Give this article your undivided attention and find out whether rental properties for sale in Texas will be a successful investment in 2023.
Table of Contents
- Are Rental Properties a Good Investment in Texas in 2023?
- 5 Things to Consider When Finding Rental Properties
- 10 Best Cities in Texas for Traditional and Airbnb Rental Investment
The Texas real estate market is a desirable place to do business—even more so now that it is slowly transitioning into a seller’s market. The demand for houses in the Lone Star State is growing at a rapid pace.
It shouldn’t come as a surprise, though. Texas has always been known as a well-performing housing market. And that’s why, today, we’ll examine this real estate market and its prospects.
We’ve done some research in order to answer the question that real estate agents from all corners of the state have been pondering:
Are rental properties for sale in Texas a good investment for 2023?
If you wish to find out the answer to that question and look at several Texas locations with tempting properties for sale, stay tuned.
In this article, we’ll discuss the potential of the Texas real estate market, the rental properties for sale, and which areas are most attractive to investors.
Are Rental Properties a Good Investment in Texas in 2023?
Let’s start by taking a moment to look at the current situation in Texas.
According to a report by the Office of the Texas Governor released in early 2022, the state is ranked as the ninth-largest economy in the world. One of the main contributors to Texas’s economic strength is the arrival of four million new residents over the past decade.
According to expert insights, the thriving economic situation and frequent in-migrations have significantly pushed the housing demand in Texas. In fact, in some of the best-performing housing markets in the state, more than 40% of households are renter-occupied.
That’s just the kind of news that real estate investors want to hear.
It’s pretty easy to draw a conclusion from the facts we’ve mentioned so far that investing in rental properties for sale in Texas should definitely be a route to consider in 2023.
Of course, that conclusion didn’t come out of the blue. We’ve got the information to back up these claims:
- According to our August report, there are 39,281 Airbnb listings in Texas.
- The monthly Airbnb rental income is $2,953.
- There are currently 73,020 traditional listings in Texas.
- The monthly traditional rental income is $2,000.
Related: The State of the US Real Estate Housing Market in 2022 (So Far)
5 Things to Consider When Finding Rental Properties
How do you find lucrative properties for sale?
Broadly speaking, the search for rental properties for sale comprises two aspects—the general one that defines the basic rules of the market and the narrow one that applies to the community or state in which you are looking to invest.
The same applies to Texas, as well.
Investors looking for investment opportunities in the Lone Star State must first make a checklist that will allow them to navigate both aspects successfully.
Here are the five important factors to consider when finding rental properties in Texas.
1. Location
The location of your desired investment property for sale should be a top priority—and that is basically the first thing you learn when you step into the real estate business.
What does location even mean in this context—and can it seriously make or break your next investment opportunity?
We’re not saying it is the only thing you should consider—but it’s definitely in the top three.
It should go without saying, but in real estate investing, you can’t just randomly pick a property for sale and decide to invest in it. Your property’s location is actually one of the main indicators of its future success.
Suppose the general area in which you are looking for properties for sale is developed, economically rich, suitable for tourists and families, and offers many amenities. In that case, you are typically on the right track.
The same goes for any area in Texas. Several Texas cities are particularly attractive to investors and, to add to it, offer various properties for sale.
But what is it exactly that lures the investors in?
For one, since the state is prosperous, it tends to attract many career-driven individuals. But that’s not all. Texas is also known for reputable schools, so you can expect many college students to move here, too.
2. Property Taxes
Landlords get to control 90% of the money coming in and out of the property, but there’s one thing they can’t influence—property taxes.
Yes, property taxes are the bane of real estate investing. They can tamper with your envisioned property for sale in the sense that they can take quite a toll on the income you’ll earn.
It would be wise to inquire whether the state is known for high taxes. When it comes to Texas, the situation isn’t at a desirable level. Even though it’s not at the top of the list, the state’s property taxes are the seventh-highest in the US. (The average property tax in the country is 1.69%).
Furthermore, the taxes are different by county. They’re the main source of money diverted to the city’s budget and infrastructure. On a related note, the counties with the lowest property taxes include Kent, Zavala, Upton, Ward, and Terrell County.
