Real Estate Investing in Houston: What You Need to Know

Welcome to Space City! Houston, home to Johnson Space Center, the heart and brain of the U.S. space program, was the cutting edge technological pulse of American domination for decades.  Many people were not sure with the Shuttle program ending and private enterprise competing for celestial dollars how Houston would fair. Add that to 3 years of 500-year record floods, and economists were holding their breath.

Ladies and Gentlemen, we have a lift-off.  Houston is alive and well.

One of the fastest growing cities in the U.S., Houston is a major world industrial base, is the fourth largest city in the U.S..  It is among the five largest GDP producing cities in the U.S. (the others being New York, Chicago, Washington D.C. and Los Angeles). It is one of the busiest ports in the nation with the largest tonnage of cargo from international sources entering anywhere in the states.

Houston is major in medicine, research, manufacturing, energy, and education

Houston also leads the world in medical research and care, with the Texas Medical Center being the largest complex of its type in the world. Nearly 1,800 research facilities, biotechnical and health companies, hospitals and clinics, with some of the most advanced medical care in the world, are located in this Texas gem.

You cannot think of Texas without thinking of oil, gas, and other energy production. Houston is the heart of everything oil and gas from production to planning to marketing to research. Because fuel is less expensive this close to production, nearly 6,500 manufacturing plants are located in the greater Houston area and a multitude of warehousing and transportation hubs as well.   All this industry and research in so many segments adds up to a very large skilled worker base, and a reason to think about investing in Houston real estate.

Interestingly one of the largest business ventures in greater Houston is not one most people would think of – education. With 14 institutions of higher education including Baylor and the University of Houston, both high in national rankings, Houston’s public school system is one of the largest in the nation with one of the most diverse populations to serve of anywhere. Houston has more variety among ESOL language students than any major public system in the U.S., providing secondary language support in 114 different languages to public school children of the area.  It is logical that Houston has one of the most diverse populations by origin of any city in the United States and it makes Houston a good place to raise a family.

All this made me feel good about maybe investing in real estate, either residential or commercial, in post-Harvey Houston. My lead gen business had given me some substantial profit margins and cash to work with, so I looked into it further.

How Houston Handled Harvey

After the massive devastation from Hurricane Harvey in 2017, it would seem logical there ought to be a lot of houses sitting vacant ready for flipping. Nothing could be further from the truth in Houston. In fact, it has been hard to find a house to flip in Houston since right after the storm. While the typical post-hurricane insurance issues are still grinding slowly after nearly 18 months, the truth is many damaged houses in Houston where people decided not to stay for record flood #4 put them up for sale and sold them nearly immediately after the storm to investors. That is why when you hunt for property to invest in, you come up with bunches of real estate investor groups in Houston and not neighborhoods, property listings, or independent investment opportunities.

After riding the tide of the third 500-year flood in three years, I guess a lot of people did what they always seem to do in Houston  – rebuild and wait for the next one.

Houston real estate is doing what?

Houston has a lot of investment property still up for sale, but it is a combination of commercial, residential and bare land. Houston, unlike some large cities, still has area to grow into, but there is also considerable real estate downtown that is abandoned or vacant that need bulldozed and started new.

New construction is a lot of what is happening right now in Houston post Harvey, with interestingly very little abatement having been done to avoid future flood damage after the last three devastating years. While the last 3 years were record breaking, Houston has a long history of flooding and devastating hurricanes. There was a lot of talk about flood control, and a little experimenting, and all of it failed miserably in 2017.  The issue is the location and layout of Houston and the arroyo system, or drainage, from the man-made reservoirs west and north of the city.

A lot of people do not realize a considerable amount of Houston’s flooding was caused by incognizant decisions made by the water management district and local government, directing burgeoning arroyos into some neighborhoods and saving others. Mother Nature did not always agree on the choices, though, and shoved water into many areas anyway, over-riding the unconscionable.

Hurricane Harvey destroyed Houston real estate values, then raised them. Flippers moved in immediately after the devastation of Harvey and bought everything they could.  Prices that people got were higher than you would have expected, then everything dropped. Since 2017, valuations have recovered some. Rental activity has shown a sharp decline in the entire east and southeast Texas region as more people leave the area or return to their water damaged properties.

Location, location, location – and water

Sadly, many homeowners have not gotten repairs even started yet, as insurance fights are still raging and will be for some time. Those properties are especially buyer beware after this length of time with damp drywall, leaking roofs and destroyed sub-flooring, as Houston’s normal heat and humidity make drying out a thing of dreams.

Many people in the Houston area ran into an odd conundrum regarding staying and repairing, staying, bulldozing and rebuilding higher, or selling off.  Insurance and FEMA do not provide flood abatement in the form of helping you get your house built on a higher grade if you bulldoze due to irreparable flood damage. Your neighbors got insurance money plus FEMA. They are now 5-6’ above grade. You repair. Guess who floods again. And, if you bulldoze and raise, with the cost of labor and new construction through the roof due to supply and demand, you will have to float a much larger loan than your house was most likely insured for at the time of whichever flood took you out – or floods.

