In this article, we hope to address your investing concerns as you take a closer look into the Texas housing market. We will show you which areas are suitable for traditional rental properties with the help of the real estate website Mashvisor. Not only that, but we will also point you to the best short term rental markets in Texas if you’re considering Airbnb.

We will also discuss the current market conditions so you can make better decisions based on relevant information and accurate data.

Let’s now take a closer look at the housing market conditions of the Lone Star State.

A Closer Look at the Texas Real Estate Market

Investing in the Best Rental Markets in Texas

Before we answer the question, “What are the best rental markets in Texas,” let’s first take a quick look at what the Texas real estate market looks like and why people find it so attractive.

Why Are Real Estate Investors Attracted to Texas?

Below are among the top reasons why you will find some of the country’s best investment properties in Texas.

It is a landlord-friendly state. It always pays to have the law on your side. Investors need not worry too much regarding legal matters as Texas is very friendly to landlords and gives them a wide variety of advantages.
It has a steady population growth rate. The demand for rental properties remains high as more and more people continue to flock to Texas.
Its economy is booming. Whenever an economy is performing exceptionally, it will always have a positive impact on the local housing market. The best rental markets in Texas have thriving economies, low unemployment rates, and high median salaries, which all translate to a strong real estate market.
No income taxes. Every conscientious person knows paying taxes is the right and dutiful thing to do. Well, the great thing about Texas is investors don’t need to worry about this because it is one of the nine states with no income taxes. It is a big plus for investors as it ultimately increases their ROI.
The properties are affordable. One of the things that make a town or city one of the best rental markets is affordability. The cost of living and the vast land availability in Texas help drive down housing prices.

The Texas Real Estate Market Going Into 2023

As 2021 came to a close, the demand for the Texas real estate market remained at a healthy level, considering the disruptions caused by COVID over the past couple of years. As a whole, it is still a great place to invest in real estate, especially for those who wish to scale their investment portfolios, build residual income streams, and build careers in real estate investing.

Now, just because the state offers a very wide selection for investors doesn’t mean each property in it is an instant gold mine. Even with the different reasons people fall in love with the Lone Star State, you will still need to perform your due diligence if you want to identify the best rental markets in Texas that will give the most optimum returns.

Investing in Texas real estate – or any market, for that matter – is easier to do with technology as your partner. Utilizing real estate platforms like Mashvisor makes the entire research process faster and more efficient.

Mashvisor’s tools help countless investors find the right investment properties that align with their goals. They’ve found income properties in Texas and nearly all US markets with the help of Mashvisor’s Property Finder, real estate heatmap, and investment property calculator.

To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.

And once you’ve been able to identify the best property for your needs and aspirations, we can help you protect it from a wide range of rental risks through our partnership with Steadily. Steadily is the top provider of landlord insurance in Texas (and across the rest of the US), offering comprehensive, yet adjustable policies at affordable prices.

Texas Real Estate Market Updates

As we near the end of Q3 2022, investors are asking, “What is the current market condition for Texas real estate?”

The Texas Tribune recently reported that the Texas housing market is starting to cool down. The article states that major metros in the state have seen a decline in home sales in the past few months. It can be due to the unpredictable movement of mortgage prices and property appreciation.

The pandemic has caused buyers to make offers above asking prices because of the stiff competition in the market. Until recently, this has been the norm due to limited supply and overwhelming demand. Today, there are more homes listed on the Texas MLS than at any other time since fall 2020.

Home sales went down by 5% in Q2 2022 compared to the same period last year. The Dallas-Fort Worth, San Antonio, and Houston markets all posted similar numbers, while Austin logged in the most significant drop-off at 12%.

Many experts and analysts predict that the appreciation rate will slow down compared to the last two years.