Related: Real Estate Taxes: Everything a Beginner Investor Needs to Know
3. Landlord-Tenant Laws
The landlord-tenant relationship should be able to function smoothly without lawyers or any authorities getting involved. Therefore, to avoid any conflict between the two parties, it’s of the utmost importance for both parties to be familiar with property laws.
Given that different states have different rules, it is important to research your location—or, in this particular case, Texas.
So, what’s the situation like in the Lone Star State?
Despite the property taxes—which may raise some concerns among potential investors—we can confidently say that Texas is a landlord-friendly state.
Here are some Texas-specific rules you might be familiar with:
- According to Texas’ property law, landlords must disclose crucial information about the property to the tenants before they move in.
- There’s no limit to how much the landlord can charge for rent. However, tenants have the right to sue landlords if they engage in any illegal activities or refuse to return the deposit.
- Tenants have the right to request repairs to the property that affect their health.
4. Home Values
The changing tides in home values in the US are making it harder for investors to apply for a loan and buy the property they want. And that’s why, when researching properties for sale, you must remember to check the home values in the state you are targeting—but not just the current situation.
It would be best if you review the market trends retrospectively, as well. It’ll give you proper insight into the evolution of the Texas housing situation over time.
Home values seem to be going up at the moment. According to the latest stats, Texas homes home went up by 22.1% in value just over the course of one year.
Even though it seems scary, you should not be worried about such a high percentage because, as we’ve mentioned, more than 40% of households in Texas are renter-occupied. The number puts Texas in a favorable position—mostly thanks to the tax levels, availability of vacant land, and, of course, its strong economy.
Just know that the “For Sale” signs you’ll find in front of many Texas homes and apartments won’t stay up for long.
“For Sale” signs for many homes and apartments in Texas are not expected to stay up for long, given the state’s thriving economy.
5. Rent Growth
When searching for properties for sale in Texas, investors are strongly advised to keep track of rent growth, as well.
Why is this important?
Well, for starters, this rule is not limited to Texas; it applies to any and all locations you might be interested in.
Rent growth is essential because it gives the investor insight into how the market is holding up—and whether the rent is tenant-appropriate.
Suppose the rent in Texas is above average. In that case, investors might get the impression that their renters won’t be able to pay their obligations, which automatically denies them their profit.
We can tell you one thing for sure. Renting an apartment or house in Texas is much cheaper than buying one. That’s shown by the high percentage of renters across the state.
Renting an apartment in Texas is an excellent great idea; most renters won’t have a problem paying their obligations in time.
Relate: How to Get Access to Airbnb Data Analytics?
10 Best Cities in Texas for Traditional and Airbnb Rental Investment
As we mentioned previously, there are several factors that you should take into account to decide which investment locations will ensure the highest profit.
If all this talk about Texas was enough to intrigue you, here is a list of the 10 best cities in the state that, according to the latest data from Mashvisor, feature the most profitable traditional and Airbnb rental investment properties for sale.
We’ll first go through the list of traditional rental properties.
5 Best Cities in Texas for Traditional Rental Investment
Here are the top five places in Texas for traditional rental properties, arranged from those with the highest to the lowest cash on cash return:
1. Edgecliff Village, TX
- Median Property Price: $368,912
- Average Price per Square Foot: N/A
- Days on Market: N/A
- Number of Traditional Listings: 3
- Monthly Traditional Rental Income: $1,987
- Traditional Cash on Cash Return: 3.40%
- Traditional Cap Rate: 3.48%
- Price to Rent Ratio: 15
- Walk Score: 14
2. Grand Prairie, TX
- Median Property Price: $400,434
- Average Price per Square Foot: $181
- Days on Market: 104
- Number of Traditional Listings: 366
- Monthly Traditional Rental Income: $1,986
- Traditional Cash on Cash Return: 2.99%
- Traditional Cap Rate: 3.07%
- Price to Rent Ratio: 17
- Walk Score: 73
3. Tyler, TX
- Median Property Price: $459,287
- Average Price per Square Foot: $188
- Days on Market: 80
- Number of Traditional Listings: 189
- Monthly Traditional Rental Income: $1,735
- Traditional Cash on Cash Return: 2.52%
- Traditional Cap Rate: 2.59%
- Price to Rent Ratio: 22
- Walk Score: 80
4. Bryan, TX
- Median Property Price: $359,161
- Average Price per Square Foot: $192
- Days on Market: 59
- Number of Traditional Listings: 472
- Monthly Traditional Rental Income: $1,554
- Traditional Cash on Cash Return: 2.52%
- Traditional Cap Rate: 2.59%
- Price to Rent Ratio: 19
- Walk Score: 36
5. Lubbock, TX
- Median Property Price: $315,613
- Average Price per Square Foot: $143
- Days on Market: 44
- Number of Traditional Listings: 656
- Monthly Traditional Rental Income: $1,351
- Traditional Cash on Cash Return: 2.51%
- Traditional Cap Rate: 2.62%
- Price to Rent Ratio: 19
- Walk Score: 35
Mashvisor’s Real Estate Heatmap can help investors locate lucrative traditional rental properties in Texas.
