Top 5 Best Real Estate Investment Markets in Texas

Alex Long

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Alex Long

September 23rd, 2022
Updated September 23rd, 2022

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Investing in Texas real estate is a great opportunity. Between the consistent population growth, diverse economy, and favorable taxes and laws for property owners, Texas has a lot going for it. Not to mention it has several beautiful markets to choose from with great profit potential.

Texas real estate market overview

It's been a tough time to get into real estate investing with such a strong seller's market the past couple years.

Texas has experienced a large influx of people moving into the state, adding almost four million residents between 2010 and 2020.[1] During that same timeframe, the average home value rose over $112,000.[2] This growth has made real estate harder to buy, but also creates an opportunity for investors if you know where to look.

» MORE: How much does it cost to buy a house in Texas?

The problem: Texas is also huge, and knowing where to invest can be hard. That's why we've researched and outlined the five top real estate investment markets in Texas below for you to start with.

💰 Looking to invest in real estate?

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What are the 5 best markets in Texas to invest in real estate?

🏆 Best overall
💰 Best value
🌴 Best for short term rentals
🛠 Best for flippers
🌟 Hidden gem

Deciding which market is best to invest in depends on your goals. What makes a successful Airbnb rental is not necessarily the same as a good buy-and-hold home.

Some investors focus on appreciation to avoid paying capital gains every year, whereas others like the steady stream of income that comes with solid cashflow properties. We've identified some of the best investment markets for multiple strategies below, but you can also use our rental property calculator to evaluate individual properties.

To find the best real estate investment market in Texas, we compiled data across the state. We evaluated the increase in property values, affordability relative to average incomes, and profitability based on the average rents versus the cost to buy a house. The markets below scored some of the highest totals in the state when considering all three of these metrics. Learn more about our methodology.

Huntsville: Best overall

🏡 Median home value
$240,804
📈 Property appreciation rate
17.9%
💰 Median household income
$41,508
🔑 Median gross rent
$893
🏦Median mortgage cost
$1,320

Located between Dallas and Houston, Huntsville is home to Sam Houston State University and is just down the road from Texas A&M. It is also the location of the Texas State Penitentiary, which is a reliable source of jobs in the area.

With a population just under 46,000, Huntsville has that small town feel while being large enough for businesses to thrive and grow. Between the university and the Texas Department of Criminal Justice, the local economy is largely recession proof. And the historic downtown and Huntsville state park ensure that everyone has something to do, whether they enjoy the hustle and bustle of downtown or the beauty of nature.

Huntsville recorded an annual population growth of 3.2% in the most recent census,and home values have been rising steadily for the past decade. Whether you take a buy-and-hold approach or prefer to fix and flip, Huntsville is a good area to consider.

Need more help getting started with investing? Check out our real estate investing guide for beginners!

El Paso: Best value

🏡 Median home value
$199,921
📈 Property appreciation rate
17.8%
💰 Median household income
$48,193
🔑 Median gross rent
$855
📫 Median mortgage cost
$1,282

With a median home value below the state average, El Paso offers real estate that can achieve strong returns without a high entry price point.

With a population over 650,000 that's grown at a rate of 4.6% in recent years, there is no shortage of people who need homes in El Paso. The fact that the median rent is only 21.3% of the median household income also means people can afford to rent in El Paso.

El Paso offers something for everyone: mountains and trails for eco-tourists, the El Paso Museum of art for culturally curious visitors, and the El Paso Zoo for families.

Due to its diverse economy, high-end medical facilities, and role as a transportation hub, El Paso is a great value bet for anyone looking to get into real estate investment without breaking the bank.

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Austin: Best for short-term rentals

🏡 Median home value
$566,479
📈 Property appreciation rate
12.2%
💰 Median household income
$80,852
🔑 Median gross rent
$1,326
📫 Median mortgage cost
$1,976

Austin is a prime example of a city on the rise. A popular place to visit due to its weird charm and many cultural events, it has become a hot destination for people all over the country. Known to locals as "Silicon Hills," Austin's business sector includes tech giants such as Google, IBM, Tesla, and Amazon.

In the last decade, Austin's population has grown over 20%, causing real estate prices to skyrocket. That kind of rapid growth, however, doesn't always go in a straight line.

Recently, home prices have actually seen a decrease in Austin, suggesting the smoking hot market might need a breather. This is good news for investors who thought the market was too pricey to get into.

Lower sale prices mean a better point of entry for new investors, and the continued popularity of Austin as a destination for tourists makes it a great market for short-term rentals.

Houston: Best for flippers

🏡 Median home value
$312,338
📈 Property appreciation rate
18.3%
💰 Median household income
$69,328
🔑 Median gross rent
$1,136
📫 Median mortgage cost
$1,788

Houston has some of the highest rates of foreclosure in the nation for major metropolitan areas. Though not necessarily ideal for the local economy, it does mean you are likely to find diamonds in the rough and undervalued properties on a regular basis.

If you want to turn a profit fixing and flipping, getting a house on the cheap will be your first step. With year-over-year home values growing at over 20% in recent years, there's an opportunity in Houston to benefit from appreciation as you build equity into your flips.

Houston is also home to one of the nation's major ports, as well as over 20 Fortune 500 companies and multiple major universities. This robust economy means the city is likely to remain strong in the real estate sector for the foreseeable future.