A good number of homes hit were outside the flood plains, too. Rebuilding has changed whole neighborhoods to new homes raised well above arroyo levels, and others simply bulldozed.  Houston’s city government’s answer to flood control was to pass new regulations allowing people to rebuild up to five feet above flood plains. There was nothing done for the people who remain at the same level, and there are no plans to control the floodplains. Regional issues with retention, detention, and conveyance have pretty much been ignored.

Now you know why every underpass in Houston has double-digit flood markers near the bottom of them. They are a life or death necessity.

Job growth is pushing Houston real estate markets

What is pushing the Houston real estate investment market are companies like Amazon building and moving warehousing operations to Houston. A number of large companies have chosen to move to the city with its strategic location on major east-to-west interstates and the port.  That has made Houston one of the top markets in the country for job creation, and is helping level out the constant fluctuation in employment numbers that have always plagued Houston from it’s reliance on oil (commodity) and the space industry (government funded). Houston’s industrial and warehousing growth is expected to help double the population of the city by 2050.

When you look at the job growth in Houston, it does not seem the flooding has influenced the influx of people coming to Houston to look for work in this diverse and international city. But, even for all the flood damage, Houston is not a cheap place to live.

Thanks to the medical facilities and energy industries, utilities, health care, and grocery bills are below national average in the greater Houston area. But due to transportation costs and housing, Houston falls 4.7% above the national average cost of living overall. Rent in Houston is well over the average for Texas and the U.S., both. A studio starts around $900 a month, and a 3-4 bedroom home at $1,700 up.

Location makes a lot of difference, as those prices are in areas you might not consider on your list. This is in a town where skilled labor is short handed and income levels run 7% below national normal. That is why even though the rents may seem cheap to you in comparison to where you are now, you may well not make nearly as much in wages to pay the bill.  In Houston, if you are white collar you have a good shot at a good rate of pay. If not, you may well nearly starve, and Texas is not known for anywhere close to equitable social assistance programs. Know that going in.

You could be in for a wild ride if you invest in Houston real estate

Employment and the local economy in Houston and Texas in general are both closely tied to the energy markets. When we are in a political spat or trade war somewhere in the world, generally energy prices go up.  When we are at peace and things are going well, the economy in an energy economy dependent state gets unstable.  That and weather are why housing prices can fluctuate up to 20% in one month in the Houston area. Yes, one month. My stress levels would be through the roof on that kind of investment. I like the stability of my lead gen properties. And I make a lot more than 4.4%, I make like 80-90% profit. Check out this link for how I learned https://www.bestrealestatedirectory.com/lead-gen/

The average home is around $187,000 in Houston now, but Houston varies tremendously by neighborhood, perhaps more than any major city. The market is considered neutral at this point. With the 20% fluctuation that can occur monthly, repeatedly and with no warning, investing in Houston real estate is a true game of nerves and timing. You hit a high and you may immediately loose substantial money. You hit a low and you can be ok, make some money – until the next high crashes.

That is just way too much uncertainty for me. I am a risk taker, but I take calculated risks. If I am going to stick my neck out on a risky venture, I want to have all the facts in front of me to decide to go for it or not. You have no control over the risk factors in Houston.

There is a lot of misinformation out about Houston real estate right now

There is a lot of crazy information out about Houston home values and how sales are. Real estate investment firms in Houston will tell you the average purchase price of a home is around $75,000. The figure is not accurate. The average is $187,000 and they are increasing about 4.4% YTD.  Some sites geared to the construction industries want you to believe Houston housing sales are up 27%+ YTD. Others are saying it has been a negative figure. There are a lot of Texas sized stories blowing a lot of hot air around about Houston real estate right now.

Bare land values have not taken much of a hit around the area, and in 2018 residential real estate enjoyed a 4.8% across the board increase. In typical Texas fashion, some of the strongest increases were on the devastated peninsulas and barrier islands. Go figure.

Overall the only market that did not see a downturn on real estate closings volume at the end of 2018 was luxury homes. Those rose 2.7%. So, valuations are going up and total sales are decreasing, mostly due to the inventory of flood damaged homes  having been sold off already.

A lot of historically architecturally significant homes were lost in Harvey and other recent flooding in Houston. Houston led the nation in modern home-style building after California, both locations for the space program. The rambling ranches of Texas fame also took a lot of damage, and with so many homes taking sewage (yes, sewage) and refinery contamination for extended periods of time, tearing down and rebuilding may be the only sane option.

Due diligence is critical due to disclosure law

There is a very important point I need to share regarding buying homes in Houston, any property, really, that is now turn key. Foreclosed homes and homes coming out of estate settlements do not require any sort of disclosure if there was flood damage. If a home is listed as having “resolved” its flood damage issues, it does not have to be disclosed, either.

I am serious.