5 Best Cities in Texas for Airbnb Rental Investment
If Airbnb is the route you’re taking, we’ve also covered this option.
According to Mashvisor, here are the top five places in Texas for Airbnb rental properties, ranked in descending order in terms of cash on cash return:
1. White Settlement, TX
- Median Property Price: $266,845
- Average Price per Square Foot: $179
- Days on Market: N/A
- Monthly Airbnb Rental Income: $3,355
- Airbnb Cash on Cash Return: 7.77%
- Airbnb Cap Rate: 8.03%
- Airbnb Daily Rate: $149
- Airbnb Occupancy Rate: 58%
- Walk Score: 42
2. Sansom Park, TX
- Median Property Price: $249,616
- Average Price per Square Foot: N/A
- Days on Market: N/A
- Monthly Airbnb Rental Income: $3,166
- Airbnb Cash on Cash Return: 7.59%
- Airbnb Cap Rate: 7.85%
- Airbnb Daily Rate: $162
- Airbnb Occupancy Rate: 56%
- Walk Score: 40
3. Woodway, TX
- Median Property Price: $464,136
- Average Price per Square Foot: $189
- Days on Market: 51
- Monthly Airbnb Rental Income: $4,847
- Airbnb Cash on Cash Return: 6.49%
- Airbnb Cap Rate: 6.62%
- Airbnb Daily Rate: $211
- Airbnb Occupancy Rate: 57%
- Walk Score: 29
4. Abilene, TX
- Median Property Price: $298,067
- Average Price per Square Foot: $358
- Days on Market: 32
- Monthly Airbnb Rental Income: $2,601
- Airbnb Cash on Cash Return: 6.46%
- Airbnb Cap Rate: 6.73%
- Airbnb Daily Rate: $137
- Airbnb Occupancy Rate: 56%
- Walk Score: 30
5. Waco, TX
- Median Property Price: $417,773
- Average Price per Square Foot: $212
- Days on Market: 66
- Monthly Airbnb Rental Income: $3,630
- Airbnb Cash on Cash Return: 6.03%
- Airbnb Cap Rate: 6.20%
- Airbnb Daily Rate: $196
- Airbnb Occupancy Rate: 57%
- Walk Score: 36
Just as with traditional rentals, you can rely on Mashvisor’s Heatmap tool to help you sort through profitable Airbnb rental properties.
The Final Verdict
Throughout this article, we’ve managed to cover all of the points related to rental properties for sale in Texas. We’ve discussed quite a few important ones along the way—so now, let’s take a moment to look back at them once again.
If you’ve been looking at Texas rental properties for sale and already have a solid strategy outlined, know that there is no room for second-guessing here.
Texas is one of the best-performing real estate markets in the US, and it’s a fruitful ground for investments in 2023. Its strong economic situation and in-migration contribute to this state’s attractive potential.
Even though Texas is a successful state, it does not imply you should be scrolling through random properties for sale. Before you decide on an investment opportunity, bear in mind its location, property taxes, landlord-tenant laws, home values, and rent growth.
The most recent reports show Texas has ten attractive places to invest in 2023. The choice investors have to make, though, is which route they will go down—traditional or Airbnb.
There’s one more thing we’d like to add before you go.
We believe that every investment strategy has potential as long as it’s well-crafted and based on up-to-date and accurate information.
Mashvisor’s tools are specially designed to assist investors in their investment journey. Our Property Finder tool can help you get a fresh start and pin your next successful investment down in no time.
