Don’t mess with Texas. The Lone Star State is the second-largest state in terms of population and land. It boasts many major metropolitan cities including Houston, Dallas, Austin, and San Antonio.
This is a historically successful market, but now is the perfect time to buy rental property. The Texas Quarterly Housing Report for the 2023 Q3 notes that the Texas housing market has experienced a small dip of 1.5% in prices while inventory is up by 15%. For those with a buy-and-hold strategy, this is an excellent opportunity to buy when real estate is cheap and benefit from long-term appreciation.
Despite the rise in supply, home prices have only dropped by a tiny 0.056% between October 2022 and October 2023, with the median home price sitting at $342,400. Approximately 14.8% of homes sell above the list price, which is great for house flippers ready to get into the real estate market. High mortgage rates have discouraged some residential home buyers, but at the same time, property in Texas only stays on the market for about 22 days, which indicates that it is still competitive.
It's important to remember that the past few years have been strange ones for all markets, and now that the housing market is equalizing, investors have a lot to be optimistic about in terms of Texas real estate.
Everything is bigger in Texas, and that includes real estate investment opportunities. With so many distinct regions, you can find a great investment property in nearly any metropolitan area. Both vacation homes and long-term rental properties can be a good choice, as research indicates a strong rental market for both. Let's take a closer look at the numbers so you can buy investment properties that meet your expectations in the Lone Star State.
Texas Vacation Rentals
With such a large tourism industry and a growing population, you're bound to develop an excellent cash flow. This is particularly true because you can enjoy potential rental income from both staycationers and those visiting from out of state, given that Texas is so vast. Mashvisor, which collates Airbnb and long-term rental data, notes that there are 55,475 Airbnb listings in Texas, which earn $2,754 a month.
The cap rate is 3.01%, and the average daily rate is $175. There are no state-level restrictions on short-term rental property, and the Texas legislature has historically been very protective of the tourism industry, challenging local ordinances that restrict the vacation real estate market.
Texas Long-Term Rentals
When you buy rental properties for long-term use, you can be assured you'll have a steady stream of tenants. The vacancy rate has dropped significantly and now sits at 7.9%. The average rental rate statewide, across all property types, is $1,847, and there are approximately 55,695 rentals currently available on the market.
Mashvisor indicates that the long-term cap rate for apartments is about 2.94%, which is good for long-term investors. The price-to-median-rent ratio is about 19, but rising home values and a higher cost of living still encourage tenants to stick around in their rental properties.
Texas offers universities, sports teams, and jobs across all markets. It has a thriving economy and relatively affordable real estate, which makes it a great state for investors. Additionally, Texas is home to beach towns such as Galveston, Port Aransas, and Corpus Christi, which are all short-term rental-friendly. This variety of locations to find real estate means that almost any city in Texas will have reasons to invest.
Great deals abound for those who would like to buy vacation properties in Texas, thanks to the low cost and high tourism traffic. These are the best cities to find great property for short-term rentals that will produce a steady rental income for years to come.
The largest metropolitan area in the Southern United States, Dallas is an ideal location for a short-term rental, as it draws in over 22.5 million tourists per year. There are attractions for people of all inclinations, from the AT&T Performing Arts Center to the Dallas World Aquarium.
The median price for single-family homes is currently $306,310, and they go to pending in 17 days, which signals that the market is hot. You can expect about $46,000 in annual rental income with a $122 average daily rate and 31% occupancy.
Houston is most well known for being the home of the NASA Johnson Space Center, but it is also home to many exciting museums, such as the Health Museum and the Museum of Fine Arts. It's the most popular place in Texas for international visitors, including 1.3 million from Mexico alone!
The median price for single-family homes was $327,000 in October 2023, making it quite affordable overall. Occupancy rates are 52%, with a nightly rate of $155 and an annual rental income of $21,216, making it a great value for rental income balanced by sales price.
Best known for the famous Alamo Mission, San Antonio is also the location of the quirky San Antonio Riverwalk and the San Antonio Missions National Historical Park. It's an incredibly popular tourist destination, with 41 million tourists annually, most of whom will contribute to the hot short-term rental market.
San Antonio is affordable for real estate investors, as the median home sales price is about $270,000. At the same time, the occupancy rate is very high at 59%, and the average daily rate is $175. You can expect to make about $27,000 in rental income annually, which provides a very admirable return on investment.
The significant growth in population and plentiful job opportunities drive up rental prices in these cities, which means your investment dollars go farther than elsewhere in the country. These three cities are some of the best in Texas for a multi-family or single-family real estate investment.
Part of the reason that Austin is so great for investments is that it has a strong economy, particularly due to the major highways that thread through the area. The Urban Land Institute notes that Austin has poured major funds into improving the highway system here, making this city a transportation hub — and, thus, a popular rental market.
It's a bit pricier than other places at $545,000, or over $310 per square foot. However, the median rental income is also high at $1,806, which is above the national average. The rental vacancy rate is relatively low at 5.8%, and the city leans toward larger properties of about 3.5 rooms.
In the Dallas metropolitan area sits Fort Worth, which is a great place for people to settle down if they want to capitalize on the strong job market in the bigger city. It's much more affordable than Austin, with the average sales price listed at $340,000, well below the national average of $431,000 during the same period. Average rental rates are smaller than in Austin at $1,455, but 43% of residents rent, which is well above the norm in the United States as a whole.
A little more rural, Waco is a charming small community of only 142,000 people, making it the best city for families who want affordable living and a tight-knit community. It's one of the cheapest areas to buy rental property, as property values are currently around $214,027. Rental income averages about $1,312 per month, with a very high renter population at 53%.
Headquartered in Austin, Texas, Visio Lending has over a decade of experience in real estate and finance. We’ve originated over 1,280 loans in Texas totaling over $276M.
Visio's loans were designed with investors in mind, offering full 30-year terms and LTVs up to 80% on purchases and rate and term refinances, and LTVs up to 75% on cash-out refinances.
Our loan process is fast, simple, and dependable with no DTI calculations or personal financial statements.