Waco, TX Rental Market

[Rob Nichols]

Hello TX investors!

I was hoping to get opinions/input on the rental market in Waco, TX, specifically the student market around Baylor University.  I have family in the area and am contemplating an investment property around Baylor, in which the property would be rented by the room. However, there's a lot of new multiple family construction going on, notably new developments like Haven South (840 bed development) and a new $40M, 702 bed complex that the city just approved.  This is in addition to newly built student buildings that are already on the market, such as 11th St Flats, the View, the Domain, Heritage Quarters, etc.

 It seems most of the new development is priced starting at $500-$600/month per room.  At those prices, there still seems to be room for the smaller investor with a lower rental price point.  Of course with all this rental inventory coming on the market, it could have some downward pressure on rental rates.  

Are any of you Waco investors/realtors seeing a risk with all the new construction or do you think the demand will still exceed the increase in supply?

Thanks for any inputs!

[Jack Vaughn]

Rob Nichols As a recent Baylor alum and huge Waco supporter, I would be cautious of multi family units around Baylor.

I was there during the construction of many of the early large facilities and I believe that it is over saturated in that area for multi family. I do believe that there is strong desire for SFHs as many of the homes are being bought up for these large complexes. Students would much rather live in SFHs than these complexes. I had lots of friends stay in the complexes and hated it. The area just south of campus (8th street to 12th street between speight and lasalle) is heavily Greek (fraternities and sororities) who much prefer SFHs. I lived on 10th street in that area for 3 years. It is filled with run down homes but have constant tenants every year and many are unofficially named and are traditions in some fraternities. I have a friend who bought a house at 10th and wood, put no work into it, collected rent for a year, then flipped it to an over zealous Californian dad 12 months later for a $30k profit. Out of state parents are buying lots of those homes for a premium.

Another area is east of lasalle ave. This is another large Greek area but has tons of non-Greek as well. I don't know as much about this area but houses are slightly nicer/newer. There's are a couple large gated communities over in that direction and a town home development by Magnolia that recently went up. East of lasalle is definitely a rougher area of town as most of East Waco is. Your a bit outside the "Baylor Bubble" once you cross lasalle, still tons of student housing though.

East Waco (where Baylor is located) is considered the rough part of town. If you plan to rent to girls, you will need an alarm system, if guys, don't worry about it. Tons of nice houses on the west side. East Waco is steadily improving with the revitalization of downtown. East Waco has really taken on the "hipster" look and has attracted the adventurous couples. I like to say it's Austin but 30 years behind...

There are three prominent property management companies in Waco as well that manage the vast majority of these student SFHs and all three have terrible reputations. The three are Brother's Management, Campus Realty, and Carbajal Realty (not sure if I spelled the last one correctly). Magnolia is cruising with there success so wouldn't surprise me if they break into the Baylor market in a bigger way too...their silos and downtown are about a mile from campus.

Baylor has grown tremendously over the last several years but enrollment has been capped as of a year ago or so, so I wouldn't rely on more and more students coming to the area looking for housing. Still ~16k students though.

I am a year removed from Waco but travel there at least a couple times a year. Don't rely solely on my words as I don't have any hard numbers to support this but take this as a data point as this is my "boots on the ground" analysis.

If you have any questions, let me know and I'll try to answer them to the best of my knowledge. I myself want to own a home and invest in Waco one day.