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REI Nation Newsroom

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The Lone Star State: Dallas vs. Houston Turnkey Investment Properties

New York Weekly | Feb 15, 2024 | Chiara Accardi

Texas is a good destination for out-of-state real estate investors, with major metro areas like Dallas and Houston offering affordable properties with strong rental demand. For turnkey properties in particular – rental homes that are purchased move-in ready with tenants and professional property management in place – both Dallas and Houston present lucrative opportunities.

But investors may be wondering – which Texas market is better for turnkey real estate? REI Nation compares the pros and cons of Dallas and Houston’s rental markets, demographics, economy.

Rental Demand Fuels Both Markets

A major motivation for investors eyeing Dallas or Houston is the strong rental demand present in both metros. Texas has been seeing an influx of new residents from other states in recent years. 

Kent Clothier Sr., CEO of real estate education company REI Nation, notes that “Texas has gained more new residents than any other state for eight years running. With all these new folks flocking to the Lone Star State needing places to live, tenant demand is rock-solid. Even during economic downturns, companies continue relocating jobs to Texas’ business-friendly metro areas, employees follow job opportunities wherever they may be.”

According to REI Nation, much of the rental demand in Dallas and Houston is driven by domestic migration, primarily from California, Florida, Illinois and New York. Between 2000-2022, Texas gained over 9 million new residents through migration from other states, more than any other state.

Job Growth Diversity Favors Dallas  

REI Nation shares that the diverse economy and job market stability of the Dallas/Fort Worth metro gives it an edge over Houston for investors eyeing the long term. Houston’s energy sector has traditionally been a keystone industry. But Dallas features a more balanced, diversified economy with key industries in tech, finance, tourism/hospitality and more. Dallas is home to 23 Fortune 500 company headquarters to Houston’s 18 as well.

As Kent Clothier Sr. points out, this job diversity benefits real estate investors: “While economic shocks – oil price slumps, recessions – more heavily impact Houston, Dallas experiences less overall volatility thanks to a diverse corporate base. This means more rental housing stability.”

Affordability Wins in Houston 

Houston does retain an advantage over Dallas in housing affordability – a key consideration for investors. According to RealtyHop data, median home prices in the Greater Houston area average $305,000 compared to $376,900 for Dallas-Fort Worth. Rental yields reflect this delta in pricing: single-family rental rates average 0.8% higher in Houston than in the Dallas metro as a result.

REI Nation says investors can acquire cash-flowing properties in Houston for 20-30% cheaper than comparable homes in Dallas.

Demographics Show Higher Household Growth in Houston

According to REI Nation, Houston is projected to experience more rental housing demand growth going forward thanks to a faster-growing population and larger household sizes.

The metro area now rates as the fourth largest in the U.S. by population, while Dallas currently ranks at #9. Houston’s average household size is at 2.89 persons to just 2.65 for Dallas – important metrics that suggest bigger rental families.

While job diversity may favor Dallas for weathering economic storms, sheer population growth and births fuel fundamental rental demand – advantages currently on Houston’s side.

Dallas Boasts Higher Rents and Occupancy 

Despite the household demographic advantages of Houston, Dallas still garners significantly higher rents along with better historical occupancy rates according to census stats. Dallas’ superior rental market strength to higher incomes, influxes of young professionals preferring to rent and the economic diversity mentioned previously.

Per Census Bureau data, average monthly gross rents run $1,190 in Dallas versus $1,120 for Houston metro apartments. Rental vacancy rates before COVID-19 cutoffs mostly ranged from 5-7% for Dallas compared to 8-10% for Houston over the 2010-2019 period. As REI Nation’s CEO Kent Clothier Sr. notes: “Investors bank on their rental properties actually being occupied, so historically lower vacancies make Dallas a lower risk market.”

Key Takeaways – Investing in Dallas and Houston Turnkey Properties  

Weighing the pros and cons, REI Nation notes that Dallas rates as a “blue chip” market pick for risk-averse turnkey investors. Superior diversification and historically higher rents/occupancy edge out Houston – but also mean pricier investment properties. Value-focused investors can cash flow well buying in Houston’s cheaper market, too despite economic volatility and new supply challenges if they hedge bets across multiple properties. Smart investors look to buy rentals in both metros – Dallas for stability, Houston for affordability and cash flow.


New York Weekly | Feb 15, 2024

Topics: In the News