Ultimate Midland Real Estate Investing Guide for 2024

The term BRRRR is an illustration of a long-term investment strategy — Buy, Rehab, Rent, Refinance, Repeat. BRRRR is a strategy for repeated expansion. This strategy hinges on your ability to withdraw money out when you refinance.

You add to the value of the asset above what you spent buying and fixing the asset. Then you take a cash-out refinance loan that is computed on the superior value, and you take out the balance. You buy your next house with the cash-out sum and start all over again. This strategy enables you to consistently increase your assets and your investment revenue.

If an investor has a large number of real properties, it seems smart to hire a property manager and designate a passive income source. Find Midland property management firms when you go through our list of professionals.

Factors to Consider

Population Growth

The expansion or fall of a market’s population is an accurate gauge of the area’s long-term appeal for rental investors. When you see robust population increase, you can be confident that the community is pulling potential tenants to the location. The region is appealing to companies and working adults to move, work, and grow families. Rising populations grow a reliable tenant pool that can afford rent growth and homebuyers who assist in keeping your investment property values up.

Property Taxes

Property taxes, similarly to insurance and upkeep expenses, may vary from place to market and have to be considered cautiously when estimating possible profits. Investment assets situated in high property tax areas will have less desirable returns. If property tax rates are unreasonable in a given market, you probably want to look in a different location.

Price to Rent Ratio

The price to rent ratio (p/r) is a comparison of median property prices and median rental rates that will show you how much rent the market can allow. If median home values are strong and median rents are weak — a high p/r, it will take more time for an investment to recoup your costs and reach good returns. You need to discover a low p/r to be confident that you can establish your rental rates high enough for good returns.

Median Gross Rents

Median gross rents are a critical illustration of the stability of a lease market. Median rents should be growing to justify your investment. You will not be able to achieve your investment goals in a community where median gross rental rates are going down.

Median Population Age

Median population age in a good long-term investment market should mirror the usual worker’s age. This can also illustrate that people are migrating into the market. When working-age people aren’t entering the area to follow retiring workers, the median age will increase. This is not advantageous for the impending economy of that community.

Employment Base Diversity

A varied employment base is something a smart long-term rental property investor will look for. When the citizens are concentrated in a couple of dominant companies, even a slight interruption in their business could cost you a great deal of renters and increase your liability significantly.

Unemployment Rate

You will not be able to get a secure rental cash flow in a market with high unemployment. Normally profitable businesses lose clients when other companies lay off employees. This can generate too many retrenchments or fewer work hours in the region. Even people who are employed will find it a burden to keep up with their rent.

Income Rates

Median household and per capita income will inform you if the tenants that you want are living in the region. Current income figures will communicate to you if wage increases will allow you to raise rental fees to meet your investment return calculations.

Number of New Jobs Created

The more jobs are continuously being generated in a city, the more dependable your tenant inflow will be. The people who are employed for the new jobs will require housing. Your objective of leasing and acquiring more properties needs an economy that can generate more jobs.

School Ratings

The status of school districts has an undeniable effect on housing market worth throughout the area. Companies that are thinking about moving prefer high quality schools for their employees. Relocating employers bring and attract prospective tenants. Homebuyers who move to the area have a good impact on housing values. Quality schools are a vital ingredient for a reliable real estate investment market.

Property Appreciation Rates

Property appreciation rates are an imperative ingredient of your long-term investment plan. Investing in properties that you expect to keep without being certain that they will grow in value is a blueprint for disaster. Inferior or dropping property value in a market under examination is inadmissible.

A short-term rental is a furnished unit where a renter resides for shorter than four weeks. Long-term rental units, like apartments, charge lower payment a night than short-term ones. Because of the increased number of occupants, short-term rentals require more frequent care and tidying.

Short-term rentals are used by clients travelling for work who are in the region for a few nights, people who are moving and need transient housing, and backpackers. Any property owner can turn their residence into a short-term rental with the assistance provided by online home-sharing platforms like VRBO and AirBnB. A simple technique to get started on real estate investing is to rent a property you already keep for short terms.

The short-term rental strategy requires dealing with renters more often in comparison with annual rental units. This leads to the landlord being required to frequently manage grievances. You may want to defend your legal liability by hiring one of the good Midland real estate lawyers.

Factors to Consider

Short-Term Rental Income

You must find out how much rental income has to be generated to make your investment worthwhile. A location’s short-term rental income rates will quickly show you if you can anticipate to achieve your estimated rental income levels.

Median Property Prices

When purchasing investment housing for short-term rentals, you must know the budget you can allot. The median price of property will tell you if you can manage to invest in that area. You can also utilize median market worth in targeted neighborhoods within the market to select cities for investing.

Price Per Square Foot

Price per sq ft can be impacted even by the look and layout of residential units. A house with open entrances and vaulted ceilings cannot be contrasted with a traditional-style residential unit with greater floor space. If you take this into consideration, the price per sq ft can provide you a general view of real estate prices.