According to Mashvisor’s September 2022 report, here are the numbers for Texas as a whole:

Median Property Price: $592,565
Average Price per Square Foot: $315
Days on Market: 54
Number of Traditional Listings: 54,570
Monthly Traditional Rental Income: $2,166
Traditional Cash on Cash Return: 2.04%
Traditional Cap Rate: 2.09%
Price to Rent Ratio: 23
Number of Airbnb Listings: 43,075
Monthly Short-Term Rental Income: $3,060
Short-Term Rental Cash on Cash Return: 2.58%
Short-Term Rental Cap Rate: 2.64%
Short-Term Rental Daily Rate: $197
Short-Term Rental Occupancy Rate: 46%
Walk Score: 48

The Top Texas Rental Markets for Investors

They say everything is big in Texas. The same can be said about its real estate market. With hundreds of locations and tens of thousands of options, how can an investor ensure they get the best possible return on a Texas real estate investment? What are the best rental markets in Texas?

Investment properties in Texas can be divided into two different categories: traditional rentals and short-term rentals. Using Mashvisor’s September 2022 location report, we’ve listed the top seven markets in each category based on different profitability metrics and reasons to visit.

Each category comes with its own set of pros and cons. Investors should take the time to carefully analyze the different sets of data comparatively and see which ones align with their investing goals.

Each list is ranked according to cash on cash return (from highest to lowest) and is filtered to show only markets with:

At least 100 traditional or Airbnb listings
An average monthly rental income of $2,000
Cash on cash return rate of 2% and up
Price to rent ratio of at least 20 for traditional rental markets
Airbnb occupancy rate of no less than 50%

7 Best Markets for Traditional Rentals in Texas

The term traditional rental applies to properties that are rented out for a period of six months and longer. Here are the top markets for traditional rentals in Texas:

1. Farmers Branch

Median Property Price: $593,409
Average Price per Square Foot: $264
Days on Market: 9
Number of Traditional Listings: 108
Monthly Traditional Rental Income: $2,391
Traditional Cash on Cash Return: 2.52%
Traditional Cap Rate: 2.57%
Price to Rent Ratio: 21
Walk Score: 43

Farmer’s Branch in Dallas County is one of the best places to live in the Lone Star State, which also makes it one of the best places to invest in Texas. With its booming economy, low unemployment rate, and suburban vibe, Farmer’s Branch is the ideal place for individuals who wish to start a family or enjoy retirement.

2. Dallas

Median Property Price: $676,473
Average Price per Square Foot: $306
Days on Market: 20
Number of Traditional Listings: 4,946
Monthly Traditional Rental Income: $2,791
Traditional Cash on Cash Return: 2.35%
Traditional Cap Rate: 2.40%
Price to Rent Ratio: 20
Walk Score: 47

With an above-average livability score of 69, Dallas is one of the best to live in the state. Low taxes, favorable business climate, low cost of living, and steady population growth make it a good place for home buyers looking for investment properties in Texas. Its overall cost of living is one of the things that make it attractive to families and retirees.

3. Plano

Median Property Price: $579,827
Average Price per Square Foot: $246
Days on Market: 34
Number of Traditional Listings: 1,470
Monthly Traditional Rental Income: $2,347
Traditional Cash on Cash Return: 2.29%
Traditional Cap Rate: 2.33%
Price to Rent Ratio: 21
Walk Score: 92

The suburban town of Plano is known for its outstanding quality of life and exquisite but affordable housing. It has been recognized by several publications in the past, including CNN Money (2003) as one of the Best Places to Live in America and NerdWallet (2008) as the third most affordable suburb in the country.

4. Waxahachie

Median Property Price: $476,708
Average Price per Square Foot: $191
Days on Market: 79
Number of Traditional Listings: 166
Monthly Traditional Rental Income: $2,002
Traditional Cash on Cash Return: 2.29%
Traditional Cap Rate: 2.34%
Price to Rent Ratio: 20
Walk Score: 65

Waxahachie, TX, in Ellis County, is an enchanting town just 30 minutes south of Dallas. Its proximity to Dallas, Arlington, and Fort Worth makes it one of the best rental markets in Texas.

Waxahachie’s proximity to all major cities, along with a low crime rate, excellent public schools, and tons of activities for both the young and young-at-heart, makes it one of the family-friendliest cities in TX. Its strong real estate market also makes it an ideal Texas real estate investing spot.

