The Dallas real estate market has consistently been one of the hottest housing markets in the country. Despite a relative cool-off in 2019, this housing market still offers tremendous opportunities for real estate investors. In this article, we will go over some expert tips for Dallas real estate investors and reveal the best places to buy a rental property in the city.
Is the Dallas Housing Market Still Viable in 2019?
The real estate landscape is often subject to radical changes. Markets that were once promising end up faltering relatively quickly due to unforeseen macroeconomic developments. In the case of Dallas, some areas have experienced a noticeable cool-off in recent months and listings of Dallas investment properties seem to be lingering longer. Having said that, these listings of Dallas homes for sale do not indicate a complete shift towards a buyer’s market. As a matter of fact, demand is still significantly higher than the supply. The slight market stagnation can be attributed to a temporary buyer resistance rather than a major market trend shift.
The most important thing that Dallas real estate investors should know is that the housing market is anchored by solid economic fundamentals. As a consequence, Dallas real estate investments will continue to yield decent returns in the foreseeable future. Here is a brief overview of the factors that make investing in Dallas residential real estate a wise move.
1 – Dallas Boasts a Strong and Diverse Economy
The strong economy of the city is one of its biggest selling points. Moreover, the diverse nature of the economy attracts a qualified workforce in a number of specialized areas. The tech sector, in particular, is projected to continue its massive expansion. North Texas is currently ranked 7th when it comes to tech employment. This puts it ahead of major areas like Seattle and Chicago.
2 – The Vacancy Rate Is Low
Vacancy rates are a critical component of every rental strategy. Potential Dallas real estate investors will be glad to know that the annual vacancy rate of the average Dallas rental property is remarkably low. This ensures reliable rental income throughout the year and creates positive cash flow for the investor.
3 – The City Has a Booming Tourism Sector
Tourism is on the rise in Dallas. In fact, the city has closed the previous year with a record number of visitors. This makes Dallas an ideal option for the short-term rental strategy. More specifically, Airbnb Dallas can provide a tremendous return on investment given the current market conditions.
4 – The Population Is Steadily Growing
Population growth is one of the most reliable indicators of a real estate market’s long-term potential. The population of Dallas has been growing at a high rate for quite some time now and the Dallas metropolitan area ranks high as one of the fastest-growing areas in the country. This generally bodes well for Dallas real estate investors who are looking to implement long-term strategies.
Now that you’re familiar with the main reasons why you should invest in the city’s housing market, let’s delve into some Dallas real estate market data.
Market Data for Dallas Real Estate Investors
- Median Property Price: $411,542
- Price per Square Foot: $202
- Price-to-Rent Ratio: 18
- Traditional Rental Income: $1,914
- Traditional Cash on Cash Return: 1.0%
- Airbnb Rental Income: $2,865
- Airbnb Cash on Cash Return: 2.4%
- Airbnb Occupancy Rate: 56.7%
Data for the Best Dallas Neighborhoods
- Median Property Price: $299,018
- Price per Square Foot: $238
- Price-to-Rent Ratio: 11
- Traditional Rental Income: $2,361
- Traditional Cash on Cash Return: 6.8%
- Airbnb Rental Income: $2,102
- Airbnb Cash on Cash Return: 5.1%
- Airbnb Occupancy Rate: 54.5%
- Median Property Price: $310,990
- Price per Square Foot: $119
- Price-to-Rent Ratio: 10
- Traditional Rental Income: $2,674
- Airbnb Rental Income: $3,618
- Traditional Cash on Cash Return: 5.6%
- Airbnb Cash on Cash Return: 7.5%
- Airbnb Occupancy Rate: 54.0%
- Median Property Price: $178,220
- Price per Square Foot: $119
- Price-to-Rent Ratio: 13
- Traditional Rental Income: $1,116
- Traditional Cash on Cash Return: 1.2%
- Airbnb Rental Income: $2,706
- Airbnb Cash on Cash Return: 7.7%
- Airbnb Occupancy Rate: 54.1%
Five Mile Creek
- Median Property Price: $211,528
- Price per Square Foot: $133
- Price-to-Rent Ratio: 13
- Traditional Rental Income: $1,414
- Traditional Cash on Cash Return: 2.2%
- Airbnb Rental Income: $2,730
- Airbnb Cash on Cash Return: 7.4%
- Airbnb Occupancy Rate: 51.8%
5 Real Estate Tips for Dallas Investors
As we stated earlier, Dallas offers a wide array of real estate investment opportunities. Here are some tips and Dallas real estate investing strategies based on the current market trends in the city.
1- Opt for an Income Property Strategy
While investing for real estate appreciation can be extremely profitable in Dallas, the current market trends lean towards favoring a cash flow strategy. Dallas is now home to more renters than homeowners. In fact, only 39% of Dallas area residents own their homes. When you couple this with the low vacancy rates in the city, it becomes apparent that investing for rental income is the ideal strategy.
2- The Near East Area Is Perfect for a Traditional Rental Strategy
This area should be at the top of the list for Dallas real estate investors. As you can see from the data above, property prices are relatively low in Near East and rental income is one of the highest in the city. Furthermore, this is a new residential area that has significant growth potential. The neighborhood is also home to several essential amenities such as trendy bars and designer shopping areas.
3- Consider Investing in Southeast Dallas for Short-Term Rental Income
The two key components of any short-term rental strategy are profitability and affordability. The Southeast area of Dallas satisfies both requirements. The median price of properties in Southeast Dallas is one of the lowest in the city and the average rental income is higher than most Airbnb markets. Additionally, the area features some of the city’s top natural attractions and recent investments in the Great Trinity Forest will only increase its appeal, making it a top location for Airbnb investing.
4- House Hacking Is a Strategy Worth Considering
House hacking is a strategy that involves living in one of the units of the property and renting out the others to tenants. This can be an effective way to generate extra income and pay expenses while living for free. For this strategy to be successful, several requirements have to come into place. The investment property needs to be affordable, it has to be situated in a nice location, and it should be able to generate decent rental income. The data outlined above shows that several Dallas neighborhoods fit the criteria. Areas like Near East and Coppell are ideal options for this strategy.
5- Take Time to Understand Property Taxes in Texas
Property taxes are often neglected when real estate investment strategies are discussed. This should not be the case since taxes clearly affect the profitability of an investment. Dallas real estate investors should know that Texas has some of the highest property taxes in the country. Needless to say, this should be factored in when doing an investment property analysis. Such analysis can be carried out using effective tools such as the Mashvisor rental property calculator. Click here to learn more about this product.
Regardless of which strategy you decide to go for, investing in the Dallas housing market is undoubtedly one of the best decisions you can make. All indicators point to a strong market in 2020 and Dallas real estate investors stand to profit in the long-run as the city’s solid fundamentals will continue to support the market.
To start looking for and analyzing the best investment properties in the Dallas real estate market, click here.