Houston continues to provide a great return on investment for investors who own rental property. Only 53% of Houstonians own their home. New homes sales are expected to reach over 20,000 homes in 2012. That number is far below sales in 2006 when builders built 49,543 homes. The current median price of a home is down 25.8% from 2006. According to the Kinder Institute at Rice University, Houston gained an astounding 1,200,000 people between 2000 and 2010, according to census figures, averaging 123,000 people each year.
Rental demand has increased due to younger adults postponing home ownership and homebuyers uncertain about the future. Single family rental homes are becoming increasingly attractive as an alternative to home ownership. Families which have been displaced by foreclosure prefer single family homes to apartments where they live next to their neighbors. Houston added 87,900 new additional jobs in the past 12 months. Ted C. Jones chief Economist for Stewart Title Company said that Houston landlord could raise their rents by 10% this year.
Location is the key
Subdivisions and school zones can greatly influence the choice of rental properties. Houstonians have the same top two concerns no matter whether they are leasing a $10.000 a month palace or a $500 cottage.
- Safety
- Schools
No one wants to live in a community where crime is running unchecked, or in a community where the gangs run the schools. Renters spend their time looking for homes in safe neighbors with good schools. Another big concern is driving time to work. Houston is a large city with very congested freeways. It is not uncommon for people to spend two hours a day in their car going to and from work. Life style is also important to renters. Is the home located near coffee shops, jogging trails, shopping, and restaurants?
Property Taxes, Mud Districts, and Insurance
Property taxes can vary greatly in the Greater Houston area. Jim Robinson, Harris County Appraisal District Chief Appraiser said that there are over 500 taxing entities in Harris County. Property taxes are local taxes. The tax rate for similar properties may vary by as much as 1% or more. A MUD (Municipal Utility District) is a special governmental entity of the State of Texas. The MUD may collect taxes, charge for services to perform its main function of providing water and maintaining drainage facilities. Taxes will be higher in a newly created MUD district with the rate declining over time as the MUD is built out and operating debt is assumed by the homeowners.
School district taxes can vary greatly depending upon the District requirements. According to TexasISD.com roughly 20% of the school districts state wide are asking voters to raise property taxes. In the Houston area Alief, Humble, and North Forest are considering following suit. State funding for schools in Texas is frozen causing school to lay off teachers and cut costs.
Insurance rates can be very high if the home is located near the Coast or in a flood zone. Hurricane Ike claims have wiped out the reserves of the Texas Windstorm Insurance Agency. Private insurance companies have abandoned windstorm insurance near the coast. If your home is near the Gulf the home may require three different insurance policies, Homeowners, Windstorm, and Flood. There are literally some homeowners paying more in insurance coverage than their mortgage. Insurers are canceling insurance on high risk homes in Texas.
Number of listings and Days on Market
A large number of listings in a neighborhood may be an indication that things are not going good. Ideally there should be no more than a 30 to 45 day inventory of homes for lease. When selecting properties different subdivisions are looked at to determine the average days on the market, rental rate, and inventory absorption rate. A good rental market will show high absorption rates, lower inventories, and shorter times on market on average.
Working with an experienced Real Estate team
Our team will provide you with information online quickly about investment properties before you make a decision. All properties are investigated thoroughly so that nothing is left to chance.
Services provided for a typical property:
- Preview multiple properties
- Prepare an accurate analysis of the property
- Determine asking price and probable rental income
- Negotiate the terms of the sale
- Referrals for finance, insurance, & inspection
- Lease the home
Adding Houston real estate investments to your portfolio is a safe way for wealth accumulation when working with real estate professionals. With our knowledge and vast experience in the Houston real estate market, Man-Edge Properties gives you the confidence of making the right purchase. There are always risks involved with any investment. Be sure you have enough money to cover vacancies, surprise repairs, and all taxes. For more information call Bill Edge at 713-240-2949.