As we are approaching the turn of the year, real estate investors are studying the housing markets. With that, comes the responsibility of deciding where to buy a rental property. Dallas, TX has been and remains to be a top choice for both local and out of state investors. The Dallas real estate market is a profitable investment option for numerous reasons which we discuss below.
1. Strong Rental Demand
One of the first factors that real estate investors should consider when choosing the location is the local demand from renters. Rental demand in Dallas will be strong in 2019 and beyond. The metro area not only has a large population but also has the highest population growth in the US. And, as every property investor knows, larger populations translate to high demand for housing.
In addition, the Dallas economy is very diverse, which is an important indicator of a real estate market. An economy which relies on a single industry is not a smart investment choice. This is because if this industry collapses, so will the housing market. On the other hand, a well-diversified economy is essential for a successful real estate investment.
Last but not least, the price to rent ratio in Dallas is 19, according to Mashvisor, a real estate data analytics company. This ratio is considered high by real estate experts. Which means that it makes more sense for people to rent a property rather than buy a home in this particular market. So, a major proportion of the large Dallas population will look for rentals rather than homes, which – for investors – means strong demand.
2. Reasonable Property Prices for a Top Market
Data from Mashvisor shows that the median property price in Dallas in November 2018 was $450,700. This is about double the US national value of $221,500. Nevertheless, this is a relatively affordable price considering Dallas is one of the top real estate markets nationwide.
For comparison, the median property price in Denver, CO is $470,000, $663,700 in Miami, FL, $847,700 in Boston, MA, $880,700 in Scottsdale, AZ, and $952,700 in Los Angeles, CA. That’s just to name a few of the hottest real estate markets in 2018-2019.
Dallas has a reasonably priced housing market at the state level too, as the median property price in Austin stands at $525,000. So, if you are interested in investing in a top market real estate market, but your budget is limited, you should explore the opportunities in Dallas.
3. Buyer’s Market
Another factor at which you should pay attention to before you decide to buy an investment property is whether the location’s market is a buyer’s market or a seller’s market. At the end of 2018, Dallas was a buyer’s market, and this trend is expected to continue in 2019. As the name suggests, a buyer’s real estate market is one which favors property buyers over property sellers.
The availability of properties for sale exceeds the demand, which means that buyers can score good deals. As most US housing markets are currently seller’s markets, real estate investors should definitely consider Dallas for their new rental property in 2019.
4. A Choice of Rental Strategies
If you are buying a property to rent out, you have two basic strategies to choose from.
First, think about renting it out on a long-term basis (as a traditional rental). Second, think about renting it out on a short-term basis (as a vacation rental). Since the creation of Airbnb.com, short-term rentals have become the preferred rental strategy for many property investors. This is because they offer a higher potential for return, as confirmed by data from Mashvisor.
However, vacation rentals have been facing more and more restrictions imposed by local authorities in many locations across the US. Fortunately for Dallas real estate investors, this city is not one of those places. Short-term rentals aren’t faced with many restrictions in Dallas, which makes them a viable option for investors.
Indeed, Mashvisor’s rental property calculator reveals that vacation rentals are the optimal strategy in most Dallas neighborhoods. This is because they yield a higher return in terms of capitalization rate (cap rate for short). The cap rate for short-term rentals in Southeast Dallas was 8.3% in November 2018 and 7.0% in Coppell. This is significantly higher than what many other top locations for real estate investments offer nowadays.
5. High Long-Term Appreciation
While the majority of property investors do not buy with the thought of selling, there always comes a time when you decide to sell your property (and maybe buy another one). Thus, you should always make your real estate investment decisions with the concept of appreciation in mind.
Real estate appreciation in Dallas has amounted to a total of 105.3% since 2000 or an annual average rate of 4.0%. This appreciation rate is significantly higher than both Texas and the national average. This means that if you buy an investment property in Dallas in 2019, you will make money not only in the short term by renting, but also in the long term once you decide to sell it.
The five reasons above should have convinced even the most skeptical real estate investors that the Dallas housing market is an excellent choice in 2019. Just in case you are not convinced yet, you will be happy to know that the Emerging Trends in Real Estate: the United States and Canada 2019 annual report of PwC ranked Dallas/Fort Worth as the number one US market to watch in terms of overall real estate prospects. This top position is the result of the market’s strong potential combined with its liquidity as a gateway market.
Daniela Andreevska is Marketing Director at Mashvisor, a real estate analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that’s usually 3 months can now take 15 minutes. We provide all the real estate information in easy to understand visualizations.