A lot of flood damage does not show up for months, sometimes years, later.

Do you really want to buy a property under those caveat emptor standards? After all, you are an outsider, and outsiders are simply not locals anywhere in Texas. There are still some serious social concerns even in diverse Houston. Not many people, especially absentee owners, can afford to loose a whole house to a mold or biohazard condemnation.

The flood maps were redone by FEMA several weeks into adjusting after Harvey, and it was done based on claims submitted and GPS coordinates taken at the front of the property. A lot of places did not flood at the road because roads tend to be built up in that part of Texas because of the flooding. The new flood maps also did not take into account areas flooded subsequently due to rivers backing up and floodwater standing over long periods of time, often containing significant chemical waste and biologics.

Many of the insurance claims were denied based on very small issues, anything that could be utilized to deny a claim, so many people patched things up or let them go. FEMA claims are not a matter of public record, and many people in Texas, if there is no mortgage, carry insurance, especially flood as they probably were not able to even buy it if they can afford it.

Can you buy insurance and get a mortgage?

One last thing. Buying insurance on a home in the Houston area can be expensive, if not impossible, due to the multiple years (and not just 3) of damage to homes over and over. If a home is uninsurable, it is rarely able to be mortgaged. You have to do your due diligence, period, before you even think about putting in an offer on any property in Houston. A lot of lenders do not even ask any more about flood insurance when writing mortgages in the Houston area, knowing full well that the new owners probably can not afford to repair after a flood, and perhaps keep the mortgage up. Guess who makes out with the property?

Lower risk and less stress ROI is the ticket to investing

I wish all this were not true, because Houston is a neat town with a great variety of cultures, neighborhoods, great restaurants, and things to do. But after reading up, it is simply not the investment opportunity for me.

One of the main things I wanted when I started looking for a business to get into was a good rate of return and something that grew well, and I did not have to stress a lot over fluctuations. I had gone straight into the corporate grind when I graduated from college, making $35/K. I quickly realized I would never get ahead and be able to invest for retirement let alone grow a business on that. I got involved in a lot of MLMs.  They were expensive, and I worked a lot of hours pretty well for nothing. I made a lot of people pretty irritated at me, too, mostly friends and family.

Then I got into drop shipping on Amazon. That worked better, but I was working stupid hours, had a ton of money in inventory, and had no life. I was making a little extra cash, but it was still not enough to really make a dent in my goals. I was working the regular job, working the side gig, and still searching for the golden arrow business that would hit my target.

One night while I was reading and ran into an article talking about a guy that was killing it in digital real estate. He was building kind of generic sites to help businesses get hooked up with customers who were already looking for a business doing what they needed done.  That got my interest. I could see the benefits as I had already figured out the internet was the way to go for marketing, I just was not sure how to get there the best way. I started to look for some information on the guy in the article, Dan, and found some info to track him down. It was this link https://www.bestrealestatedirectory.com/lead-gen/

I was curious so I made an appointment for a phone call to ask questions. When the time came, I had a list and all the questions got answered.  Dan was really straight up about what he was doing. I already knew he had written some training to learn how to do what he was doing day in – day out earning a good living. We talked about his course and it was way less than I had paid for a lot of others, so I signed up and dug in.

The first thing I did was build a lead gen website. Here it is:

 

It took me about six hours to get it up and running, and I was able to find a business that wanted the leads off it right away. The business owner agreed to pay me $750/month. He is paying me that same amount to this day, every month, direct deposited to my bank account. I have had minimal expenses as I average 80-90% profit margins on my sites. In just under five years I have made $36,400 in profit on this site that took me six hours to do. I hardly ever touch it, either.

Would $36,400 help you reach a goal or two? Do something really good for your family?  Help you finance even more growth in your business to make even more money?

I was really pleased and realized the builds were not hard, even though I had never done one before. I kept building. I put in some work, and I knew it would take that as any business and anything worth having takes work. I stayed focused, and in five months I was able to resign and leave the J-O-B. It was not too long after I got all the inventory out of my place for the drop shipping, too. It took more time than it was making me, my time was more valuable writing sites and selling the leads to businesses. I found out it was a lot easier than I thought, as business owners really truly needed more customers, and had no idea how to gain them digitally.

Five years later, I just turned 30. I am going to kill seven figures this year, and I work the hours I want. I do not answer to anyone but myself. I travel when I want, work with the clients I want. And I do not work the unreal hours I used to, either. I have a life, and I have some fun and now.

Are you hunting that golden arrow? I looked hard at real estate investing and it just did not make me a return I wanted without a lot of headaches and expenses connected to it, no matter where I looked.

You can have the same conversation I did by clicking this link to get information and make an appointment https://www.bestrealestatedirectory.com/lead-gen/

There are no gimmicks, no obligations, no catches. No one is going to bug you. Your info is private. We think if you really want to make a difference for yourself, your family, leave a legacy, you should spare 15 minutes to learn how to change your entire life.

I did.