Houston Rental Market Update: Double digit climb plus highest rents on record

Long term real estate investment strategies are founded upon the investor’s ability to secure continuous incoming rent over the term of the investment. That’s why the most frequently asked question by real estate investors has always been: How do I know the property will rent quickly and stay rented? In that spirit, I want to keep you updated on the state of the rental market in Houston Texas. Fresh off the Houston Association of Realtors presses:

Strong activity persisted in Houston’s lease property market in June. Rentals of single-family homes climbed 15.9 percent compared to June 2011 and year-over-year townhouse/condominium rentals increased 13.5 percent. Rents in Houston are at their highest levels ever, with the average rent among single-family homes reaching $1,641 per month in June and the average rent among townhouses/condominiums coming in at $1,408 per month.

Average rents reaching the highest level on record is not doubt good news. But what’s even better news is the drop in price to rent ratios that this causes.  High rents by themselves don’t guarantee that there will be cashflow. Look at New York – extremely high rents but they’re coupled with extremely high property prices that don’t allow the numbers to work. In Houston, you can purchase quality investment properties in good locations for 6-8 times annual rent. The true magic lies in the combination of affordable prices and increasing rents. That’s where a lot of investors miss the boat: They think it’s all about buying cheap enough properties. Actually, you can purchase a more expensive higher quality property where the price to rent relationship is much more favorable than in a lower priced property.

Rents are rising while opportunities for well priced quality assets are plentiful. That’s what makes the Houston market one of the hottest markets in the country to invest your hard earned capital.