Over the past few years, the Texas real estate market has been red hot. Sales have been at all-time highs, and prices have been shooting up. Until recently, many experts would have recommended investing in Texas real estate. However, it is becoming harder to determine whether that confidence is still well placed.
The problem is that a cooling off looks inevitable. After all, mortgage rates are high, and many potential buyers are now priced out of the market. Even homeowners insurance premiums tend to be higher in Texas, increasing the actual amount owners are spending every month. If you buy, there is the risk that demand could decrease and your brand-new asset could lose a lot of its value.
Should you be concerned, or is it still worth investing in Texas real estate in 2023? Below, we’ll cover some of the things you need to know to answer that question. This advice will help you make the best choices so your profits can be as high as possible.
Table of Contents:
1. A cooling off does not mean plummeting prices
The fears of a cooling off in the Texas property market are well founded. In fact, we have already seen something of a cooling off. However, this does not necessarily mean that home values will go down, as many people assume. It simply means that fewer sales are being made and houses may stay a bit longer on the market.
Now, a drop in demand does usually lead to a drop in prices. But our property market has been unbalanced for a long time. There is a huge lack of supply, and that is unlikely to change anytime soon, especially with world events leading to new delays in the construction supply chain.
In other words, while demand is not quite as high as it was a few months ago, there is still a lot more demand than supply. As such, buyers do not have a wealth of options. Therefore, they still have to pay the high prices.
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2. There’s a lack of affordable housing
If you’re buying a home to live in, the home’s fluctuating value may not be an issue for you. It may lead to buyer’s remorse, but ultimately you will still own the home that you chose. As an investor, however, you do not want to buy an asset that depreciates in value. You want to buy an asset that at least retains its value.
But the value of the property only tells part of the story. When it comes to making money off property, what is more important is the income opportunity it provides. Renting your property out will continue to make you money even if the value of the property drops, as long as there is demand for rental properties.
The “good” news is that the demand for rentals is going nowhere. Well, it’s not good news in the sense that this demand is caused by an affordable housing crisis. However, as a property owner, it does mean you have plenty of opportunity to make money, even while setting rent at reasonable rates. And even if you have to settle for a little lower rental rate, there is still a really high possibility of making a suitable profit.
The lack of available property to live in has led to empty offices in Texas being repurposed for housing. There are empty offices due to the increased work-from-home culture, and it only makes sense for owners of these properties to take the opportunities they can. What it tells us is that if you own any property, you stand to make good rental income.
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3. Necessity, not greed, drives the current boom
If you’re concerned about a housing crash like the one we saw in the 2000s, the good news is that the conditions today are very different, so crash possibilities right now are quite low.
Back then, the huge demand for property led to investor greed. People and businesses invested in building housing to take advantage of the opportunity. This led to too much supply becoming available.
Today, the boom in home values is connected to necessity. The demand is high because there is not enough supply. It will take a long time before there is the supply to match the demand. This market is not going to fall apart because of people chasing opportunities to make money.
Is property in Texas a good investment today? It is impossible to say for sure. However, there are signs that it is still a good time to buy.
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4. Selecting the right Texas real estate investment strategy
It is important to analyze every single potential investment community with a real estate investment strategy in mind. If you do not have one, it will be difficult to end up with the profit you surely want.
For instance, location fundamentals are always vital. This includes things like commutes, public safety and airport transfer availability. You have to look at the data for the entire city, then concentrate on critical areas that are particularly good for what you are interested in.
Think about amenities and events that could draw visitors. This is very important for short-term rental investments. With short-term fix-and-flippers, DOM (Days on Market) in your potential location should be a critical factor in your decision. If the property does not sell, you only end up with problems. If the DOM in the area is six months or more, for example, it would be better to look in another location.
The real estate investment strategy also needs to take into account employment rates in the area. This is particularly important for long-term investors. A Texas real estate investment strategy that is focused on long-term gains should account for things like the tempo of new job creation, employment data and employing company diversity.
If this is your first real estate investment and you do not know how to draft a solid real estate investment strategy, you have to look for property investment mentors. This will allow you to quickly figure out exactly what you want under the guidance of professionals. You can even end up with their help in buying great real estate property that will bring in a profit.