There’s a lot to learn before investing in real estate, but it’s nothing you can’t handle if you prepare yourself for what’s ahead. That includes sweltering humidity, a booming job market, tasty Texan cuisine, and—hey, would you look at that—an affordable real estate market.
If that’s not enough to convince you, who knows what will?
Before you jump headfirst into a long-term commitment like this, read up on these three tips for investing in Texas real estate—and then you can get back to enjoying your ten-pound bucket of Texas BBQ chicken in the midday sun.
#1 Understand the Market
Overall, Texas is considered a prime investment opportunity when it comes to real estate. But the state and its many counties are as varied as they are vast—no two markets are alike.
Be sure to brush up on your knowledge of the different Texan housing markets:
- High-growth markets – These areas boast economic development and consistent housing demand. Home prices have continued to rise, which is promising to an investor unless they rise too much. An average home price that exceeds 20% of the average income is a warning sign.
- Medium-growth markets – These areas have also seen some economic growth and acceptable demand for housing, specifically for rental properties and single-family homes. Buying real estate in these areas will likely yield positive results.
- Low-growth markets – The housing prices may be low, but that’s for a reason. You’ll likely struggle to rent in these areas because of the low demand for housing, and you certainly won’t see the cash return you’d like.
#2 Find the Hottest Neighborhoods
You can find a promising piece of real estate in virtually any state, county, or city, but some rise above the rest in terms of smart investments. If you’re looking into listing your property on short-term rental sites like Airbnb and Vrbo (conveniently headquartered in Austin, Texas), check out these three promising locations:
- Lufkin – This Deep East city is the largest in Angelina County, Texas, and one with a promising average Airbnb occupancy of 64%. Investors with rental properties have seen an average cash return of 11%.
- Waco – This middle ground between Dallas and Austin is a lovely little city in its own right. Rental properties see an average cash return of 17% and 56% Airbnb occupation, so if you’re looking for loans in Waco, now’s the time to seal the deal before the market blows up. As the home of Baylor University, it features a younger, up-and-coming demographic—Sic ‘Em, Bears!
- Spring Branch – This may be a quaint little city, but it’s still part of the San Antonio-New Braunfels metropolitan area. With an average cash return of 14%, it’s nothing to scoff at despite its small size and population—get in on the ground floor, as they say.
#3 Base Your Location Search Off Your Rental Plan
Nowadays, Airbnb and other short-term rental sites are very legitimate ways of listing your property—technology really is the wave of the future, huh?
But this isn’t quite the same as owning a timeshare in Maui or ski chalet in Vail (or any major tourist destination with visitors practically lining up to book accommodations).
Some areas lend themselves to traditional, long-term tenants, while others are more suited to short-term Airbnb guests. This decision will impact where you purchase and what key factors you’re looking for in a neighborhood:
- For traditional rentals, you’ll want an area with steady job market growth to attract long-term tenants. To ensure a high cash return, you should search for neighborhoods with high demand for rental properties and high monthly rent—that allows your property to be competitive at a similar rate.
- For short-term vacation rentals, check out cities and areas with a strong tourism industry and high nightly rates in surrounding hotels, resorts, and other Airbnbs. Similarly, this means you can list your rental at that same price without losing business to cheaper accommodations. Keeping your property competitive amidst luxury hotels means providing that “homey” feel that many travelers enjoy—in the Lone Star State, you’re still looking for a five-star review.
Invest Now, Profit Later
Long-term investments can take time to yield profits, but once they do, you’ll thank your past self for making such a smart decision. As the cash return starts rolling in, try not to spend it all in one place, unless it’s your favorite BBQ joint—in that case, we really can’t blame you!
