Houston portfolio management – Successful real estate investing depends on understanding the local Houston rental market and how a particular investment property fits into that market. Today we’re looking at home values, and the factors that influence what you can earn on your property when you’re renting it out to tenants.
1. Location Drives Home Values
Real estate is extremely local, and this is true in the rental market as well as the sales market. The neighborhood in which a property is located will always be one of the largest influences on property value and rental value. It drives appeal, it drives rental price, and it impacts which tenants will be interested in renting the home.
Good schools, easy access to commuter routes, and proximity to shopping, dining, and entertainment all make a property more valuable. More remote homes will often rent for less. Houston city had the fifth-highest influx of renters in 2020, compared to the other top cities in the country.
2. Houston’s Rental Market Impacts Value
The current state of the local Houston real estate market will also influence a home’s rental value. Prices will depend on supply and demand. This fluctuates based on extremely local nuances, making Houston property management essential.
Local economic and population shifts will also impact the way the market influences home values. Pay attention to demographics, employment conditions, and local real estate trends.
As of May 2021, property sales are 29.5% ahead of 2020’s pace. Low interest rates and low inventory are contributing to soaring home prices. The average price for a single-family home increased by 29.7% to $387,105 and the median price increased by 21.7%to $304,000.
This upward trend is expected to continue. According to the Zillow Home Value Index, Houston home values have appreciated by 81% in the last 10 years.
3. Houston Rental Property Age and Condition
Newer and well-maintained homes always lead to higher values on both the rental and the sales market. These properties often require less maintenance and they’re more attractive to tenants who are looking for modern conveniences and upgrades. A home with energy efficient appliances and hard surface flooring, for example, will always earn more than a home with aging appliances and cheap carpet.
4. Bedrooms, Bathrooms, and Square Footage
Size impacts value, and it’s possible to establish that value with a price per square foot matrix, up to a certain point as the correlation is not linear. The value of a property increases linearly with size till it reaches the mean price of the neighborhood, beyond that, there is an inverse decline in the value with the increase in size.
In Houston, the best rental values are found in three or four-bedroom homes with at least two full bathrooms, ranging from 1,700 to 2,500 square feet. In apartment buildings and condominiums communities, a two-bedroom, two-bathroom property with 1,200 square feet may be better when establishing rental value. The average sales price for single family homes increased by 36.5% over the past year, while that for condominiums increased by 15.7%.
5. Pet-Friendly Properties and Rental Value
Pet-friendly properties are more valuable and more profitable to investors. A larger pool of tenants is almost guaranteed because more than half of Houston’s households include at least one pet. There’s also an opportunity to earn more in rent and to collect a pet fee.
Allowing pets also keeps vacancy to a minimum and increases response rates during the marketing period.
Pet fees are typically $200 or $300 per pet, and it’s always better to charge a pet fee instead of a pet deposit. A deposit needs to be refunded if it is not used. When a pet fee is collected at the beginning of the leasing period, it can be kept through and after the tenancy.
6. Appliances and Amenities
Houston portfolio management – If there’s an outdoor space or even a private balcony or patio, the rental value of that property will go up. Good tenants are also looking for home security systems and smart technology. Parking will influence value. In single-family homes tenants will pay more for an attached garage, and in attached homes, they’ll want to see off-street parking in a lot, driveway, or dedicated space.
Houston portfolio management – These are six of the factors that are weighed while establishing a rental value for any property managed by our team. If you’re looking for help with your Houston real estate investments, contact us at HNB Realty. We can help you navigate the entire investment process, providing the leadership and expertise you need for a successful rental experience.