The Best Real Estate Investment Locations in Texas
Eyeing the Lone Star State for your next income-generating asset? Use this guide to know the best locations for Texas real estate investment.
If you’re looking to invest in Texas real estate, the present conditions could be in your favor.
A study revealed that the four of Texas’s largest metropolitan areas — Austin, San Antonio, Dallas, and Fort Worth — have shown significant improvements in housing affordability in 2024. Nationwide, affordability has been a challenge due to mortgage rates hovering in the upper 6% range.
However, Texas stands out as an increasingly attractive option. As housing costs ease in these major cities, the state is cementing its reputation as a prime hotspot for real estate investments, appealing to both buyers and investors alike.
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What does the current market environment mean for Texas investors? And how can investors maximize their potential earnings within the Lone Star State?
To get to the heart of the real estate market in Texas, we spoke with Melissa Orr, a top real estate agent in Victoria, Texas, who works with over 80% more single-family homes than the average agent in her region. Years of experience networking with investors give Orr a unique perspective on what qualifies as a hot investment market and a good investment property in Texas.
Factors of a great real estate market in Texas
Before we dive into specific Texas investment markets, it’s worth noting a few things that optimize an area for investment in general.
Orr says it’s important to evaluate the city as a whole first. “Look at how the schools are doing in that market. How is the health of that city? How are they growing? What are they doing [for jobs]? And then also, are there any restrictions?”
As you’re looking into investment locations, keep the following factors in mind.
Desirable area
A great property at a great price is nothing if it’s not in a great area. Savvy investors spend time researching the location of the property, paying special attention to features that would make it desirable to renters or buyers.
Many know that Texas is one of the hottest vacation spots in the country. With over 3,000 miles of shoreline, varied cultural experiences, and plenty of natural parks, Texas has seen a travel surge, with visitor spending contributing nearly $95 billion to the state’s economy in 2023. The tourism boom is great news for the short-term rental market.
In addition, the influx of people choosing to call Texas “home” continues to rise. According to the 2024 Texas Relocation Report, about 668,000 people moved to Texas from other states. The state ranked as the number one destination Americans moved to in 2023. That’s great news for investors looking into long-term rentals and fix-and-flip operations.
As you’re researching a local market within the state, consider what makes that area particularly attractive. Is there something –– such as a university, industry, or natural feature –– that will continue to draw tourists, renters, or buyers to that area?
Growing economy or job market
CNBC ranks Texas as the third-best state for businesses in 2024. The state secured the top spot in the workforce and technology and innovation categories, second place in the economy, and sixth in access to capital.
A growing economy usually indicates a stable, appreciating real estate market. At a local level, investors should note large businesses with a solid track record in the area and any new businesses intending to move into the location. Both are great indicators of consistent residential needs.
Consistent population growth
Population growth is good for investors because it means the area will continue to demonstrate a strong demand for housing. Currently, Texas is the second most populated state, with over 30 million residents. The state of Texas is expected to increase by 11.4% between 2020 to 2030.
Of course, investors will want to dial that number in closer to their intended city or county. To research historical and projected population growth in any given area, consider checking the World Population Review as well as this county-by-county data.
Competitive average rental rates
Since cash flow is directly related to rental income, investors should always look into an area’s average rental rates. Investors can expect the following rental rates, on average in Texas:
- Studio apartments: $792
- One-bedroom units: $840
- Two-bedroom units: $1,037
- Three-bedroom units: $1,358
- Four-bedroom units: $1,568
However, within the state, rental rates vary significantly by location. The average rent for a two-bedroom residence in Baylor County, TX is $905, while in Austin-Round Rock, TX MSA, it’s $1,924. Even within the same county, factors such as waterfront access and community amenities create variable rent prices that investors will need to look into by neighborhood, specifically.
Aligned with personal portfolio goals
In addition to data, investors should also choose an area for how it can generally help advance their personal goals. For example, some investors have no interest in management and maintenance. They may therefore want to choose an area based more on long-term appreciation than on cash flow.
Other investors prefer a hands-on approach to real estate. Thus, they would want to choose property that’s within driving distance of their permanent residence.
Orr recommends that investors consider an area with strong multi-family prospects. “Multi-family is a great way to get started, and here’s why: If you purchase a duplex, you can live in one side, rent the other, and qualify for an FHA loan.” Since not all locations are zoned for multi-family, that goal would need to be considered among other priorities.