Texas: Which Cities offer the Best Property Investments?
If you’ve already determined that buying real estate and rental income properties has the best investment return compared to bonds, mutual funds, stock market, gold and a savings account, you only need to figure out which cities are best to buy real estate.
Are you considering buying property out of state? There are a lot of cities with good potential and quite a few of them are in the Lone Star State. This post might help you begin the process of determining those Texas cities with the best investment ROI for rental properties
Thriving Dallas ranks high for rental property investment
In the last few years, buyers may have shied away from Boston, New York, Miami, and perhaps away from San Francisco, San Jose and Los Angeles. Specific cities in Florida, Texas, Colorado, Utah, and Nevada have been the hot markets of late.
Easing the Tax Problem
What’s notable about Florida and Texas though is the lack of state income tax, the fast growing economies, and the increase in residents who need rental apartments, condos, and houses.
In fact, the Texas economy in part is due to their “religion” of low tax and low regulation. Sounds like an ideal situation for property investors. And the secret is neighborhoods, and cities inside the best states for real estate.
The rent over price ratios in Texas cities makes them very attractive. All told, Dallas, Houston, Forth Worth, Plano, San Antonio, Plano, Arlington, and other TX cities are key cities for landlords, property investors and property managers.
Screen Shot courtesy of Texas A&M https://assets.recenter.tamu.edu/documents/articles//2046.pdf
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Sign up for FreeThe Booming Texas Economy
The Texas economy has performed very well despite the fact oil and energy prices have been moderate. Oil Prices have sagged badly in 2016/2017 and if there should continue to be price growth in oil, Texas will benefit hugely.
Hot Austin is drawing technology companies and start ups, giving it the name “Silicon Hills.”
Texas isn’t just oil however. It’s home to a staggering number of Fortune 500 companies including AT&T, Dell, & Sysco.
The Texas economy is reasonably diversified with information technology, oil and natural gas, aerospace, defense, biomedical research, fuel processing, electric power, agriculture, and manufacturing making it a dynamic and recession proof environment for investment and exports.
Besides oil and energy production, Texas is the leader in beef, sheep, and cotton production in the US.
The port of Houston is the 6th busiest port in the world, which means this state has a lot of financial and business power. Both American Airlines and Southwest are headquartered in Texas.
Price Increases in the State of Texas
We could go on and on about post recession rates of change in home prices, but it’s suffice to say that price increases in Texas major metros have been strong. The point for you however, is how much room for growth is left?
It looks like Texas may have the best outlook of any state, and that will draw real estate speculators. Might be wise to dig into buying real estate in Texas and find the right properties in the right cities for you.
Screen Shot courtesy of Texas A&M https://assets.recenter.tamu.edu/documents/articles//2046.pdf
Low Priced Property with Big Potential
With respect to real estate, property is reasonably priced in some Texas cities and hasn’t really spiked (which may be short lived) as it has in California or New York. The reason for this may be the fact that land is more plentiful and there are fewer prohibitive regulations on building and development.
The influx of new residents and business from California is one key driver of growth here. Businesses have found it too difficult to do business from Silicon Valley. For instance, many new tech startups are seeing Austin as ideal to help their companies survive the launch years.
But is Texas Affordable for Renters?
It’s all good for price growth, but what dangers lurk for tenants who can’t pay their rent? This chart below courtesy of Numbeo.com, shows how affordable Texas is compared to rival cities. With discretionary income higher, renters will find it easier to pay higher rents.
