With a population only second to California, Texas has a huge amount of opportunities for a wide range of people and industries. Not only is real estate investing one of those industries, but drawing people from all walks of life from all over the country also boosts the real estate market as a whole. Because of this influx, Texas is among the fastest-growing states in the country, alongside California, Florida, Arizona, and North Carolina, so let’s learn more.
Background of the Texas market
With median home values surpassing $330,000 in 2022 (source: Texas Association of Realtors), the Texas housing market is seeing meteoric increases in market prices. However, this doesn’t mean that it’s unattainable to enter, nor has it always been this way. The median home value has increased by 51% since 2017, according to the Texas Association of Realtors.
Why is Texas so popular?
So what’s caused this recent boom in Texas population and housing? There are a number of large factors, including a thriving economy, no state income taxes, affordable cost of living, and being a landlord-friendly state. From taking lease violations very seriously and prioritizing landlords’ rights to many Fortune 500 companies moving to Texas cities and the potential for higher ROI due to no income tax, it’s clear why so many people are relocating to the state. This leads to increased demand for housing, which fuels the real estate market and gives lots of opportunity for investors. Let's take a look at the best cities in Texas for long-term and short-term rental properties.
Top Texas cities for long-term rental properties
While there are tons of rental properties with huge potential in Texas, the state is so large that it’s necessary to narrow down where to start looking. Some Texas markets are poised for skyrocketing growth, while others are beginning to plateau or never really took off in the first place. Being informed on this can mean the difference between buying a property with plenty of space to increase in value, or one that’s going to lose money and struggle to be filled — so let’s take a look at the best markets in Texas for real estate investors.
The Dallas Business Journal proves Dallas-Fort Worth could be considered the best rental market in Texas. These major metropolitan areas have a 92.4% occupancy rate with an average rental property rate of $1,497 per month. Dallas-Fort Worth also boasts a booming economy, strong school districts, and great sports and entertainment.
A recent report in the San Antonio Current said that the San Antonio rental market is increasingly competitive. In fact, for every vacant rental property, there are 12 potential tenants. Further, in 2022, more than half of San Antonio renters renewed their lease and 94% of all rental properties were occupied. Boasting a median home value of $314,945 and an average rental income of $1,816(Source: San Antonio Board of Realtors), San Antonio is very affordable and profitable, making it a strong contender for Texas investors.
Another large Texas city (and where we're headquartered), Austin has been cited as one of the fastest growing cities in the entire country. The Austin-Round Rock metro area has increased by almost 15% in population from 2015 to 2020, and things have only heated up since then. It's seen explosive growth in home value, partially due to major tech companies like Tesla, Apple, and Samsung moving to the city. Now might be a good time for real estate investors to tap into the rental market, since U.S. News and World Report reported some stabilizing of home prices. Though Austin median home value is still 20% higher than the national average median home value, it still remains a promising real estate investment market for investors. The U.S. News article said that the Austin rental market has a vacancy rate of 4.9% , which is slightly lower than the national average. Austin further has a large millennial population, which promotes a strong job market and low unemployment rates.
The largest city in Texas, Houston has a strong rental market with 57% of households renter-occupied (Source: Zumper). A 4-bedroom rental property in Houston has a median rent of $1,995, and 3-bedroom unit has a median rent of $1,809. Houston further has a robust economy and growing population (Source: Colliers)
Northeast of San Antonio, New Braunfels is considered a hidden gem by savvy real estate investors. Home prices are expected to continue to rise, driven by traditionally suburban areas in Texas becoming crowded. Cities like New Braunfels offer an escape from this, while still providing easy access to jobs and major metropolitan hubs. There’s plenty of development going on here right now, so getting involved now might provide more cost-effective opportunities.
About an hour and a half southeast of Dallas, Tyler is a stunning city with a strong (and growing) economy that has been attracting more and more people to it. A relatively high Price-to-Rent ratio of 27 also means that many people are renting rather than buying, which is a great sign for long-term investment properties. Housing options are already starting to be snapped up so get in while you can.
An article in El Paso Inc. stated that El Paso is the number two top housing market for growth in 2023 on Realtor.com's list. The article further stated that El Paso homes have a median price under $300,000, making it a low cost entry point for investors. According to RentCafe, the average rent in El Paso is $1,024 and the city is 40% renter-occupied.
Best cities in Texas to Buy Short-Term Rentals
If you're interested in vacation rental investment properties, don't overlook Texas. The Lone Star State is filled with beaches, culture, and tourist destinations. Not to mention there is no state income tax and there are great deals in terms of property values. Here are the cities in Texas to look at for vacation rentals.
South Padre Island
South Padre Island is a thriving short term rental market. Mashvisor reported that in this beach town the median home value is $519,000 and the median rent is $2,234 for a vacation rental.
Filled with wineries, museums, and great dining, Fredericksburg boasts fantastic real estate investment opportunities. Though it is priced higher than other Texas real estate markets with a median home value of $774,990, it also has a high earning potential with median rents hitting nearly $3,000 (Source: Mashvisor).
Like Fredericksburg, Port A is priced high for a Texas rental market. According to Mashvisor, though, this short-term rental market is highly profitable. Not only does the beach town boast a 45% Airbnb occupancy rate, but it also has monthly income potential surpassing $5,000. At a median entry point of $699,000, the cash flow potential is substantial.
Finance your Texas rental Property with Visio
Whichever Texas market you decide to invest in for your next rental property, get started with the nation’s leader in rental loans. Texas is our home state and we have over a decade of experience in the market, so partner with someone who can help set you up for success.
Contact us to get started today