Ultimate Lubbock County Real Estate Investing Guide for 2024

The term BRRRR is a description of a long-term lease strategy — Buy, Rehab, Rent, Refinance, Repeat. BRRRR is a system for continuous expansion. A critical part of this program is to be able to receive a “cash-out” mortgage refinance.

The After Repair Value (ARV) of the investment property needs to total more than the total purchase and repair expenses. The investment property is refinanced based on the ARV and the balance, or equity, comes to you in cash. You acquire your next property with the cash-out capital and do it all over again. You purchase additional properties and constantly increase your lease income.

When an investor has a substantial number of investment properties, it seems smart to employ a property manager and establish a passive income stream. Find Lubbock County real property management professionals when you go through our directory of professionals.

Factors to Consider

Population Growth

The increase or deterioration of an area’s population is a valuable benchmark of its long-term desirability for rental investors. An increasing population usually signals vibrant relocation which means additional renters. Employers consider this community as promising place to relocate their enterprise, and for workers to relocate their families. An expanding population creates a reliable foundation of renters who can handle rent raises, and a strong seller’s market if you decide to liquidate your assets.

Property Taxes

Real estate taxes, just like insurance and maintenance costs, may vary from place to market and have to be reviewed cautiously when estimating possible profits. High property tax rates will hurt a property investor’s returns. If property taxes are excessive in a particular area, you probably need to look elsewhere.

Price to Rent Ratio

The price to rent ratio (p/r) is a contrast of median property prices and median rental rates that will signal how much rent the market can handle. How much you can demand in a region will determine the sum you are able to pay determined by how long it will take to repay those funds. You are trying to find a low p/r to be assured that you can set your rents high enough to reach acceptable returns.

Median Gross Rents

Median gross rents illustrate whether a community’s rental market is dependable. Look for a continuous rise in median rents year over year. If rental rates are declining, you can eliminate that area from deliberation.

Median Population Age

Median population age should be similar to the age of a typical worker if a community has a consistent supply of tenants. You’ll learn this to be factual in cities where workers are moving. If you discover a high median age, your source of tenants is declining. This isn’t advantageous for the forthcoming economy of that market.

Employment Base Diversity

A diversified employment base is something a wise long-term investor landlord will hunt for. If your renters are concentrated in only several significant employers, even a slight issue in their operations might cause you to lose a great deal of renters and expand your exposure substantially.

Unemployment Rate

You will not be able to have a secure rental income stream in a city with high unemployment. Non-working residents cease being clients of yours and of other companies, which causes a domino effect throughout the community. The remaining people might find their own salaries marked down. Current renters could delay their rent in these conditions.

Income Rates

Median household and per capita income information is a critical tool to help you find the regions where the renters you want are living. Historical salary statistics will illustrate to you if wage raises will permit you to mark up rental fees to meet your investment return projections.

Number of New Jobs Created

The more jobs are regularly being created in a market, the more stable your tenant supply will be. A market that creates jobs also boosts the number of stakeholders in the housing market. This allows you to acquire more lease real estate and replenish existing empty units.

School Ratings

School quality in the city will have a strong impact on the local property market. Businesses that are thinking about relocating prefer good schools for their workers. Business relocation provides more renters. Homeowners who move to the region have a beneficial impact on real estate values. For long-term investing, hunt for highly endorsed schools in a prospective investment area.

Property Appreciation Rates

High real estate appreciation rates are a necessity for a successful long-term investment. You have to be certain that your investment assets will increase in market price until you decide to sell them. Inferior or declining property appreciation rates will exclude a community from consideration.

Residential properties where renters reside in furnished spaces for less than four weeks are referred to as short-term rentals. Short-term rental owners charge a higher rent per night than in long-term rental properties. Because of the increased turnover rate, short-term rentals require additional regular upkeep and sanitation.

Average short-term renters are holidaymakers, home sellers who are relocating, and people traveling for business who need a more homey place than a hotel room. House sharing platforms such as AirBnB and VRBO have helped many real estate owners to engage in the short-term rental industry. This makes short-term rental strategy an easy technique to endeavor residential property investing.

The short-term property rental strategy requires dealing with tenants more regularly compared to annual rental properties. As a result, investors deal with problems regularly. You may want to cover your legal exposure by working with one of the best Lubbock County investor friendly real estate lawyers.

Factors to Consider

Short-Term Rental Income

You need to determine how much rental income has to be earned to make your effort pay itself off. Understanding the average rate of rental fees in the market for short-term rentals will help you choose a desirable city to invest.