Short-Term Rental Occupancy Rate

A quick check on the city’s short-term rental occupancy rate will tell you if there is an opportunity in the district for more short-term rentals. A high occupancy rate shows that a new supply of short-term rentals is necessary. If investors in the community are having challenges filling their existing units, you will have trouble renting yours.

Short-Term Rental Cash-on-Cash Return

To find out if it’s a good idea to invest your funds in a certain rental unit or area, evaluate the cash-on-cash return. Take your expected Net Operating Income (NOI) and divide it by the cash amount you’re ready to invest. The return is a percentage. High cash-on-cash return indicates that you will get back your money more quickly and the investment will have a higher return. Loan-assisted projects will have a higher cash-on-cash return because you will be investing less of your money.

Average Short-Term Rental Capitalization (Cap) Rates

This criterion compares investment property worth to its annual revenue. An investment property that has a high cap rate and charges typical market rental prices has a good market value. If cap rates are low, you can assume to pay more money for rental units in that region. The cap rate is calculated by dividing the Net Operating Income (NOI) by the listing price or market value. This gives you a percentage that is the year-over-year return, or cap rate.

Local Attractions

Short-term rental properties are desirable in communities where visitors are drawn by activities and entertainment sites. When a location has places that regularly produce interesting events, such as sports arenas, universities or colleges, entertainment centers, and theme parks, it can draw visitors from outside the area on a recurring basis. At specific times of the year, places with outdoor activities in the mountains, seaside locations, or along rivers and lakes will attract crowds of tourists who require short-term residence.

The fix and flip approach requires buying a home that needs repairs or restoration, generating additional value by upgrading the property, and then selling it for a better market worth. To get profit, the investor has to pay below market price for the house and compute how much it will take to renovate it.

You also need to know the resale market where the property is situated. Choose a region that has a low average Days On Market (DOM) indicator. To effectively “flip” real estate, you have to liquidate the renovated house before you have to come up with a budget maintaining it.

To help distressed property sellers find you, enter your firm in our lists of cash home buyers in Midland TX and real estate investors in Midland TX.

Also, coordinate with Midland real estate bird dogs. These professionals concentrate on rapidly discovering lucrative investment ventures before they are listed on the market.

Factors to Consider

Median Home Price

The market’s median home price could help you spot a desirable city for flipping houses. You’re on the lookout for median prices that are low enough to indicate investment opportunities in the area. This is a necessary feature of a fix and flip market.

When you see a quick weakening in property values, this could signal that there are possibly properties in the location that qualify for a short sale. You’ll hear about potential investments when you partner up with Midland short sale processors. Find out how this happens by reading our explanation ⁠— What Do You Need to Buy a Short Sale House?.

Property Appreciation Rate

Are home values in the market on the way up, or on the way down? You want an area where home values are regularly and continuously ascending. Home prices in the market need to be going up regularly, not suddenly. Buying at an inappropriate moment in an unsteady market can be problematic.

Average Renovation Costs

Look carefully at the potential repair costs so you will know whether you can reach your projections. The manner in which the municipality goes about approving your plans will have an effect on your investment as well. To draft an on-target financial strategy, you will need to understand whether your plans will be required to involve an architect or engineer.

Population Growth

Population statistics will tell you if there is an increasing necessity for houses that you can sell. When there are purchasers for your renovated houses, the numbers will show a positive population increase.

Median Population Age

The median citizens’ age can also show you if there are enough homebuyers in the area. The median age in the city should be the age of the average worker. Employed citizens can be the people who are probable homebuyers. Individuals who are planning to leave the workforce or are retired have very particular residency requirements.

Unemployment Rate

When researching a market for real estate investment, search for low unemployment rates. The unemployment rate in a future investment location needs to be less than the nation’s average. When the community’s unemployment rate is lower than the state average, that is an indication of a strong investing environment. To be able to acquire your fixed up houses, your buyers are required to work, and their clients as well.

Income Rates

Median household and per capita income are an important sign of the scalability of the real estate environment in the region. When families buy a house, they normally need to take a mortgage for the home purchase. Their wage will dictate the amount they can borrow and if they can purchase a home. You can determine based on the city’s median income whether many individuals in the city can manage to purchase your real estate. Scout for regions where wages are going up. To keep up with inflation and soaring building and material expenses, you have to be able to periodically mark up your purchase prices.

Number of New Jobs Created

The number of employment positions created on a steady basis indicates if income and population growth are viable. A higher number of people buy homes if the city’s financial market is adding new jobs. With more jobs appearing, more prospective home purchasers also relocate to the area from other places.

Hard Money Loan Rates

People who purchase, fix, and liquidate investment homes are known to engage hard money instead of normal real estate loans. This lets investors to immediately buy distressed properties. Discover hard money lending companies in Midland TX and estimate their mortgage rates.

Investors who aren’t well-versed concerning hard money lenders can learn what they need to understand with our resource for those who are only starting — What Is a Hard Money Lender in Real Estate?.

