Finding the best places to invest in Texas real estate other than your hometown is a challenge for many investors, often our tendency to avoid the discomfort of investing in an unknown market limits our investment potential. “How to Tell a Good Rental Market From a Bad One in Texas.” However, an intricate part of an investment business growth is expanding boundaries.
To this end, you should be comfortable analyzing properties across Texas for the maximum amount of profits from your real estate investments while taking the lowest possible risk with your money. Then after locating your market, you can narrow it down to the best neighborhood within your budget and then the right property.
Read on as we explore how to tell a good rental market from a bad one in Texas.
Population Growth Rate
Stable markets tend to be better suited for those investors who wish to invest and hold over the long term. At the same time, those with population growth trends are very nicely suited to the BRRRR (Buy, rehab, rent, refinance, repeat) method of investing. You need to know what is happening with the population because a decline indicates a decaying economy, making this one of the quickest ways to tell a good rental market from a bad one in Texas.
High Employment Rates
A high unemployment rate is another sign that the economy is on a downward trend, so you must also review the employment rates to tell a good rental market from a bad one in Texas. Additionally, check into the wage rates because higher income indicates employment demand and a tenant pool with stable income.
More Economic Sectors
A greater diversity of economic sectors creates a cushion against economic downturns in one area affecting the economy as a whole. For example, when a market has several economic sectors such as agriculture, tourism, and manufacturing within the same market, this is another way to tell a good rental market from a bad one in Texas. However, if a market is limited to one or few sources of employment, and something should go wrong, then your rental income is no longer stable.
Home Prices vs. Rental Rates
Savvy investors know that when buyers investigate a market, they typically use a formula to determine if it is currently better to rent or buy, known as the price-to-rent ratio. When this ratio falls below 15, buying is a better option, between 16 and 20. While it may vary by property, it is typically better to rent than buy, and over 21 indicates renting is a much better option. If your potential market sits at 21 or higher, your investment will likely provide you with great returns, making this another excellent tool to determine a good rental market from a bad one in Texas.
Occupancy rates are a fantastic measurement you can use to tell a good rental market from a bad one in Texas. High occupancy rates indicate a strong demand for rental properties, and a steady history of this trend can further ensure that your investment is sound.
Another factor in telling a good rental market from a bad one in Texas is the local restrictions and requirements governing the specifics of rentals. More landlord-friendly guidelines can equate to a better overall return on the investment. Your income is far more secure when a landlord has more control over their properties and tenants.
Just as with any rental property, you must focus on the best available neighborhood within your budget. Investors must still practice due diligence in researching the local crime statistics, the quality of the schools, and the perks offered to the residents by living in the community, such as parks, access to public transportation, and convenient shopping. Naturally, lower crime rates and proximity to these amenities are another way to tell a good rental market from a bad one in Texas. It is better to buy the lowest-priced property in the best area, offering the most return for your investment dollar.
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