Texas Multifamily Investment Market Quick Overview
The Texas multifamily investment market as of 2016 is HOT! In fact, it’s so hot there are certain Texas markets where it’s STUPID HOT.
Dallas, Houston and Austin are trading at 4-6 cap rate and the developer have hundreds of thousands of apartments in various stages of development and all these will join the rental markets in the next couple of years.
The city of Plano alone approved over 40,000 additional units in a recent vote.
These cap rates and terms might make sense to out of country investors or even some CA investors but we could't make the (conservative/realistic) numbers work. So we started looking outside the metroplexes and realized that there is more out there than DFW, Houston and Austin.
The secondary and tertiary markets are still trading at a more reasonable cap rate and there is still opportunities and money to be made there. This is why personally our investments focus is on these markets.
Comments (4)
Hi @Ram Saran the DFW metroplex is pushing out to all the surrounding markets.
You can still find some good opportunities in places like Greenville, Bonham, Celina, Desoto, Lancaster, Prinston, Farmersville, Duncanville, etc.
You'll probably need to work a little harder to find off market deals but they are out there...
Joseph Gozlan, about 8 years ago
Hi Joe,
Can you please share with me the secondary markets where you are finding these good cap rates with decent economics?
Thank you,
Ram
Ram Saran, about 8 years ago
Hi Steve,
The most important thing about secondary/tertiary is the economy.
The ONLY thing about a property you can't change is it's location and with a population of 6,000 people (Gidding) you really have to make sure there are enough stable employment sources.
If the main employer is laying off or the city is not on a growth path, the risk is much higher.
This doesn't mean you should drop the deal just do your underwriting accordingly.
I had to walk away from a deal because the economy was just not sustainable even though the property looked great on paper.
As for the pro-forma numbers, they always look great, that's the agent's job to make them look great.
Good luck!
Joseph Gozlan, over 8 years ago
Hi Joe! Definitely want to hear more. I am looking at a mid size apartment in Giddings TX right now. Not sure how good the deal is. Pro forma looks great though!
Steven Silva, over 8 years ago