No matter the housing market you choose for real estate investment, you always need to keep up with its trends so you know all the right moves to make. The general forecast for the Texas real estate market is looking pretty positive so far, but we’ve got a couple of tips to help you out. So if you’re a Texas real estate investor (or want to become one), here’s how to make the most out of your investments:
1) Check Out the Local Buyer’s Markets
Texas real estate investors shouldn’t be so quick to hit the hottest markets in the state. Just because some cities have high competition, doesn’t mean you should necessarily start your search there.
While the Texas housing market did start out with some scarce inventory for the beginning of 2019, things are looking up for buyers. It’s so important for Texas real estate investors to keep tabs on inventory levels as this plays a big role in determining what kind of a deal they’ll get. For example, early 2018 wasn’t the easiest time for buyers as Texas houses for sale were at 3.4 months of inventory supply. This definitely added some constraint on the levels of affordability for Texas real estate investors; this is because when housing inventory levels are low, high demand from buyers allows sellers to up their prices.
Fast forward to today, the market has regained some balance and according to Zillow, Texas real estate investors are in a cool market. Inventory levels now favor the buyer and affordability in the market is generally better. Construction activity has also been increasing since last year; the Texas Residential Construction Leading Index (RCLI) hit it’s highest levels since 2007.
Texas real estate properties are still holding strong value amidst the increase in inventory, with a median property value of $196,100 (which increased by 5.9 percent over the past year).
Texas real estate investors should check out Dallas and Houston as they’re both high-growth buyer’s markets. Austin is also a strong market but it’s starting to warm up to a seller’s market so if you’re set on buying an investment property there, move now.
You can use Mashvisor’s search tools to find lucrative investments quickly. Start looking for and analyzing the best investment properties in your city and neighborhood of choice.
2) Choose the Right Rental Strategy
Texas is the biggest state in the country, and property investors should use different strategies depending on the local housing market conditions. The main rental strategies Texas real estate investors can choose from are long term rentals (traditional) and short term rentals (Airbnb). Regardless of the strategy you go for, remember to get an appropriate landlord insurance in Texas to protect your investment and yourself.
Meanwhile, if you’re wondering what factors play a role in determining the optimal rental strategy for the market you’re in, there are a couple.
When choosing an investment location for traditional rentals (rental properties in which tenants occupy units for long periods of time), real estate investors should look for:
- Landlord-friendly laws
- Job market growth
- High rental demand
- High rental rates
- Strong traditional return on investment metrics
When choosing an investment location for Airbnb rentals (rental properties in which tenants occupy units for a period of time less than 30 days), real estate investors should look for:
- Limited Airbnb regulation
- High tourism markets
- High comparable nightly rates
- Strong Airbnb return and occupancy rates
Where to Invest in the Texas Real Estate Market
Real estate investors can find some markets in which Texas investment properties perform well under both strategies. However, usually one strategy tends to be more profitable when it comes to local markets. In the Texas housing market, traditional real estate investors should invest in the following markets:
- Pampa (Average Cash on Cash Return of 6%)
- Laredo (Average Cash on Cash Return of 5%)
- Livingston (Average Cash on Cash Return of 4%)
Airbnb real estate investors should first check out these markets for profitable short-term Texas rental properties:
- Waco (Average Cash on Cash Return of 17%, Average Airbnb Occupancy Rate of 56%)
- Lufkin (Average Cash on Cash Return of 11%, Average Airbnb Occupancy Rate of 64%)
- Spring Branch (Average Cash on Cash Return of 14%, Average Airbnb Occupancy Rate of 45%)
You can find data like this and more on Texas rental properties when you sign up for Mashvisor. To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
3) Take Advantage of Low Mortgage Rates
Lower mortgage rates have been stimulating some buyer activity in the Texas real estate market recently. Most buyers are going for existing homes rather than newly-constructed properties because of price. New homes are priced about 30 percent higher than existing homes. So what should Texas real estate investors go for?
Well as interest rates continue to drop as a result of global economic growth and trade uncertainty, today’s mortgage rates are helping out not just Texas real estate investors, but most property buyers in the nation. The 30-year fixed-rate dropped down to a rate below 4.1 percent.
There are multiple types of loans for investment investors can get:
- Conventional Loan: requires a minimum down payment of 15%
- VA or FHA Loan: government-backed loans which require you to purchase a multi-unit property and occupy one of the units
- Commercial Loan: used by Texas real estate investors searching for commercial investment properties (property with more than 5 units)
It’s important to never settle for the first loan offer you get and to compare different lenders. Texas real estate investors can find different rates from different lenders but the deal they end up with ultimately depends on their personal financial situation.
The financing method you choose for your Texas real estate investment shouldn’t be neglected. Mashvisor knows that this plays a big role in your investment’s overall return. You can click here to learn more about our tools, but here’s a quick summary. You can start by using one of our search tools to find the best property and investment strategy for your market, all the while filtering search results based on your criteria- whether it be property type, financing method, rental income, or other factors. We then provide you with an investment property analysis tool which will project how profitable this investment will be. Here’s the ultimate tip for Texas real estate investors: use Mashvisor.
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