How to Buy Houston Real Estate Investment Property in 2024
Thinking of buying an investment property in Houston? It’s not a bad thought. With the city’s population growing steadily, fueled by both domestic and international migration, housing demand remains strong. In its latest report by the Urban Land Institute, Houston ranked 11th among 80 markets for best overall real estate prospects in 2024.
The city’s affordability, ample job opportunities, and cultural diversity make it an attractive destination for people seeking better opportunities and a higher standard of living. Houston boasts a diverse and robust economy, primarily driven by industries such as energy, healthcare, aerospace, manufacturing, and technology.
Despite being a major metropolitan area, Houston’s real estate market remains relatively affordable compared to many other large cities in the United States. The potential for property appreciation coupled with affordable housing options makes it an attractive prospect for investors seeking long-term growth. To top it off, multiple Fortune 500 companies are moving their headquarters to Houston, bringing thousands of jobs with them.
The city has a bright future, but before snatching up a piece of real estate, it’s important to understand the overall market.
In this guide about how to buy Houston investment property, we’ll look at:
Important Houston real estate investment market trends for 2023.
Hot neighborhoods and towns to look for investment opportunities.
Tips for finding and financing an investment property in Houston.
Let’s jump in.
Houston is a sprawling city, with plenty of suburbs and affordable housing stock
This growth shows no signs of stopping. Cushman & Wakefield estimate the metro area’s population will grow by over 1.2 million from 2020 to 2029. At this rate, Houston would have the second-highest number of new residents in the nation for the second decade in a row.
New residents will compete for Houston’s real estate — which is already in short supply — pushing up rents and home values.
And people aren’t the only ones moving to Houston. Large companies continue streaming into Houston’s exploding business hub.
Three new Fortune 500 companies — ExxonMobile, Hewlett Packard, and NRG Energy — are all migrating their headquarters to the Houston area. After the dust settles, Houston will house a total of 25 Fortune 500 companies, the third-highest in the nation.
Each company that moves to Houston brings in new residents, creates new jobs, and bolsters the economy.
Speaking of jobs, Houston is home to almost a third of the country’s oil and gas jobs. Studies show that oil prices can affect real estate values, and as the Energy Capital of the World, Houston is especially susceptible.
Before the Russia-Ukraine conflict began, analysts wondered if plunging oil prices might hold back Houston’s real estate growth potential. Since then, oil prices have done a complete 360, jumping 60% this year. These increased oil prices could help lift Houston property values even higher over the short term.
Nearby Galveston draws tourists from all over Texas and is a popular STR market for investors
Houston real estate market trends
In November 2023, Houston Real Estate experienced a resurgence as reported by HAR. Single-family home sales across Greater Houston rose for the first time since March 2022, by 4.9%. Total property sales also increased by 3.7%, and total dollar volume climbed by 7.5 percent, reaching $2.9 billion from $2.7 billion. Single-family pending sales rose by 11.9%. Active listings, or the total number of available properties, were 13.5 percent ahead of the 2022 level.
Months of inventory expanded from a 2.8-months supply last November to 3.5 months, matching its October 2023 level. It is the greatest supply of homes since November 2019. Housing inventory nationally is at a 3.6-months supply, according to the latest report from the National Association of Realtors (NAR). A 4.0- to 6.0-month supply is generally considered a “balanced market” in which neither buyer nor seller has an advantage.
With the average home valued at $404,597 and an average rental income of $1,800, Houston is a very active real estate market. This means it is relatively easier to exit an investment property in Houston.
The Houston Heights is one of the hottest neighborhoods, characterized by Victorian and Craftsman styles
Hot neighborhoods for Houston investment properties
Spring
Spring is a suburb that lies directly north of Houston.
The town will serve as the new headquarters for both Hewlett Packard and ExxonMobile — the 10th largest company in the nation. ExxonMobile already houses over 10,000 employees in their Spring campus, and the headquarters migration will bring even more.
As these companies move in, money flows into the local economy, employees compete for housing, and real estate investors benefit.