Median Property Prices

You also must determine the budget you can afford to invest. To find out if a market has potential for investment, study the median property prices. You can tailor your location survey by looking at the median market worth in specific sub-markets.

Price Per Square Foot

Price per square foot provides a broad picture of property values when looking at similar units. When the designs of prospective homes are very different, the price per square foot might not provide an accurate comparison. You can use this information to get a good general view of property values.

Short-Term Rental Occupancy Rate

The percentage of short-term rentals that are currently tenanted in a location is critical knowledge for an investor. A region that requires additional rental housing will have a high occupancy rate. If investors in the market are having challenges filling their existing properties, you will have difficulty finding renters for yours.

Short-Term Rental Cash-on-Cash Return

To find out whether it’s a good idea to put your money in a specific property or city, calculate the cash-on-cash return. You can compute the cash-on-cash return by taking your Net Operating Income (NOI) and dividing it by your cash investment. The return is a percentage. High cash-on-cash return means that you will recoup your funds faster and the purchase will have a higher return. Funded ventures will have a higher cash-on-cash return because you are spending less of your money.

Average Short-Term Rental Capitalization (Cap) Rates

One measurement illustrates the market value of a property as a cash flow asset — average short-term rental capitalization (cap) rate. High cap rates mean that income-producing assets are available in that location for reasonable prices. If investment real estate properties in a region have low cap rates, they usually will cost more. You can determine the cap rate for potential investment real estate by dividing the Net Operating Income (NOI) by the Fair Market Value or purchase price of the residential property. This presents you a ratio that is the per-annum return, or cap rate.

Local Attractions

Important public events and entertainment attractions will draw tourists who want short-term rental houses. Individuals visit specific areas to attend academic and sporting events at colleges and universities, see professional sports, support their kids as they participate in fun events, have the time of their lives at annual carnivals, and go to amusement parks. Natural scenic attractions like mountains, waterways, beaches, and state and national parks can also draw potential tenants.

The fix and flip approach entails buying a home that demands improvements or rebuilding, generating added value by upgrading the building, and then reselling it for a higher market worth. The keys to a profitable fix and flip are to pay less for the home than its as-is value and to accurately analyze the amount needed to make it sellable.

It’s critical for you to figure out the rates houses are going for in the region. Select a city with a low average Days On Market (DOM) metric. To profitably “flip” a property, you must sell the rehabbed home before you are required to put out money maintaining it.

So that home sellers who have to get cash for their home can conveniently discover you, promote your status by utilizing our catalogue of the best cash property buyers in Lubbock County TX along with top real estate investors in Lubbock County TX.

Also, look for top bird dogs for real estate investors in Lubbock County TX. These professionals specialize in rapidly locating good investment ventures before they come on the open market.

Factors to Consider

Median Home Price

Median property price data is a key tool for estimating a prospective investment region. Low median home values are an indicator that there must be an inventory of real estate that can be purchased below market worth. This is an important component of a profitable fix and flip.

When regional data signals a sharp decrease in real estate market values, this can indicate the availability of potential short sale properties. Investors who work with short sale processors in Lubbock County TX get regular notifications about potential investment properties. Learn how this happens by reading our guide ⁠— What Is Involved in Buying a Short Sale Home?.

Property Appreciation Rate

Are real estate prices in the community moving up, or going down? Predictable growth in median values indicates a strong investment environment. Unsteady market value shifts aren’t good, even if it is a remarkable and unexpected surge. When you’re acquiring and liquidating swiftly, an erratic environment can hurt your investment.

Average Renovation Costs

You’ll want to analyze building expenses in any prospective investment location. The way that the local government processes your application will affect your investment too. You need to know if you will be required to use other contractors, like architects or engineers, so you can be ready for those expenses.

Population Growth

Population increase is a strong indication of the reliability or weakness of the location’s housing market. When the number of citizens is not increasing, there is not going to be a sufficient supply of homebuyers for your houses.

Median Population Age

The median population age is a simple sign of the presence of preferred home purchasers. The median age shouldn’t be lower or higher than that of the typical worker. People in the area’s workforce are the most stable home purchasers. Individuals who are about to leave the workforce or are retired have very specific housing needs.

Unemployment Rate

If you stumble upon a market with a low unemployment rate, it is a strong indication of good investment opportunities. An unemployment rate that is less than the country’s average is a good sign. When the community’s unemployment rate is lower than the state average, that’s an indicator of a desirable financial market. If you don’t have a robust employment environment, a region cannot supply you with enough home purchasers.

