Texas Real Estate Market: Where to Buy Long-Term Rentals

It seems like everyone knows that the Texas real estate market is the place to invest, but where exactly should you be investing in Texas rental properties for high return?

3 Reasons Why You Should Invest in the Texas Real Estate Market

If this market has been on your radar for a while now, there’s a reason for that- Texas real estate investments are profitable and it’s no secret. Investors know what to look for when choosing an investment location, but what exactly does the Texas housing market have that real estate investors want?

1) A Growing Job Market, Population, and Economy

One of the factors with the biggest impact on any housing market is the state of its job market. Luckily for the Texas real estate market, job growth is up and employment opportunities are drawing in even more and more people.

Job growth is definitely something motivating all of the investing in Texas real estate; the markets experiencing the highest growth in 2019 are Houston, Dallas, and Austin (almost 4 percent). With about a 4 million increase in population since 2010, the Texas housing market has got many job-seekers who also need housing.

Job opportunities aren’t the only thing drawing people to move to Texas; a wide range of successful industries support the growing economy. It’s quite the business-friendly state seeing as it is home to over fifty Fortune 500 companies. It’s also home to multiple leading colleges and universities which help bring people to Texas. This is exactly what long-term rental property investors want to hear. A larger population means more potential renters.

2) Low Property Prices and High Inventory

A little over 35 percent of houses in the Texas real estate market fall in the $122,826-$245,686 price range. Don’t assume that because Texas real estate is quite affordable compared to other states like California and New York, everyone will just buy a home. The renter pool in the Texas real estate market is widening every day and right now about 40 percent of the Texas population is renting their housing. What this means for property investors is high demand, rental income, and returns. Additionally, rental expenses, like Texas landlord insurance, are reasonable.

To get a statewide understanding of what you’ll find when buying rental property in Texas, here are Mashvisor’s numbers:

Median Property Price: $324,824
Price per Square Foot: $145
Average Days on Market: 82
Price to Rent Ratio: 17
Monthly Traditional (Long Term) Rental Income: $1,589
Traditional Cash on Cash Return: 1%
65,000 listings currently up for sale in Mashvisor’s database

What does any of this really mean for a Texas real estate investor? It gives you a quick initial analysis of Texas investment property so you can get a general feel of how things are looking. While it’s good to know how the average rental property performance is statewide, this data isn’t enough to help you determine where to invest in the Texas real estate market. That’s because the Texas real estate market is huge. So property prices and inventory levels can differ from market to market within the state. That’s why, in just a bit, we’ll list the same type of data for the top-performing city markets in Texas.

3) It’s a Buyers Market

According to Zillow, buyers have the upper hand as market trends are in their favor. As the market is currently cool, it’s the right time for investors to make a move and start searching for Texas houses for sale.

Current median property value in the Texas real estate market is $196,100. Investors can be confident that their long-term rentals will not only generate positive cash flow, but they will also appreciate well. Texas property values have increased by 5.9 percent over the past year, and are predicted to go up another 2.8 percent within the next year. So even though it is a cool buyer’s market, property value is still going up.

Finding the Best Places to Invest

When searching for where to invest in real estate, you need to know what qualifies as a good market for your strategy. In this case, we’re looking for high return markets for long-term rental property investments. Remember, long-term rentals are the traditional rental properties in which tenants occupy the units for long periods of time. Notice the distinction between this and short term rentals in which guests typically stay for about a week or so. Different markets perform better for each strategy in the Texas real estate market.

Using Mashvisor’s investment property calculator, we will now list the best markets in Texas for investors looking to invest in profitable long-term rentals.

1) Pampa- Gray County

Median Property Price: $140,202
Price per Square Foot: $73
Price to Rent Ratio: 9
Monthly Traditional Rental Income: $1,331
Traditional Cash on Cash Return: 6%

Pampa is a small city in Texas which shouldn’t be overlooked as a potential investment location. As you can see, the median property price is much lower than the state level and with that comes a substantial average rental income. A 6 percent cash on cash return is a good sign for an affordable yet profitable rental property investment in this market. Start searching now.

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2) Houston- Harris County

Median Property Price: $399,260
Price per Square Foot: $169
Price to Rent Ratio: 17
Monthly Traditional Rental Income: $1,953
Traditional Cash on Cash Return: 2%

Houston really needs no introduction. It’s the largest city in Texas and with 57 percent of its population renting, real estate investors can definitely profit from buying rental property in this market. Yes, prices aren’t as low as the smaller communities, but the return is worth it if you choose the right property. You can definitely find individual properties with a cash on cash return in the double digits using Mashvisor’s Property Finder. Start searching now.

3) Laredo- Webb County

Median Property Price: $226,236
Price per Square Foot: $107
Price to Rent Ratio: 11
Monthly Traditional Rental Income: $1,656
Traditional Cash on Cash Return: 5%

Laredo is a great choice for investors searching for high-return properties in the Texas real estate market which don’t break the bank. Buyers are picking up on this opportunity and this is a city in the Texas real estate market which is starting to heat up so we highly recommend you start your search immediately to get the best deals before it’s too late. Start searching now.

4) Gainesville- Cooke County

Median Property Price: $236,506
Price per Square Foot: $128
Price to Rent Ratio: 12
Monthly Traditional Rental Income: $1,587
Traditional Cash on Cash Return: 4%

Gainesville is yet another solid option for investors in the Texas real estate market. With strong returns and homes appreciating 5 percent over the past year, investors can add some Gainesville rentals to their portfolios confidently. Start searching now.

5) Midland- Midland County

Median Property Price: $420,835
Price per Square Foot: $131
Price to Rent Ratio: 13
Monthly Traditional Rental Income: $2,620
Traditional Cash on Cash Return: 4%

Midland is a medium-sized city in the Texas real estate market which has got some hidden investment opportunities. You can find real estate properties at different price points which can operate as profitable long-term rentals. Start searching now.

6) Odessa- Ector County

Median Property Price: $344,586
Price per Square Foot: $137
Price to Rent Ratio: 13
Monthly Traditional Rental Income: $2,187
Traditional Cash on Cash Return: 4%

Odessa is quite the profitable market for either rental strategy, but real estate investors can be sure to generate some serious cash flow with long-term rentals here. Start searching now.

Do you have a free Mashvisor account? Use our Property Finder to find lucrative Texas investment properties that match your criteria in a matter of minutes!

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