Why should international real estate investors buy in Houston?


 Why should international real estate investors buy in Houston?

Houston is the third market for foreign real estate investors. (According to the 2015 AFIRE annual foreign investment survey) just behind New York City and San Fransisco. Houston has steadily climbed the ladder in this ranking in the past couple years and has become a main destination for international investors.

The top 5 buyers are: China, Canada, India, Mexico and the UK. The main reasons for investors to invest in the USA in general are (not in order of most frequent as it varies significantly based on the country of origin):  getting a vacation home, building a rental portfolio, a mix of vacation and rental, primary residence, and residence for a child/student in the US.

Houston is not a strong vacation market but it is a strong educational center with its medical center and a great place for investment rentals. The two purposes can also be combined by buying a fourplex or large house and renting out a larger portion of the dwelling while your child studies in Houston.

If you focus on the rental investment segment, I will argue that Houston is a better place than New York and San Francisco. Here is why:

  • Houston Real Estate is (still) affordable.

100 to 200k will buy a very nice and recent home in a good neighborhood in Houston. 100 to 200k will not get you much in SF or NY, maybe an efficiency studio if you want to be in a good neighborhood.

  • Ease of process / low transaction costs

Title company (independent third party to the transaction) closing in Texas is both inexpensive and efficient. You do not need to hire an expansive attorney (like you almost have to in NY) to draw standard documents.

  • No state or city transfer fee, no wealth tax

    In Manhattan, even a small 2-bedroom purchase is subject to the wealth tax.
     
  • Population growth, out of state and international relocations

As Houston mayor, Sylvester Turner, repeats consistently: ‘’ Houston is more diverse than New York’’. International and out of state relocations drive rental demand up as people typically rent for a few years when they first move in.
Houston and Harris County are expected to be the largest growing city and county in the US according to projections made by the city of Houston and Harris County.

  • Cash Flow

The gross yield is much better in Houston: 12 to 15% is reasonable and brings better cash flow. Investors in New York and San Fransisco are betting (speculating?) on appreciation which leads us to the next point

  • More stable / less volatile market

Texas and Houston has been much less volatile than California and New York. During the financial crisis of 2008 the drop in California was spectacular whereas good neighborhoods in Houston simply remained flat.

  • Texas laws are the most landlord friendly in the US.

‘Don’t mess with Texas’ which you see in all highways across the state should really be: ‘’don’t mess with Texas Landlords’’. In general US laws are more landlord friendly than most international countries, and within the US, Texas is the one with the strongest protections for landlords. As an example, in fort bend county, in the west side of Houston, the eviction process is 15 days versus months in New York and California.

A few interesting references for those of you who like numbers (contact us if you want more details and statistics):

http://www.houstontx.gov/abouthouston/houstonfacts.html

http://www.houstontx.gov/planning/Demographics/demograph_docs/PopProjections.htm

http://www.realtor.org/infographics/2015-profile-of-international-home-buying-activity


If you enjoyed this post, please consider sharing it with others.


Post Category: Foreclosures & Investments, International Real Estate, General

Go to Francois Delille Blog

Join the discussion

To post a comment on this blog post, you must be an HAR Account subscriber, or a member of HAR. If you are an HAR Account subscriber or a member of HAR, please click here to login. If you would like to create an HAR Account account, please click here.

Login to Comment
Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the HRIS.
Advertisement

Contact Francois Delille

Please limit to 500 characters.

Request Information
Click to view phone
Advertisement

Blog Archive

  • Archive
    •     2017
    •     2016
Advertisement