In the United States, 14.5 households and 44 million people were renting single-family homes in 2019, according to statistics, and Urban.org forecast a 21 percent surge of new rental households between 2020 and 2040.
Owning rental property can take a lot of time and effort, even while investing in single-family rental property can frequently generate a solid, regular revenue flow.
Rental investment in Texas has historically been a no-brainer. The population increased by 3.5 million since 2010, which is a million higher than either California or Florida. That equates to a new housing stock of 1.5 million units.
Nearly 2 million of them relocated from somewhere else in search of employment and affordable housing. Look at the close to 4% growth in jobs over the past year in the three major areas to see if those attractions are still there. That is two times the US average.
What Makes Rental Investments in Texas Such a Wise Choice?
Investors search for a variety of factors to support their purchase in a specific state in order to guarantee a consistent and strong return on investment. One of the best places to buy turnkey homes in is Texas because it provides the desirable investing options that people are looking for. Texas also offers great opportunity for rental investors looking to follow the BRRRR investing (buy,rehab, rent, refinance, repeat) in Texas. Whether you are looking to build your rental portfolio from scratch or updating on your existing properties, understanding rental investments in Texas is crucial. In order to understand why, our post will go over four essential elements that make investing in Texas real estate a smart move.
Why Do Real Estate Investors Choose Texas?
These are a few of the main explanations for why Texas has some of the best investment properties in the nation.
- It is a state that welcomes landlords. Being on the right side of the law always pays off. Texas is quite kind to landlords and offers them a wide range of benefits, so investors need not worry too much about legal issues.
- Its population is increasing at a steady rate. As more and more individuals continue to move to Texas, the demand for rental properties is still very high.
- It has a flourishing economy. The local housing market will always benefit whenever an economy is doing exceptionally well. The greatest rental markets in Texas are characterized by robust economies, low unemployment rates, and high median earnings, all of which contribute to a healthy real estate market.
- No taxes on income. Every moral person understands that paying taxes is the right and responsible thing to do. The beautiful thing about Texas is that this is not a concern for investors since it is one of the nine states without an income tax. This is great news for investors because it raises their return on investment.
- The homes are reasonably priced. A town or city’s affordability is one of the factors that makes it one of the finest rental markets. Texas’s high land supply and low cost of living both contribute to the state’s low house prices.
Despite the setbacks brought on by COVID during the previous few years, demand for Texas real estate was still at a strong level as 2022 came to a conclusion. Overall, it’s still a fantastic place to invest in real estate, particularly for individuals looking to expand their investment portfolios, create passive income streams, or start their own real estate investing businesses.
However, just because the state provides a very large selection for investors does not automatically imply that every property in it is a gold mine. Despite the many reasons that people fall in love with Texas, you still have to do your research if you want to find the rental markets in Texas that will provide the highest possible profits.
Financing options for rental rental investment in Texas
Your bottom line as a real estate investor can be impacted by the type of loan you select to fund your investment because it can effect your interest rates, down payment, and loan term. The following are a few distinct investing strategies for real estate financing.
1. Conventional loan: This is a common form of conventional finance provided by banks or credit unions. They feature stable interest rates, flexible down payment requirements, and average to good credit requirements. To make sure you have enough money to repay the loan, lenders will evaluate your assets, debt, cash reserves, tax returns, and other qualifying characteristics. After the lender evaluates your financial situation, you will either be accepted or rejected.
2. Hard money loans: Compared to traditional loans, these loans have fewer requirements for qualification. Instead than using a individual’s personal income or credit history to guarantee the loan, they use the future profitability of the property. A significant portion of the cash for the house will be provided up front by hard money lenders to meet the estimated market value of the property. These loans are short-term, frequently lasting no more than a year.
However, some hard money lenders in Texas such as 14th Street Capital also offer longer term loans specifically for landlords looking to build their rental portfolio in the state. This can be a great option for you specially if you are self employed, have low credit score or a history of foreclosure or bankruptcy which can have you at a disadvantage when seeking funding from conventional sources.
3. Property equity loans and cash-out refinancing: An HELOC is a loan where the borrower pledges their home as security. This loan is comparable to a standard line of credit in that you can borrow against the value of your house and pay interest-based monthly payments, albeit the rates are liable to alter in accordance with the prime rate. A cash-out refinance, in which you refinance the remaining amount of your mortgage rather than getting a second mortgage, can also be part of a home equity loan.
Where to buy Texas Investment property?
You already know that Texas is a great state in which to invest in rental property, but which cities are particularly popular with investors? Here are the top recommendations from a list of the best places to purchase rental property in Texas:
Houston
Because it is home to NASA’s Mission Control Center, this city in the Lone Star State is well known. This may sound interesting, but the only reason it is best because it has an effect on Houston by helping to improve the employment market and the economy. Houston also has 41 Fortune 1000 firms and is the location of The Texas Medical Center. All of this contributes to a strong local economy, attracts a lot of tenants, and significantly affects population growth. Last but not least, Houston has housing costs that are seen as advantageous by investors in real estate.
Austin
Due to the high demand for rental homes, Austin, the state capital of Texas, is a favorite among real estate investors. This is due in part to the location of Texas University, numerous tech businesses, prosperous startups, and a sizable millennial population that has been drawn to the area as a result. Overall, Austin boasts a strong economy, a rapidly expanding population, a low unemployment rate, and reasonably priced housing. This region will be successful for investors searching for a city in Texas where they may buy real estate to keep onto.
Dallas
With more than 25 million tourists coming here each year, this well-known city is a sought-after travel destination. All the jobs required to support tourism are good for the economy because more jobs mean more people seeking for rentals nearby. Almost 10 significant Fortune 500 corporations, as well as other businesses in the healthcare, construction, technology, manufacturing, and other sectors, are based in Dallas. Together, these factors result in a booming economy and a competitive rental market. Like Austin and Houston, you may discover reasonably priced homes in cities with consistent population growth and a thriving rental real estate market.
Conclusion
In 2022, choosing an investment property in Texas is a wise and prudent move. Given the current publicity around it, its low-value homes, and its outstanding quality of life, Texas is a great place to invest in rental homes.
According to market patterns during the previous two years, the Texas housing market is expanding quickly and is not expected to slow down any time soon.
Consider the best cities for investing in the Texas property market if you want to catch the wave and safeguard your future by purchasing an investment property in Texas.
The seasoned lender 14th Street Capital will help you get a hard money loan for non-owner occupied buildings so you can start renovating and flipping in Taxes. Even if you have a bad credit score, are self-employed, or have a history of foreclosure, you can still get the capital you need with the help of simple asset-backed hard money loans. There is minimal paperwork and adjustable terms with these loans. To start investing in real estate right immediately, get in touch with us.