Location is easily the most important factor in real estate. Therefore, the first step of buying an investment property is to search for the best investment locations. We can make it really easy for you by narrowing it down to the Texas housing market. Texas is one of the best states to invest in real estate. And if you want to invest in the Texas real estate market, we suggest you start your investment property search in the Houston real estate market.
In this blog, we’ll cover the most important questions about investing in Houston real estate:
- How is the Houston real estate market performing?
- Why should you invest in Houston real estate?
- Where should you buy houses for sale in Houston?
Related: What Makes the Texas Housing Market a Great Place to Invest?
Houston Real Estate Market: Mashvisor’s Investment Data
How is the Houston housing market performing? To answer that, we need to use real estate data. Where can you obtain access to such data? Right here, with Mashvisor! Mashvisor’s real estate investment tools can analyze any rental market or property for sale in the US. For more on Mashvisor’s assortment of tools, click here!
So, is the Houston real estate market a profitable market? See for yourself with Mashvisor’s investment data below!
- Median Property Price: $401,276
- Price per Square Foot: $170
- Price-to-Rent Ratio: 18
- Traditional Rental Income: $1,871
- Traditional Cap Rate / Cash on Cash Return: 1.7%
- Airbnb Rental Income: $2,399
- Airbnb Cap Rate / Cash on Cash Return: 2.4%
- Airbnb Occupancy Rate: 55.4%
Why You Should Invest in the Houston Real Estate Market
Based on the data above, you know that the Houston housing market is currently performing well. But will these Houston real estate market trends continue next year? Let’s get into the Houston real estate market forecast and why you should invest in Houston real estate.
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Both Traditional and Airbnb Investments Will Be Profitable
Above all, the Houston real estate market is and will continue to be lucrative. This is the case for both traditional and Airbnb Houston rental properties. With Houston real estate, you can even earn a higher traditional rental income than many places in the Texas housing market, where the average monthly income is $1,619.
When it comes to the return on investment figures, real estate investors must keep an important note in mind- Mashvisor’s data only lists the average return on investment of Houston real estate. In other words, Houston real estate investors can find more profitable investment properties. Check out a few high cap rate properties for sale in the Houston real estate market here.
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Houston Housing Price Growth Will Cool Down
Another highlight of the Houston real estate market is the cooling of its price growth. According to Mashvisor, the median price of a Houston real estate investment is $401,276. This is admittedly higher than the Texas median of $316,517. However, Houston has experienced a relatively low appreciation rate as of late. According to NeighborhoodScout, Houston’s real estate appreciation rate in the latest quarter is one of the lowest in the country. Houston properties are expected to appreciate by 2%, according to Zillow. These low appreciation rates will make it easier for real estate investors to enter the market next year.
In addition to cooling house prices, Houston will be a buyer’s market. As many major markets and the US as a whole are considered a seller’s market, Houston real estate market conditions will make it a great place to buy an investment property next year.
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There Will Be No Official Airbnb Regulations for the Foreseeable Future
We’ve discussed the profitability of Airbnb in the Houston real estate market. However, is Airbnb legal in Houston?
Houston is one of the few major cities that has not adopted official Airbnb regulations. Therefore, there are no restrictions on non-owner occupied rentals for Airbnb Houston. The only Houston Airbnb laws of note are a 7% Hotel Occupancy Tax and a 6% State Hotel Occupancy Tax. Currently, there is no expected change regarding Airbnb regulations in Houston.
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Demand for Houston Real Estate Property Will Increase
Most importantly, the Houston real estate market will have high demand. Houston real estate will be in demand in part due to population growth. As the most diverse city in America, it’s no surprise Houston has a high population growth rate that is double the national average. Still, a buyer’s market is expected as new inventory will be coming to meet the demand. According to the PwC’s Emerging Trends in Real Estate 2020 Report, Houston is 3rd overall for homebuilding prospects.
It’s important to note that the growing population will continue to add to the renter population in the city as about 57% of H-Town’s residents live in rental properties. And with a price to rent ratio of 18, many residents will continue to rent rather than buy homes. Overall, these factors will enhance the demand for rental properties in Houston next year.
The Best Neighborhoods in Houston for the Traditional Rental Strategy
Where should you invest in the Houston real estate market? The following neighborhoods will be the best for traditional Houston investment properties:
Golfcrest – Bellfort – Reveille
- Median Property Price: $202,068
- Price per Square Foot: $136
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $1,519
- Traditional Cap Rate / Cash on Cash Return: 3.5%
Greater Fifth Ward
- Median Property Price: $190,605
- Price per Square Foot: $145
- Price-to-Rent Ratio: 12
- Traditional Rental Income: $1,349
- Traditional Cap Rate / Cash on Cash Return: 3.4%
Greater Fondren Southwest
- Median Property Price: $162,855
- Price per Square Foot: $83
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $1,260
- Traditional Cap Rate / Cash on Cash Return: 3.4%
Hunterwood
- Median Property Price: $175,102
- Price per Square Foot: $97
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $1,386
- Traditional Cap Rate / Cash on Cash Return: 3.1%
South Main
- Median Property Price: $283,543
- Price per Square Foot: $169
- Price-to-Rent Ratio: 12
- Traditional Rental Income: $1,910
- Traditional Cap Rate / Cash on Cash Return: 2.7%
Related: Where to Find Neighborhood Data for Real Estate Investing
The Best Neighborhoods in Houston for the Airbnb Rental Strategy
What about Houston short-term rentals? According to Mashvisor, these are the best neighborhoods for Airbnb Houston:
Hunterwood
- Median Property Price: $175,102
- Price per Square Foot: $97
- Price-to-Rent Ratio: 11
- Airbnb Rental Income: $4,417
- Airbnb Cap Rate / Cash on Cash Return: 17.9%
- Airbnb Occupancy Rate: 49.5%
Golfcrest – Bellfort – Reveille
- Median Property Price: $202,068
- Price per Square Foot: $136
- Price-to-Rent Ratio: 11
- Airbnb Rental Income: $4,371
- Airbnb Cap Rate / Cash on Cash Return: 14.3%
- Airbnb Occupancy Rate: 56%
Edgebrook Area
- Median Property Price: $178,926
- Price per Square Foot: $109
- Price-to-Rent Ratio: 12
- Airbnb Rental Income: $3,520
- Airbnb Cap Rate / Cash on Cash Return: 11.3%
- Airbnb Occupancy Rate: 77.5%
Greater Fifth Ward
- Median Property Price: $190,605
- Price per Square Foot: $145
- Price-to-Rent Ratio: 12
- Airbnb Rental Income: $2,622
- Airbnb Cap Rate / Cash on Cash Return: 10.7%
- Airbnb Occupancy Rate: 61.7%
Pecan Park
- Median Property Price: $240,500
- Price per Square Foot: $186
- Price-to-Rent Ratio: 16
- Airbnb Rental Income: $3,542
- Airbnb Cap Rate / Cash on Cash Return: 8.6%
- Airbnb Occupancy Rate: 54.2%
The Bottom Line
The Houston real estate market will be one of the best places to buy a rental property. Want to start investing in Houston? To start looking for and analyzing the best investment properties in your neighborhood of choice, click here.