Investing in an Appreciating Market: How is Dallas Performing?

Question

Hi all! I’m a real estate investor based in Indiana. My husband and I primarily invest in long-term rentals here. It’s a solid market with a median home price around $250K and a rent-to-price ratio of roughly 0.8% (potentially higher in some areas or with older properties). Historically, property values here have doubled over a 10-year span.

While appreciation is steady, we’re considering whether to invest out of state for better appreciation and diversification. I’d love to hear your thoughts on markets with strong appreciation potential.

I still hear a lot about people moving to Texas and wonder if it’s still worth exploring. We'll be visiting Austin and Dallas around Thanksgiving and would be happy to meet up if anyone’s interested.

Bruce Lynn · Answer

Hi Sunny,

I expect DFW and Indianapolis to be similar to as you describe, although $250,000 price point can be tough on newer homes less than 10 years old.  I am starting to see some homes though in that price range.  Typically I am seeing investors put down 30-40% to break even or cash flow a bit, so that is about the same as your 80% coverage ratio.

Growth prospects still look strong to me in DFW area.  Many of the big announcements haven't been completed yet or still under construction.  BofA, Wells Fargo, Goldman Sachs, TI plants, Global Wafers plant, etc.  There are also still a lot of projects in the talks stage, for example some people whispering that DFW will become the electric car capital of the world.  Also the Adelson family of Las Vegas Sands fame have purchased a couple of big parcels with hopes to build a giant casino/convention resort perhaps anchored by the arena for the Mavericks for which they also just purchased majority ownership from Mark Cuban.  Add a very diversified economy here with banking, insurance, oil and gas, education, three medical schools, 3 law schools, life sciences, DFW airport, and so much more, it looks like the growth just goes on and on.

As far as appreciation goes, that's always tough to predict.  While we saw some big jumps around covid times, it has now slowed as I expect is the same for your current area if not most of the country.   However, if you remember the presidential candidate from years ago who was Dallas based, Ross Perot, he said, if you want to make a billion dollars in real estate, buy in the path of progress.  He practiced that well and his son is now one of the largest developers in the country, if not the world.

The nice thing for investors is that there should be a 2-3 or maybe 4 year gap in major apartment developments coming online.  There are some other dynamics that also will likely play a factor in making the situation great for investors...such as runup in home prices and interest rates probably created a permanent renter class of society.  I think I saw a stat last week that said 40% of DFW renters are now paying 50% of their salary in rent.  That will make it near impossible for most of those people to buy any time soon.

Ryan Ambler · Answer

If you had 80-100k for down payments, what were your move be, as a first time investor?

We did look at brokenbow, beautiful area but it looks like there is a lot of competition there now.

Day trips to the lakes versus overnights makes a lot of sense. That may be why Lake O’ The Pines shows so much higher occupancy on AirDNA. It’s about 2.5hours from Dallas, making more prone to overnight.

Bruce Lynn · Answer

In my circles I just don't hear about a lot of people taking lake vacations and staying in AirBnB/STR type accommodations.  I am sure there are people that do, but I don't hear about it much.  Some people go to Lake Lewisville/Dallas/Grapevine, but I don't hear about them spending the night and there are pretty limited options right on the water.

I still hear a few people going up to Broken Bow/Hochatown, but that talk is way way down since about 2021.  Every now and then hear about people going to Texoma and Cedar Creek.  If any place has HOA/POA I would be very careful with those restrictions and talk to plenty of people including every board member before buying about their views on STR.  It can be painful to be on the wrong side of their sentiment.

As far as LTR...I like the prospects of Sherman/Denison.  Also I'd look at drawing a big circle around DFW and then considering just outside that circle.  I like North vs South, but that's not always exclusive.  New neighborhoods can be brutal on investors with rules.  HOA just pulled up 4 of my signs this week after courting investor client to buy there.  Others basically down right prohibiting investors.  After all the trouble I've had with HOAs the past two years, I would probably never consider buying a rental in one.  To live in maybe, but not for investment/rental property.

Bruce Lynn · Answer

Having lived here off and on for about 40 years now and selling real estate for about 25, I would be looking anywhere along 75 between Sherman and Denison.

Also more generally between the 4 corners of Gainesville-Denison-McKinney-Decatur.  Prices still attractive, but town growing that way.  I lived in Sherman once and didn't especially like living there, but there sure are a lot of dynamics that make it look attractive for investment now.  At that time for example Frisco was about 5000 people with one flashing red light.  Now a giant city 250,000 people and home to Cowboys, Stars, FC Dallas, minor league baseball, lots of companies, new Universal Studios theme park and something like 10 high schools now...big high schools.  Sherman is about 30 minutes north of there and many of the biggest nationwide and local residential developers have bought land and working on master planned communities.   Plenty of demand drivers and diverse economy.

Ryan Ambler · Answer

Bruce,

We are based in SATX, but are considering where to buy our first (and hopefully 2nd) investment property in 2025.  Based on what we're seeing, Dallas seems slightly favorable to SATX for LTR, which we are considering SFH or a duplex.

We are also looking at the Dallas lake region for a STR. Lake O' The Pines seems to have better prices and AirDNA shows higher occupancy rates and return.  I have not personally been to any of the lakes, or really to Dallas outside of quick work trips.

Looking to be around 500-600k between both properties.

Any insight on neighborhoods to target for LTR, or lakes to target for STR (open to non lakes as well).

Wale Lawal · Answer

@Sunny Chen

The Indiana market offers stable cash flow and moderate appreciation, but has limitations such as slower appreciation and limited diversification. To explore out-of-state markets, consider population growth, job growth, and diverse industries. Texas, with its strong tech hub and job growth, is worth exploring, but home prices are higher and rent-to-price ratios are often below 0.5%. To diversify, visit and analyze Texas markets, speak with local investors, evaluate other regions remotely, build a team, start small, and connect with local investors. Focus on areas with sustainable growth and manageable competition.

Good luck!

Sunny Chen · Answer

Thanks Trevor! I will look into those markets

Trevor Finn · Answer

Hi @Sunny Chen,Indiana is a great market for steady cash flow, but if you’re looking for stronger appreciation and diversification, exploring out-of-state options makes sense. Texas still has solid growth potential, particularly in cities like Austin and Dallas, but prices have risen, so returns may vary. Consider emerging Sunbelt markets like Phoenix, Tampa, or parts of North Carolina (like Raleigh or Charlotte) that continue to see high migration and job growth, driving both appreciation and rental demand. Diversifying into a high-growth market could balance out your Indiana portfolio nicely.

Investing in an Appreciating Market: How is Dallas Performing?

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