Income Rates

Median household and per capita income rates tell you whether you will find adequate buyers in that community for your houses. Most individuals who purchase residential real estate need a home mortgage loan. To be issued a mortgage loan, a person can’t be spending for housing more than a certain percentage of their wage. The median income stats tell you if the location is beneficial for your investment plan. You also want to see salaries that are improving continually. To keep up with inflation and rising building and material expenses, you should be able to regularly raise your prices.

Number of New Jobs Created

Understanding how many jobs are created yearly in the region adds to your confidence in a community’s real estate market. A larger number of people acquire homes when their area’s economy is generating jobs. Experienced trained professionals looking into purchasing a home and settling choose moving to regions where they will not be out of work.

Hard Money Loan Rates

Real estate investors who work with rehabbed residential units often utilize hard money financing rather than traditional loans. Hard money funds allow these purchasers to take advantage of current investment possibilities without delay. Discover top hard money lenders for real estate investors in Lubbock County TX so you may review their costs.

Those who are not knowledgeable regarding hard money lenders can uncover what they need to understand with our detailed explanation for those who are only starting — What Is Hard Money Lending?.

As a real estate wholesaler, you sign a contract to purchase a residential property that other real estate investors might need. However you don’t purchase the house: once you control the property, you get someone else to take your place for a price. The owner sells the property to the investor not the wholesaler. You’re selling the rights to the contract, not the property itself.

Wholesaling relies on the involvement of a title insurance firm that’s okay with assignment of contracts and knows how to proceed with a double closing. Discover Lubbock County title companies for real estate investors by using our list.

Our in-depth guide to wholesaling can be read here: Property Wholesaling Explained. As you go about your wholesaling business, insert your firm in HouseCashin’s directory of Lubbock County top wholesale real estate investors. This will let your potential investor clients find and call you.

Factors to Consider

Median Home Prices

Median home values are essential to discovering markets where houses are being sold in your real estate investors’ purchase price point. As investors want properties that are available for lower than market price, you will want to see lower median prices as an indirect tip on the potential availability of homes that you may purchase for lower than market value.

Accelerated worsening in real estate prices might lead to a lot of homes with no equity that appeal to short sale flippers. This investment strategy often delivers numerous particular benefits. However, there could be challenges as well. Discover details concerning wholesaling short sale properties with our complete instructions. When you’ve determined to attempt wholesaling short sale homes, make sure to employ someone on the list of the best short sale legal advice experts in Lubbock County TX and the best foreclosure lawyers in Lubbock County TX to advise you.

Property Appreciation Rate

Median home market value changes clearly illustrate the housing value in the market. Real estate investors who want to liquidate their properties in the future, like long-term rental landlords, want a region where residential property market values are growing. A declining median home price will illustrate a poor leasing and home-buying market and will eliminate all sorts of investors.

Population Growth

Population growth data is an indicator that real estate investors will consider carefully. When the community is expanding, additional residential units are needed. There are a lot of individuals who lease and plenty of customers who buy homes. When a community is not multiplying, it doesn’t require additional houses and investors will search in other areas.

Median Population Age

A preferable housing market for investors is active in all areas, notably renters, who turn into home purchasers, who move up into bigger properties. A community with a large workforce has a consistent source of tenants and buyers. A place with these characteristics will display a median population age that is the same as the employed adult’s age.

Income Rates

The median household and per capita income demonstrate steady improvement historically in cities that are ripe for investment. Income increment demonstrates a place that can deal with rent and home listing price raises. That will be crucial to the real estate investors you want to reach.

Unemployment Rate

Investors whom you approach to take on your sale contracts will consider unemployment figures to be a crucial piece of insight. Late rent payments and lease default rates are worse in locations with high unemployment. Long-term investors who depend on consistent rental income will lose money in these areas. High unemployment causes uncertainty that will stop people from purchasing a property. Short-term investors won’t take a chance on being pinned down with a home they cannot resell quickly.

Number of New Jobs Created

Learning how frequently additional jobs are created in the market can help you determine if the real estate is positioned in a stable housing market. New residents settle in a region that has fresh jobs and they look for housing. Long-term real estate investors, like landlords, and short-term investors that include flippers, are gravitating to cities with strong job production rates.

Average Renovation Costs

An essential variable for your client real estate investors, specifically house flippers, are renovation expenses in the city. When a short-term investor flips a house, they need to be prepared to unload it for a larger amount than the whole expense for the purchase and the rehabilitation. Look for lower average renovation costs.

