[REN #826] Real Estate Investing: Texas Housing Demand on Fire

Real Estate Investing: Texas Housing Demand on Fire, Real Wealth Show Podcast Episode #826

If you’re looking for a really hot housing market, you’ve got a few good options in Texas. Both Dallas and Houston are booming right now. The business-friendly Lone Star state has some of the strongest job growth in the country, and that’s boosting demand for housing, including rentals. As it stands, more than half of the residents in each city are renters.

The Dallas-Fort Worth area is popular among investors, especially after it was dubbed the top U.S. Market to Watch in 2019, by PricewaterhouseCoopers. Mashvisor reports that 59% of the residents are renters. (1) Houston also has an expansive rental market, especially after Hurricane Harvey. Many people lost their homes, and were forced into rentals. Mashvisor says the rental population in Houston is 57%. (2) 

The Dallas Market

Let’s take a look at Dallas. It has a population of more than 1.3 million people. That number grows to about 7.4 million if you include the entire Dallas-Fort Worth metropolitan area. The metro population increased more than 15% from 2010 to 2018 turning it into the largest metro in Texas and the fourth largest in the nation.

At 59% of the population, the tenant pool for the city of Dallas is quite large. The national average is only about 36%. Mashvisor says, “This translates into strong demand for traditional long-term Dallas rental properties.”

Mashvisor described the Dallas-Fort Worth area as one of the fastest growing economies in the country. It’s also a very diverse economy with a mix of both blue collar and white collar jobs. Top industries include healthcare, banking, commerce, information technology and data, telecommunications, energy, transportation, and defense. About 43% of the state’s high tech workers are in Dallas. The city is also home to some 19 Fortune 500 companies.

The job growth rate is about 3.23% or about double the national rate. And the unemployment rate is extremely low, at 3.1%.

The Houston Market

The city of Houston has a bigger population than Dallas, at about 2.3 million people. But if you expand that to the entire metro area, it’s slightly smaller. The metro population grew almost 16% from 2010 to 2018. The 2018 census estimates come in at around 7 million people, making it the second largest metro in Texas, behind Dallas. According to the Greater Houston Partnership, the area will add between about 4 and 8 million new residents between 2010 and 2050.

Houston is also one of the strongest economies in the nation with an equally strong rental market. The local economy was built on the oil and gas industry which has been lagging, but the area has expanded into other industries such as health care, biomedical research, and aerospace.

Houston’s annual job growth rate is about 3.75% with an unemployment rate of 3.6% in September. The percentage of Houstonians that are renters is about 44%, according to Adobo.

Surge in Residential Construction

Residential construction activity shows the enormous need for housing in both of these cities. HousingWire just published an article called: “Everyone’s building in Texas.” (3) It’s about the massive number of building permits issued in the Houston and Dallas metros. Those two cities top the list for most number of building permits in the U.S.

According to a study by Apartmentguide.com, the national average is 1,843 building permits a year for U.S. metros. (4) For the year ending in July, Houston had issued more than 36,000 residential building permits, and Dallas had issued more than 34,000. The report said, “These metropolitan areas are likely seeing construction increase due to a spike in job growth.” 

Single-Family Rentals

If you’re looking to invest in Dallas, Mashvisor recommends single-family rentals.They account for a majority of the properties in Dallas. About 70% of the listings are for single-family homes. They are also the cheapest per square foot, according to Mashvisor, and they offer the highest return on your investment for both long-term and short-term rental strategies. 

Mashvisor says it’s possible to find good investment deals in Dallas, and that paying with a mortgage is a viable option. Landlord-tenant law also favors landlords. It’s not something that a landlord typically wants to do, but if you have a bad tenant, it’s good to know you can evict them without a huge headache.

A few of the drawbacks to the Dallas market include a higher than average crime rate, so you may need to invest in some security measures for your rentals. Home prices are higher than the national average. The Texas property tax is also the sixth highest in the nation at 1.86%. This pushes the Dallas tax rate to about 2.72%. Mashvisor says that rents are also high enough to make the numbers work.

Properties in Houston have a lower price point than Dallas, in general, so that may be appealing for investors looking for single-family rentals. You’ll find more details about each of these markets on our website. We will also have property teams from both those metros at our next live event along with property teams from Jacksonville and Tampa. We’ll be in San Mateo on December 7th and Los Angeles on December 8th. It’s free. You just need to sign up at our website, here.

Links:

(1) Mashvisor Article 1

(2) Mashvisor Article 2

(3) HousingWire Article

(4) Apartment Guide Article

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