5. The Colony

Median Property Price: $566,902
Average Price per Square Foot: $288
Days on Market: 54
Number of Traditional Listings: 277
Monthly Traditional Rental Income: $2,234
Traditional Cash on Cash Return: 2.16%
Traditional Cap Rate: 2.20%
Price to Rent Ratio: 21
Walk Score: 51

The Colony is considered a good place to raise a family. Also known as the City by the Lake, The Colony is also one of the most ideal places to live for those who want to get away from the big city life. With Dallas just a 30-minute drive away, a lot of families and young professionals choose to settle in The Colony to get the best of both the urban and suburban worlds.

6. Little Elm

Median Property Price: $532,907
Average Price per Square Foot: $238
Days on Market: 66
Number of Traditional Listings: 759
Monthly Traditional Rental Income: $2,212
Traditional Cash on Cash Return: 2.14%
Traditional Cap Rate: 2.18%
Price to Rent Ratio: 20
Walk Score: 30

With a livability score of 88, Little Elm is considered one of the best places to live in the Lone Star State. Its growing population and thriving economy make it one of the fastest-growing cities in north TX. All of them and more make Little Elm, TX one of the best real estate markets in Texas. Investors will find buying rental properties in this little city quite rewarding.

7. Pflugerville

Median Property Price: $500,353
Average Price per Square Foot: $243
Days on Market: 79
Number of Traditional Listings: 101
Monthly Traditional Rental Income: $2,049
Traditional Cash on Cash Return: 2.03%
Traditional Cap Rate: 2.07%
Price to Rent Ratio: 20
Walk Score: 13

Lots of real estate investors love Pflugerville for many reasons. But primarily, it is well-loved by investors for the success it offers them. Its peaceful suburban atmosphere and sprawling outdoor spaces make it a great place to live away from the hustle and bustle of big cities like Austin, which is only a 30-minute drive away.

To start looking for and analyzing the best locations for traditional rental properties in Texas or any city and neighborhood of choice, click here.

7 Best Markets for Short-Term Rentals in Texas

Real estate investors looking to make their investment properties in Texas more profitable should consider going into the short-term rental business, such as Airbnb.

Since the pandemic began, short-term rentals experienced a significant increase in their market share of travel lodging, hitting as high as 41% in peak-pandemic 2020. CNN reported in August 2022 that Airbnb demand continues to soar amid the prevailing economic uncertainty.

As a real estate investor, here are the top short-term rental markets in the Lone Star State you should look into:

1. Abilene

Median Property Price: $280,330
Average Price per Square Foot: $408
Days on Market: 31
Number of Airbnb Listings: 188
Monthly Short-Term Rental Income: $2,455
Short-Term Rental Cash on Cash Return: 6.40%
Short-Term Rental Cap Rate: 6.68%
Short-Term Rental Daily Rate: $139
Short-Term Rental Occupancy Rate: 53%
Walk Score: 28

Abilene in Taylor County, TX is an excellent moneymaker for investors with a 53% occupancy rate that offers more than $2,400 worth of monthly Airbnb rental income. Due to its historical significance as a once-frontier settlement, tourists and history buffs flock to it for its museums and other top-notch attractions.

2. Waco

Median Property Price: $411,904
Average Price per Square Foot: $218
Days on Market: 76
Number of Airbnb Listings: 392
Monthly Short-Term Rental Income: $3,570
Short-Term Rental Cash on Cash Return: 6.17%
Short-Term Rental Cap Rate: 6.35%
Short-Term Rental Daily Rate: $186
Short-Term Rental Occupancy Rate: 57%
Walk Score: 33

Many people find Waco attractive, especially those who enjoy a country-chic appeal. Its farmer markets, unique shops, and fantastic dining options make it one of the most profitable cities for short-term rentals.

Waco’s short-term rental game gives investors close to a 60% occupancy rate and a high cash on cash return of 6.17%, making it among the best locations in TX for real estate investors.

3. Woodway

Median Property Price: $486,634
Average Price per Square Foot: $196
Days on Market: 62
Number of Airbnb Listings: 225
Monthly Short-Term Rental Income: $4,663
Short-Term Rental Cash on Cash Return: 6.06%
Short-Term Rental Cap Rate: 6.18%
Short-Term Rental Daily Rate: $184
Short-Term Rental Occupancy Rate: 56%
Walk Score: 30

Speaking of Waco, its suburb Woodway makes it to our list of the top Airbnb rental income generators in the entire state of Texas. It offers visitors tons of fun things to do, like visits to museums, zoos, parks, and amusement centers like the Family Fun Center and Kids & Games Limited.

