Investing in rental property can be a passive, yet highly rewarding way to make money. You collect rental income, use it to cover all your expenses, and keep the rest as profits. Simple, right? So why don’t more people tap into this real estate investment strategy?
The short answer is that not all rental properties are equally profitable. If you choose the wrong property, you could end up suffering major losses; the expenses can quickly spiral out of control and extended vacancies can make it hard to recoup the costs.
So what makes a Texas property management strategy profitable? And how do you find one that fits your needs?
In Search of Profitable Texas Rental Properties
Profitability isn’t a single dimension. Instead, it’s a quality that emerges in response to several unique, yet interdependent variables. For a property to be profitable, it must be capable of collecting significant revenues, minimizing expenses and losses, and growing over time in both value and revenue potential.
Finding profitable properties isn’t exactly hard, especially because Texas is such an in-demand state. However, finding the most profitable properties can be difficult. That’s why it’s a good idea to work with a real estate agent who can better analyze your needs and lead you to the best properties for your portfolio.
Profitability in real estate investments is often tied to local job growth, which drives strong rental demand and competitive rental rates. When buying rental properties, it’s important to assess lease agreements carefully and consider working with a property manager who can streamline the process of collecting rent and managing potential tenants effectively.
Common Features of the Most Profitable Texas Rental Properties
In your search, you should pay especially close attention to the following features, which are all common in the most profitable Texas rental properties.
- A good neighborhood. High crime rates are bad for everyone (and everything). It makes people feel unsafe, pushes rent prices lower, and generally leads to more degradation and value loss with time. That’s why your first consideration should be neighborhood quality. Is this a place where people feel safe and the neighbors freely talk to each other? Is this a generally clean and walkable location? Is the neighborhood beautiful enough that residents take pride in it?
- Good schools. Similarly, you’ll want to look at the nearby schools. Everyone knows that a good school district can push investment property values and rent prices of an area higher; that’s because good schools attract attentive parents and families, increasing demand. But it’s also worth mentioning that owning rental property in an area with good schools can increase profitability by discouraging vacancies; families who want to get their kids through school are disinclined to move, helping you keep your occupancy rate higher.
- Solid bones. There’s nothing wrong with having a rental property in Texas that has superficial defects or a kitchen that hasn’t been updated for 20 years. What’s important is that the house is built on a solid foundation, relatively free of defects or major issues. The newer the house is, the better, but you can also find quality older houses as long as you’re willing to conduct inspections. Fixer uppers have the potential to be profitable, but they also take more work and are more of a gamble, so exercise caution here.
- (Relatively) low property taxes. High property taxes can often be offset by raising rents, but this isn’t always the case. In fact, many real estate investors benefit from seeking out properties in areas with relatively low property taxes, so they can maximize income while minimizing expenses.
- Access to jobs. Areas with plentiful access to jobs tend to attract more people and push rents higher. In local economies where everyone is employed and most people have disposable income, it’s easy to keep raising rent prices without sparking new vacancies. Look for properties in areas close to major employers and in areas marked for economic growth in the near future. If you buy rental property where the jobs are, you should never have to worry about income.
- Access to transportation. Renters love to see convenient access to transportation – and for several reasons. First, it gives them access to the nearby jobs they want. Second, it gives them more autonomy and freedom. Third, it gives them a sense of connectedness and comfort. The good news is, access to transportation can come in many forms; excellent rental properties are often close to bus stops, as well as highways, and they have walkable sidewalks for people to enjoy.
- Art and amenities. Art districts tend to be great places for rental properties because they’re full of culture and community. You should also prioritize rental properties that are close to valuable amenities like parks, restaurants, gyms, bars, and stores.
- Reasonable rent prices. Before purchasing rental property investment, you should look at rent prices of similar properties in the area. Ideally, you’ll look for a place with reasonable rent prices – in other words, monthly rent that is affordable to a wide number of people, yet still highly profitable to rental property owners. Too-high of rent can lead to vacancies, while too-low of rent can jeopardize your profitability.
- Few vacancies. Pay attention to vacancy rates as well. Vacancy rates of surrounding properties can predict the vacancy rate of yours; plus, neighborhoods that suffer from higher collective vacancy rates often suffer from higher crime as a result.
- Upward momentum. Finally, consider properties with lots of upward momentum. Are people generally excited and enthusiastic about the future of this neighborhood? Are there major projects or transformations due in the near future? You can’t always predict how prices in a neighborhood are going to change, but it’s always better to invest in a neighborhood with optimism than it is to invest in a neighborhood with pessimism.
Finding the Perfect Property
Finding the perfect property is hard, but it’s much easier with the help of a seasoned Texas real estate agent. And managing that property can be challenging, but nearly all the headaches are eliminated when you work with a Texas property management company. Lucky for you, Green Residential can help you with both sides of the equation. Contact us today for a free consultation!
Tiffany is the Director of Operations at Green Residential.She has been in the multifamily property management industry for 7 years, serving most recently as an Area Manager in Nashville, TN. Tiffany specializes in all aspects of the property management process.
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