Texas has one of the fastest growing populations in the country. With immigration, new tech industries springing up throughout the state, and people relocating to Texas for jobs, real estate is at an all-time high. Clocking in as the second largest state in both land area and population in the US, Texas has a lot of potential when it comes to investing in property. To become a successful real estate investor, you need to have a firm grasp on the ins and outs of owning a rental property in the Lone Star State. From location to financing a rental property, below is a list of what you need to know about investing in Texas real estate.
Financing a Rental Home
When it comes to investing in rental property, you need to first figure out how you’re going to take the plunge and buy your property. Buying your first home for you and your family typically requires only a 3% down payment. This is not the case when it comes to purchasing property for investment purposes. Mortgage insurance doesn’t cover investment properties, so you’ll need to place at least a 20% down payment for traditional financing. However, the larger down payment you place, the better interest rate you’ll receive.
Depending on where you’re searching to invest property in, there are multiple options you can choose from. You can apply for hard money loans in El Paso, which are perfect for people who may have poor credit scores or debt. With hard money loans, investors look at your assets rather than your financial history, allowing you to take on large projects such as flipping a home. Or, if you’re looking into a larger city like Dallas, you can take out a bank loan for commercial property such as a shopping center or office building.
Location, Location, Location
These 3 L’s are the mantra of every real estate investor. Location is an extremely valuable aspect of owning rental property. Why? Because you want to invest in areas where people actually live! In a state as large as Texas, you may sit there wondering where on earth you should begin looking to invest. A good thing about living in the 21st Century is technology. There are numerous real estate investing apps that allow you to search for homes on the go!
A good tip is to start with large or growing cities. Texas is rapidly growing in the computer tech industry, oil, healthcare, and renewable energy. The reason for Texas’s population growth is because college graduates from universities along both coasts, as well as leading industry professionals, are moving there. Cities such as Dallas, San Antonio, Houston, and Austin are expanding quickly, so looking here is a good place to begin.
Lastly, an always in demand audience are college students. Large college towns such as Waco, College Station, and Lubbock have an endless supply of students looking to rent. With high turnover, you’re able to make adjustments to rental prices year by year to compete with college housing prices. To ensure you properties stay intact, screening services allow you to determine if potential renters are good for your home. Or, if you want to dip your toes into the tourism sector of cities like San Antonio, Airbnb gives investors an easy platform for renting their property.
Taking Care of Your Real Estate Property
Investing in real estate is extremely rewarding. If you make real estate your sole source of income, you free yourself from that dreaded 9-5 work schedule or sitting in an office all day. However, it’s not all butterflies and rainbows. With rental properties come repairs. A way to save money is learning how to do common repairs yourself. Along with repairs, renovating your rental property will increase its value and allow you to make a larger profit in the long run. Remember, this is an affordable investment opportunity that can pay off heavily in the long run. Knowing simple repairs such as fixing leaky faucets or a hole in the wall will save you time on expensive contractors.
If a large-scale reconstruction project needs to be done in order to stay on top of state laws and codes, you could find yourself knee deep in expenses. Whether you need a foundation repair or a new roof, you want to get the job done as cheap as possible for the best quality. You can contract freelance laborers through online freelance marketplaces and adjust your search by cost and type of repair. Or, opt for the traditional route and research the best professionals near you.
Taking It All In
Investing in real estate in Texas offers endless opportunities for financial success. With an ever-growing population and a wide array of industry sectors, finding tenants will be no problem. However, knowing how to finance a rental home, where to buy, and how to renovate and repair your property are important pieces to owning your very own rental property.
Nicole Hicks a graduate of UFT. She’s based in Toronto but travels much of the year. Nicole has written for NPR, Motherboard, MSN Money, and the Huffington Post. Nicole is a financial reporter, focusing on technology, national security, and policing.