Seeking Advice: Best Neighborhoods for Multifamily Properties? - Houston

[Zac Hugh Nguyen]

I'm currently in the early stages of researching multifamily properties, and I could really use your insights on identifying good neighborhoods to focus my search.

I've done some preliminary research and understand that location plays a crucial role in the success of multifamily investment. However, I'm finding it a bit overwhelming to narrow down the best neighborhoods to target. My goal is to find neighborhoods that offer a balanced combination of strong rental demand, the potential for property appreciation, and a relatively low vacancy rate.

If any of you have experience with multifamily investments, I'd greatly appreciate your recommendations on neighborhoods that have proven to be promising in terms of these factors. Whether you're focusing on cash flow or long-term appreciation, I'm open to hearing about different strategies and perspectives.

Here are a few questions I have in mind:

1. Are there specific neighborhoods or cities that you've found to be particularly favorable for multifamily investments? What are the key factors that make them stand out?
2. How do you go about researching and evaluating neighborhoods? Are there any specific tools, data sources, or indicators you rely on?
3. What are some warning signs that a neighborhood might not be a good fit for a multifamily investment, even if the property itself seems appealing?
4. Have you encountered any unexpected challenges or successes related to neighborhood selection in your multifamily investing journey?
5. Are there any emerging neighborhoods or markets that you believe could become prime locations for multifamily investments in the near future?

I'm committed to learning and making informed decisions, and I believe the insights from this community could provide valuable guidance. Your personal experiences, tips, and stories will undoubtedly help me and others who are embarking on a similar path.

Thanks so much in advance for taking the time to share your knowledge and expertise. I'm looking forward to engaging in some insightful discussions and expanding my understanding of multifamily real estate investing!

[Daniel Marklin]

Hi Zac, know if you are looking Small MF (<20) or larger. Small MF deals can be found in more places. The biggest 2 keys are:

1. Know the difference between "working class" and "ghetto".

2. Be in the path of progress.

I drove the areas as someone else said; go at 10am on a Wednesday or Thursday and if you see people hanging around outside, walking on the streets, that probably means there is poor employment. I check the crime and the general income demographics-- you want your median income to be ~3x the planned rent. Also look at new developments that are up-and-coming.

In Houston I like being within or near 610:

East End (by Gus Wortham Golf Course), Garden Oaks/Independence Heights (northwest of 610), Spring Branch are three solid areas that are up-and-coming and still have opportunities.

3rd ward, 5th ward, Northside Village, and South Side are hot investment areas, but I think the tenant base isn't as strong-- if you can weather the storm for 5 years, these could be big upside though.

I think West along Westheimer and Southwest past Bellaire are somewhere in between.

The drawback of being in Harris county is that:

1. Property taxes are higher (and they are aggressive with appraisals)

2. City of Houston public works is stricter and more of a pain than tertiary markets

3. Utilities can be higher (Houston water jumped 10% and they plan on continuing to go up)

Tertiary markets can be a gold mine, just need to know that you have a strong tenant base/demographic. I know people who have done well in Victoria, Rosenberg, TX City, Corpus Christi, Beaumont; but you have less room for error.

If you are close to the coast/on the eastside of Houston, insurance rates have jumped considerably-- from $600-800 a door, up to $1600-1800 and higher.

Here's some good tools to see crime and demographics:

https://communitycrimemap.com/

https://justicemap.org/

https://www.city-data.com/city/Houston-Texas.html

If you have someone that can access Costar, you might be able to get better income and census population data.

A great tool for new developments in the city:

https://umap.openstreetmap.fr/nl/map/houston-developments_57...