4. Elm Mott

Median Property Price: $360,280
Average Price per Square Foot: $161
Days on Market: 20
Number of Airbnb Listings: 109
Monthly Short-Term Rental Income: $2,725
Short-Term Rental Cash on Cash Return: 5.35%
Short-Term Rental Cap Rate: 5.54%
Short-Term Rental Daily Rate: $145
Short-Term Rental Occupancy Rate: 55%
Walk Score: 26

Another McLennan county location ideal for Airbnb investing is Elm Mott. It offers visitors many popular attractions, including the Heart O’ Texas Speedway and the Homestead Heritage. An investor is most likely to get a good return on investment when they set up shop in such an unassuming city.

5. Lubbock

Median Property Price: $316,944
Average Price per Square Foot: $147
Days on Market: 49
Number of Airbnb Listings: 495
Monthly Short-Term Rental Income: $2,617
Short-Term Rental Cash on Cash Return: 4.55%
Short-Term Rental Cap Rate: 4.72%
Short-Term Rental Daily Rate: $150
Short-Term Rental Occupancy Rate: 53%
Walk Score: 33

Known for its art and culture, as well as being the home to Texas Tech U, Lubbock attracts all tourists from all walks of life year in and year out, making it one of the best rental markets in Texas. The town’s population may be small, but its tourism sector attracts millions each year, making it a lucrative town for real estate buyers to invest in.

6. Tyler

Median Property Price: $472,716
Average Price per Square Foot: $193
Days on Market: 66
Number of Airbnb Listings: 121
Monthly Short-Term Rental Income: $3,092
Short-Term Rental Cash on Cash Return: 4.41%
Short-Term Rental Cap Rate: 4.53%
Short-Term Rental Daily Rate: $131
Short-Term Rental Occupancy Rate: 59%
Walk Score: 80

More than just being the Rose Capital of America, Tyler, located in Smith County, TX, has a little something to offer everyone. Known for its scenic camping grounds and challenging golf courses, Tyler isn’t just a popular getaway destination but also an excellent place for families on vacation.

7. Fort Worth

Median Property Price: $449,224
Average Price per Square Foot: $210
Days on Market: 21
Number of Airbnb Listings: 1,155
Monthly Short-Term Rental Income: $3,227
Short-Term Rental Cash on Cash Return: 4.32%
Short-Term Rental Cap Rate: 4.43%
Short-Term Rental Daily Rate: $162
Short-Term Rental Occupancy Rate: 56%
Walk Score: 36

Fort Worth is the 12th largest city in the US. It is where the West begins. Fort Worth boasts such a diverse and rich cultural history that brings in millions of visitors each year. Its bustling tourism sector, coupled with affordable housing (with median prices significantly lower in Fort Worth compared to other TX metros), makes it a worthwhile location for real estate investors.

To start looking for and analyzing the best Airbnb locations in Texas or any city and neighborhood of choice, click here.

Finding Rental Property in Texas Is Easy With the Right Tool

To find the best rental markets in Texas, real estate investors should perform their due diligence to make sure they make the smartest decisions. However, even if you were able to determine the best rental market in Texas but lack a sound investment strategy, the business venture will very likely end up as a major flop.

Aside from working hard, you should also learn how to work smart and leverage technology to assist you in your search for the most profitable rental property not just in Texas but all over the US, too.

This is where Mashvisor comes in. We specialize in analyzing data that help determine a listed property’s profitability. Using our platform allows investors to access important and accurate data in a matter of minutes with tools like:

Property Finder, which helps investors look for listed properties in a particular area;
Real Estate Heatmap, which shows the highs and lows of listing prices, rental income, cash on cash returns, and occupancy rates;
Investment Property Analytics, which helps investors find the most lucrative rental properties using accurate and up-to-date data; and,
Short-Term Rental Calculator, which helps crunch the numbers to determine a property’s profitability.

Investing in the best rental markets in Texas requires plenty of research and preparation. We at Mashvisor are here to help you locate the most profitable properties that align with your goals.

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The Best Rental Markets in Texas: The 2023 Guide