| City | Cost of Living Index | Rent Index | Cost of Living Plus Rent Index | Groceries Index | Restaurant Price Index | Local Purchasing Power Index |
| Plano, TX | 76.1 | 40.4 | 58.8 | 73.6 | 63.6 | 99.72 |
| Austin, TX | 74.3 | 50.4 | 62.7 | 74.4 | 78.1 | 138.36 |
| Houston, TX | 68.9 | 43.6 | 56.6 | 68.1 | 69.6 | 152.61 |
| Fort Worth, TX | 67.8 | 35.3 | 52.0 | 65.3 | 65.0 | 136.93 |
| Lubbock, TX | 67.1 | 23.8 | 46.1 | 63.2 | 68.8 | 130.36 |
| Dallas, TX | 66.1 | 42.3 | 54.6 | 62.5 | 66.8 | 168.88 |
| Arlington, TX | 64.8 | 30.0 | 48.0 | 61.5 | 61.5 | 152.84 |
| College Station, TX | 61.8 | 32.5 | 47.6 | 68.8 | 57.0 | 117.89 |
| San Antonio, TX | 61.4 | 34.5 | 48.3 | 59.1 | 60.9 | 151.53 |
| San Francisco, CA | 97.6 | 111.6 | 104.4 | 107.1 | 90.5 | 105.9 |
| Santa Rosa, CA | 90.6 | 58.6 | 75.1 | 92.0 | 79.2 | 132.0 |
| Berkeley, CA | 88.6 | 78.6 | 83.7 | 96.2 | 80.7 | 114.5 |
| Irvine, CA | 85.5 | 66.2 | 76.2 | 90.3 | 76.4 | 138.0 |
| Oakland, CA | 84.5 | 79.7 | 82.2 | 86.5 | 81.4 | 103.0 |
| San Jose, CA | 82.1 | 80.9 | 81.5 | 84.0 | 82.3 | 156.5 |
| Los Angeles, CA | 82.0 | 68.9 | 75.7 | 81.5 | 82.3 | 109.7 |
| Chicago, IL | 81.3 | 56.0 | 69.0 | 80.4 | 77.9 | 128.1 |
Is Taxation an Issue?
There is no income tax in Texas, however there is sales tax. That can be a big draw for job hunters to move to Texas. Property taxes are collected at the local level and are said to be fairly high. So to cash in on the Texas boomtimes, you’ll have to pay a little more in property taxes.
Only 5 other states have property taxes worse than Texas. Texas is funded mostly through property tax. So that’s the nature of this investment property beast. Despite that, the potential for capital gains and rental income earnings are outstanding.
You’ve no doubt watched the HGTV television show fixer upper which is set in Waco Tx. The number of older homes available here may give you an extra opportunity in property flipping.
Yet new housing construction numbers foretells of a state with vast potential for you for portfolio growth. Growing the number of your investment properties is a key to big income growth as is improving your cash flow and tenant screening. Add the best property management software and you become a professional level investment property manager.
Texas Booming Housing Construction Sector
Screen Capture courtesy of https://assets.recenter.tamu.edu/documents/articles//2046.pdf
Texas Property Investment Vital Statistics
| Texas City | Projected Permits 2017 | % Home Value Growth, 2010 – 2016 | % Change in Vacancy Rate, 2010 – 2016 | Rent to Price Ratio | Home Price | Average Rent Price |
| Austin, TX | 29,872 | 2973% | -1.24 | 0.4% | $333,900 | 1,305 |
| Dallas, TX | 48,772 | 5348% | -0.33 | 0.7% | $176,300 | 1,148 |
| Houston, TX | 47,946 | 1939% | -1.07 | 0.3% | $358,176 | 1,070 |
| El Paso, TX | 4,044 | 209% | -1.57 | 0.6% | $115,400 | 747 |
| San Antonio, TX | 11,326 | 925% | 0.19 | 0.6% | $168,500 | 977 |
| Fort Worth, TX | 13,456 | 3974% | -0.62 | 0.6% | $166,192 | 1,045 |
| Corpus Christi, TX | N/A | N/A | N/A | 0.8% | $121,848 | 970 |
| Plano, TX | N/A | N/A | N/A | 0.4% | $337,400 | 1,256 |
| Stats Courtesy of Trulia | ||||||
See the best cities to buy investment property post to compare potential of Texas cities to others across the US.
Investing in the right cities is a lot like choosing the best rental management software technology to manage it.
We welcome your comments on investing in Texas real estate. Tell us how you feel about apartments, condos, houses and flipping in Texas.
Please do share this post with your clients and friends. Opportunity in real estate investing awaits!
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