Thinking about investing in the Houston real estate market? You should be! To begin with, Houston with its population of well over two million people is the most populated city in the State of Texas and the fourth one nationwide. It is also an important trade, business, energy, and medical center.
Mark Dotzour, a former chief economist for the Texas A&M University’s Real Estate Center, described Houston housing market’s performance as “stunning, astonishing, astounding” as in his words “it’s amazing how resilient the housing market is in Houston when you’re in the middle of a root canal.”
According to Neighborhood Scout, the Houston real estate market has experienced an overall appreciation of 136%, which means an average annual appreciation of over 3%.
In the past 10 years, the overall appreciation was 48%, with an average annual appreciation of 4%, which ranks Houston in the top 10% nationally.
In the past 12 months, the housing market in Houston appreciated with 7%, higher than in 80% of US cities and towns.
Related: Texas Real Estate Investing: The Best Areas
Disclaimer: The data showcased in this blog shows the Houston real estate market performance for Q4 2017. However, the hosing market is not static, and it is subject to change over time and may differ drastically depending on the time you read this blog.
But how exactly is the Houston real estate market performing for investment properties in general, and rental properties in particular?
Houston Real Estate Investment Performance
The Houston real estate investing market has shown promise throughout the year, with the number of investment properties steadily rising. Due to the high demand for new homes, the Houston real estate market has been performing very well for rental properties, and people have been more inclined to rent properties for longer periods of time in general.
Property Sale Price: $425,621 Median | $2,354 Avg/Sq Ft
With $403,338 as the median property sale price, investing in Houston real estate can be considered fairly accessible compared to other cities in the U.S., and it should be fairly easy for real estate investors to obtain the required amount of cash to invest in Houston real estate properties.
Cash on Cash Return: 4.89% Traditional | 0.66% Airbnb
The Houston real estate market seems to be doing very well for traditional rental properties, and not as well for Airbnb rental properties. While this applies to most areas in Houston, there are a few neighborhoods that have been performing extraordinary well for Airbnb rental properties, such as the neighborhood of Macgregor.
Additionally, with an average of 30% Airbnb occupancy rate, renting out a property using Airbnb might prove to be a challenge for most real estate investors, and they would have to ask for high nightly rates in order to get their cash flow to the positive side and start earning money through their real estate investment.
According to our data, there are currently 1,088 investment properties, 797 Airbnb rental properties, and 8,548 traditional rental properties in the Houston real estate market.
Related: Why Texas Real Estate Has Always Been Sexy For Investors
But what are the top neighborhoods for investing in Houston real estate, and how are they performing?
Note: Click here to find the best investment property in any of these neighborhoods in Houston.
Braeswood Place
With a Mashmeter score of 71%, Braeswood Place has been the best performing neighborhood in the Houston real estate market.
Median Property Price: $542,450
Cash on Cash Return: 2.99% Traditional | 0.43% Airbnb
Rental Income: $2,182 Traditional | $1,214 Airbnb
Airbnb Occupancy Rate: 40%
As you may notice, similar to the Houston real estate market in general, although traditional rental properties have been performing very well in the market, Airbnb properties have very low stats, making traditional rentals the more favorable rental strategy for investing in Braeswood Place in Houston.
Afton Oaks – River Oaks Area
Although Afton Oaks’ Mashmeter score (50%) is fairly low in comparison to most of the other neighborhoods in Houston, the main reason behind that is due to the high median prices in the area. But the neighborhood remains one of the top performing neighborhoods in Houston in general.
Median Property Price: $1,302,500
Cash on Cash Return: 5.63% Traditional | 0.41% Airbnb
Rental Income: $3,636 Traditional | $1,061 Airbnb
Airbnb Occupancy Rate: 37%
Midtown
With the highest Mashmeter score (81%) in Houston, the Midtown neighborhood is one of the top performing neighborhoods, especially when it comes to the cash on cash return for traditional rental properties.
Median Property Price: $382,450
Cash on Cash Return: 4.29% Traditional | 0.63% Airbnb
Rental Income: $1,981 Traditional | $1,178 Airbnb
Airbnb Occupancy Rate: 36%
Montrose
With the second highest Mashmeter score (79%), Montrose is a very well performing neighborhood for real estate investing in spite of its relatively high median proeprty prices. The neighborhood has also been performing relatively well for Airbnb properties when compared to the other neighborhoods, and it is one of the few neighborhoods with an Airbnb cash on cash return that is close to the 1.00% mark.
Median Property Price: $736,975
Cash on Cash Return: 2.60% Traditional | 0.99% Airbnb
Rental Income: $2,399 Traditional | $1,563 Airbnb
Airbnb Occupancy Rate: 35%
Macgregor
Although its Mashmeter score is below average (42%), Macgregor is a fairly low priced real estate market, which made it perform much better for Airbnb rental properties than for traditional properties, and it is the only neighborhood on this list that has a preferred rental strategy of Airbnb properties in the Houston real estate market.
Median Property Price: $365,000
Cash on Cash Return: 2.55% Traditional | 4.36% Airbnb
Rental Income: $1,203 Traditional | $1,187 Airbnb
Airbnb Occupancy Rate: 34%
Related: Buy Investment Properties in These Neighborhoods in the Houston Real Estate Market
To Sum Up
The Houston real estate market is, in general, one of the best real estate markets nationwide, mostly due to the high population count in the city.
Note: Click here to start searching for the best investment properties in the Houston area!
With traditional rental properties being dominant over Airbnb rentals, the Houston real estate market offers house investors the chance of renting out investment properties for long-term tenants for a more secure investment, and it is generally better to step away from the low occupancy rate Airbnb properties in the area as investing in them can be unreliable and might even cause the investor to lose money on his/her investments.
For more real estate insights on your favorite city of choice, use Mashvisor’s platform, type in a name of a city, and get a list of all investment properties in that city with their stats and projected returns in order to pick the investment property that is most suitable for your type of investment.