Buying mortgage notes (loans) pays off when the mortgage loan can be acquired for a lower amount than the face value. When this occurs, the note investor becomes the borrower’s lender.

Loans that are being paid off on time are considered performing notes. Performing notes are a stable source of passive income. Non-performing loans can be restructured or you can buy the property for less than face value through a foreclosure process.

Someday, you could have multiple mortgage notes and have a hard time finding additional time to manage them on your own. When this develops, you could choose from the best loan servicing companies in Lubbock County TX which will make you a passive investor.

When you choose to take on this investment strategy, you ought to include your project in our list of the best mortgage note buying companies in Lubbock County TX. This will make your business more noticeable to lenders offering desirable possibilities to note buyers like you.

Factors to consider

Foreclosure Rates

Low foreclosure rates are an indication that the region has opportunities for performing note buyers. Non-performing mortgage note investors can carefully take advantage of places with high foreclosure rates too. But foreclosure rates that are high sometimes signal an anemic real estate market where liquidating a foreclosed house may be a problem.

Foreclosure Laws

It is critical for note investors to learn the foreclosure regulations in their state. Are you faced with a mortgage or a Deed of Trust? With a mortgage, a court will have to allow a foreclosure. Note owners do not need the court’s permission with a Deed of Trust.

Mortgage Interest Rates

Purchased mortgage loan notes contain a negotiated interest rate. That interest rate will significantly impact your profitability. Regardless of which kind of note investor you are, the mortgage loan note’s interest rate will be crucial to your forecasts.

Traditional lenders price different interest rates in different locations of the US. Mortgage loans offered by private lenders are priced differently and can be more expensive than conventional mortgage loans.

A note investor ought to be aware of the private and traditional mortgage loan rates in their markets all the time.

Demographics

When note buyers are determining where to purchase mortgage notes, they consider the demographic data from potential markets. Note investors can interpret a great deal by reviewing the extent of the populace, how many citizens have jobs, what they make, and how old the residents are.
Performing note buyers need clients who will pay without delay, developing a stable income source of mortgage payments.

Note investors who acquire non-performing notes can also take advantage of dynamic markets. If these note investors want to foreclose, they will need a thriving real estate market in order to unload the REO property.

Property Values

The greater the equity that a homeowner has in their property, the more advantageous it is for you as the mortgage note owner. If the lender has to foreclose on a mortgage loan with lacking equity, the foreclosure sale might not even repay the amount owed. The combination of loan payments that lower the loan balance and annual property market worth growth increases home equity.

Property Taxes

Usually, lenders receive the property taxes from the homebuyer every month. The mortgage lender passes on the payments to the Government to make sure the taxes are paid promptly. The lender will need to compensate if the house payments stop or the lender risks tax liens on the property. When property taxes are delinquent, the municipality’s lien jumps over all other liens to the front of the line and is paid first.

Because tax escrows are collected with the mortgage payment, growing taxes mean higher mortgage loan payments. Past due clients may not be able to maintain growing payments and might interrupt paying altogether.

Real Estate Market Strength

A growing real estate market showing good value increase is beneficial for all kinds of note investors. Since foreclosure is an essential component of note investment strategy, appreciating real estate values are critical to finding a good investment market.

Note investors also have an opportunity to originate mortgage notes directly to borrowers in strong real estate areas. It is an additional phase of a mortgage note investor’s career.

A trust investing in income-generating real estate properties and that sells shares to investors is a REIT — Real Estate Investment Trust. This was originally invented as a method to allow the everyday investor to invest in real estate. Many investors these days are able to invest in a REIT.

Shareholders’ involvement in a REIT falls under passive investment. The liability that the investors are assuming is spread among a group of investment real properties. Shareholders have the option to sell their shares at any time. However, REIT investors do not have the option to select individual real estate properties or markets. Their investment is limited to the properties selected by their REIT.

Mutual funds owning shares of real estate firms are referred to as real estate investment funds. The fund doesn’t hold properties — it owns shares in real estate firms. This is another method for passive investors to diversify their portfolio with real estate without the high initial cost or exposure. Real estate investment funds aren’t obligated to distribute dividends unlike a REIT. The profit to investors is produced by increase in the value of the stock.

You can locate a fund that focuses on a distinct kind of real estate firm, like residential, but you can’t choose the fund’s investment real estate properties or locations. As passive investors, fund participants are glad to permit the management team of the fund make all investment choices.