It’s already happening. According to Zumper’s Houston Metro Report, Spring saw the largest month-over-month increase with rent increasing 2.5%.
Clear Lake City
Clear Lake City is home to NASA’s Johnson Space Center, the University of Houston Clear Lake campus, and several research institutions.
Students and scientists are constantly moving in and out of the area, which creates continual rental demand. According to Zumper, the median rent for a 1-bedroom apartment currently goes for $1,224, up 6% from last year.
Downtown
Downtown Houston isn’t your ordinary downtown. It’s not all commercial real estate and exorbitantly expensive condos — at least not yet.
In fact, downtown Houston’s up-and-coming residential market has doubled over the past few years, with new condo developments targeting both high-end and mid-range residents.
Approximately 70% of the residential area is renter-occupied, making it another prime location for rental property.
Greater Third Ward
Greater Third Ward is a historic district located just southeast of downtown, right next to the University of Houston.
The University of Houston is the third-largest university in Texas, and with over 45,000 students, there’s no shortage in rental demand.
There are many new developments in the area driving up prices, which have unfortunately led to gentrification issues. According to Redfin, the median sale price for homes in Greater Third Ward was $382,000 in December 2023.
Space Center Houston is located in the Clear Lake neighborhood
How to buy an investment property in Houston, Texas
The process for investing in Houston real estate can be broken into five steps:
Are you looking for a single-family home, or do you want multiple units? Do you have time to work on the property yourself? Or would you prefer a turnkey investment?
With the current shortage of sub-$500,000 houses, now is an envious time to be a landlord. But Houston has lucrative fix and flip opportunities as well. At Longleaf, one of our customers flipped a house in Houston for over $110,000 profit — all within four short months. .
2. Plan Your Financing
Planning is key when it comes to buying investment property in Houston. The best opportunities don’t stay on the market for long, so you need to know how you’ll finance a project before you find it.
You have three main options:
Conventional loan. Banks and conventional lenders usually offer the lowest rates, but only if you qualify. Many investment properties do not meet bank requirements. And even when they do, it can take months to secure funding.
Hard money loan. Private lenders offer fast-closing hard money loans specifically for real estate investors. They evaluate loans based on a property’s investment potential, focusing less on your personal financial history.
Joint venture. Once you have a successful track record, you may be able to finance your project by pooling together funds from multiple investors.
Since hard money loans can finance your project in a matter of days, they are usually the best option for investing in a competitive market.
Whichever method you choose, build your relationships ahead of time. That way, you can pounce on opportunities that arise.
3. Search for Properties
Many of the best Houston investment properties never make it to sites like Zillow or Trulia. To find them, you need connections.
Choose the neighborhood you’re most interested in, then connect with wholesalers and agents who specialize in that area. Since they constantly have their ear to the ground, they may be able to help you find off-market opportunities.
When comparing investment options, make sure to consider:
Vacancy rates
Job and population growth
Future development projects
Housing and rental price trends in the area
Percentage of renter- vs. owner-occupied homes
Armed with this data, you can calculate the estimated ROI for your project — something a hard money lender will certainly want to see.
4. Secure Financing
If you meet bank requirements, don’t mind piles of paperwork, and aren’t in a hurry, a conventional mortgage is the way to go. Underwriting can take 30 to 45 days, so make sure to start the process immediately.
If time is of the essence, a hard money lender can finance your project faster. At Longleaf, rental loans take as little as two weeks, and short-term residential loans (AKA bridge loans) can close in 48 hours.
5. Refinance (if necessary)
Bridge loans allow you to close as fast as possible, but you’ll need to refinance within 6 to 24 months.
You can refinance into a traditional mortgage if you qualify. If not, you can roll your bridge loan into a long-term rental loan. These loans are similar to bank mortgages, but more flexible.
At Longleaf, we can save you fees by bundling your bridge loan together with your refinance.
Need financing for a Houston investment property?
Longleaf Lending is a Texas-based private lender and offers flexible loan programs designed for property investors who need to close as fast as possible. If you have any questions about Houston investment property financing, give us a shout at 979-200-2823 or info@longleaflending.com.
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