» MORE: The Ultimate Guide to Flipping Houses in Texas

Palestine: Hidden gem

🏡 Median home value
$150,216
📈 Property appreciation rate
19.0%
💰 Median household income
$45,847
🔑 Median gross rent
$829
📫 Median mortgage cost
$1,102

Just like buying blue chip stocks, buying property in large markets can be a safe bet. But experienced investors know the best returns can often be found in lesser known areas. Palestine, Texas, is one great example of this.

Although Palestine isn't necessarily a location you'll find on travel websites or HGTV, it's statistically one of the best markets to invest in real estate in all of Texas.

Palestine is a charming city of just under 18,000 residents and is located between Dallas and Houston, allowing it to benefit from everything these cities have to offer without the congestion and high prices. Palestine thrives on locally owned small businesses, but it's also known for its appealing natural environment and historical sites.

The average home only costs about $150,000, but annual appreciation is 19% year-over-year. The relatively low cost of real estate in Palestine, combined with the consistently high appreciation rate and solid return on rental income, make it a triple-threat investment.

If you're looking for an up-and-coming market where you don't have to bid against 10 other investors for large upside potential, Palestine might be the market for you.

How to find undervalued properties in Texas

There's an old saying in real estate that you make your money when you buy. This is counter-intuitive to a lot of investors — obviously, what happens after you buy impacts how much you make, or lose, on your investment.

But your profit is always measured relative to your initial investment, so the best way to enhance your returns is to pay a good price for your property.

Below are some strategies you might consider to acquire properties at a discount.

1. Use investment software

We live in a technologically driven world, so if you want to keep a competitive edge, you need to use all the tools at your disposal. In real estate, this means leveraging technology to locate, analyze, and track your deals.

DealMachine is one such software that can help you scale up your business by finding deals other buyers aren't aware of.

DealMachine's real estate software helps Texas investors find and research distressed homes, and get in touch with owners fast via batch skip tracingand direct mail campaigns.

Download the DealMachine app for a 7-day free trial and a $15 credit for marketing costs.

Other technology that could be useful to real estate investors includes:

  • Flipperforce: The Flipperforce app helps BRRRR method investors analyze home values to calculate the maximum purchase price to offer on a property before making a purchase.
  • Stessa: Stessa's software allows you to easily track the performance and financial status of all your properties in one easy-to-use app. It provides regular reports on how profitable your properties are and can be linked to your financial accounts for automatic updates.
  • Neighborhood Scout: This website is one of the leading market analysis tools in the nation, providing in-depth analysis of crime statistics, employment data, and appreciation rates at the neighborhood level.

2. Invest in foreclosures, auctions, and off-market properties

Buying distressed properties is a great way to find value, but remember that a diamond in the rough is rarely shiny. Getting a great deal on distressed properties means not being afraid to spend time and money making your investment profitable.

» MORE: 8 steps to buy foreclosures in Texas

If you don't have the time or skills to renovate a fixer-upper yourself, HomeAdvisor can connect you with top local contractors to do the work in a timely manner at a fair price.

3. Partner with an investor-friendly agent

Working with a top agent who is an expert in the local market is a tried-and-true way to consistently find good deals and negotiate like a pro — because that's what they are.

Besides understanding local trends in real estate and knowing which areas to target and avoid, great agents also know how to locate deals before other buyers get to them. They can also alert you to laws and regulations that may impact your decision on which properties to invest in.

Working with a Clever agent means you'll have a top, local professional on your side, and you may also be eligible for 0.5% cash back on your purchase after closing!

👋 Start your real estate investing journey now!

Buy your investment property with a top local realtor who specializes in helping real estate investors find great deals. Clever can connect you with investing pros at trusted brands like Keller Williams and RE/MAX.

Enter your zip code to get personalized agent matches sent straight to your inbox. Compare your options until you find the perfect fit, or walk away with no obligation. Try Clever's free service today!

Methodology

Using data from the U.S. Census Bureau and Zillow, we've compiled median home values, average household incomes, median homeownership cost, and median rents to evaluate the real estate market trends for cities all over the nation. We then scored each city on appreciation, rent-to-income ratio, and rent-to-mortgage ratio to determine which cities were most profitable and affordable for real estate investors.

The cities with the highest total scores were then evaluated on less quantifiable information like economic diversity, quality of life, and desirability of destination to determine the top five markets in each state. We broke these markets down into five distinct categories to account for the various goals and approaches to real estate investment our readers may identify with.

Frequently asked questions

Generally speaking, Texas is a good state for owning rentals. Texas laws are favorable to real estate investors, and the state as a whole is relatively affordable and economically stable. That said, the best place to invest really depends on your investment strategy and goals.

Some Texas markets are better than others for buying profitable rentals currently, but it really depends on your investment goals. If the rental income exceeds your homeownership costs, and you are buying in a market that is generally trending upward, it is probably a good long-term investment.

Most experts don't expect real estate prices to fall anytime soon. That said, real estate is a locally based sector, so it depends on your area. If you're not planning to own the property for at least a few years, you may want to hold off or try flipping houses.

Related content

ARTICLE SOURCES
[1]

Texas Demographic Center. "Who Contributed to Texas' Population Growth? 2010-2020." Accessed Sept 23, 2022.

[2]

Texas Realtors. "Decade in Texas Real Estate: Median Price Increased $112,000 from 2011 to 2020." Accessed Sept 23, 2022. Updated Aug 9, 2021.

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