Wholesaling is a real estate investment strategy that entails locating properties that are appealing to investors and signing a sale and purchase agreement. A real estate investor then “buys” the sale and purchase agreement from you. The seller sells the home to the real estate investor not the wholesaler. You’re selling the rights to the contract, not the property itself.

This method includes utilizing a title company that is experienced in the wholesale purchase and sale agreement assignment operation and is able and predisposed to manage double close transactions. Discover Midland real estate investor friendly title companies by utilizing our directory.

Read more about the way to wholesale property from our comprehensive guide — Wholesale Real Estate Investing 101 for Beginners. As you go with wholesaling, include your investment project on our list of the best investment property wholesalers in Midland TX. That way your desirable customers will see your availability and reach out to you.

Factors to Consider

Median Home Prices

Median home prices are instrumental to finding communities where properties are being sold in your investors’ purchase price point. A community that has a sufficient supply of the reduced-value properties that your clients want will have a low median home price.

A sudden downturn in property prices might be followed by a sizeable number of ‘underwater’ houses that short sale investors hunt for. Wholesaling short sales frequently delivers a list of different advantages. Nonetheless, there may be risks as well. Discover details about wholesaling short sales with our exhaustive guide. Once you’ve decided to try wholesaling short sale homes, be certain to engage someone on the list of the best short sale attorneys in Midland TX and the best mortgage foreclosure attorneys in Midland TX to advise you.

Property Appreciation Rate

Median home value fluctuations clearly illustrate the home value picture. Investors who need to liquidate their investment properties later, such as long-term rental landlords, require a region where real estate prices are increasing. A dropping median home price will show a weak rental and home-buying market and will exclude all types of real estate investors.

Population Growth

Population growth information is essential for your prospective contract purchasers. An increasing population will require additional housing. This includes both rental and resale real estate. If a population isn’t growing, it does not require more houses and real estate investors will search somewhere else.

Median Population Age

Investors want to see a steady real estate market where there is a good supply of renters, first-time homebuyers, and upwardly mobile citizens switching to larger properties. A location that has a huge workforce has a consistent source of tenants and buyers. That is why the location’s median age needs to be the age of skilled workers in the employment market.

Income Rates

The median household and per capita income in a reliable real estate investment market need to be on the upswing. Income improvement demonstrates a city that can manage rent and real estate price surge. That will be critical to the property investors you are trying to reach.

Unemployment Rate

Real estate investors will carefully evaluate the city’s unemployment rate. Delayed lease payments and lease default rates are worse in areas with high unemployment. Long-term investors who rely on steady rental income will lose revenue in these markets. Investors cannot count on renters moving up into their houses when unemployment rates are high. Short-term investors will not take a chance on getting pinned down with a property they cannot liquidate without delay.

Number of New Jobs Created

The amount of new jobs being created in the market completes a real estate investor’s assessment of a prospective investment spot. People settle in a location that has fresh job openings and they need a place to live. Whether your client pool consists of long-term or short-term investors, they will be attracted to a region with constant job opening production.

Average Renovation Costs

An imperative consideration for your client real estate investors, particularly house flippers, are renovation expenses in the market. When a short-term investor renovates a home, they have to be able to liquidate it for a higher price than the combined sum they spent for the purchase and the upgrades. The less you can spend to fix up an asset, the more profitable the market is for your future purchase agreement clients.

This strategy includes purchasing debt (mortgage note) from a mortgage holder for less than the balance owed. By doing so, you become the lender to the original lender’s borrower.

Performing loans mean mortgage loans where the homeowner is always current on their payments. Performing loans are a stable generator of cash flow. Non-performing notes can be rewritten or you could pick up the property for less than face value through a foreclosure process.

At some point, you could build a mortgage note collection and find yourself lacking time to service it by yourself. At that juncture, you might want to employ our catalogue of Midland top mortgage servicers and redesignate your notes as passive investments.

Should you decide to follow this investment plan, you ought to include your venture in our list of the best real estate note buying companies in Midland TX. Once you’ve done this, you’ll be discovered by the lenders who promote desirable investment notes for acquisition by investors like yourself.

Factors to Consider

Foreclosure Rates

Low foreclosure rates are a signal that the area has investment possibilities for performing note purchasers. If the foreclosure rates are high, the region could nonetheless be desirable for non-performing note buyers. But foreclosure rates that are high sometimes indicate an anemic real estate market where getting rid of a foreclosed home could be hard.

Foreclosure Laws

Successful mortgage note investors are completely knowledgeable about their state’s laws concerning foreclosure. Some states use mortgage paperwork and others require Deeds of Trust. A mortgage dictates that you go to court for approval to foreclose. You only have to file a notice and start foreclosure process if you’re utilizing a Deed of Trust.

Mortgage Interest Rates

The interest rate is indicated in the mortgage notes that are purchased by note investors. That rate will undoubtedly affect your investment returns. Interest rates are important to both performing and non-performing note buyers.

The mortgage rates charged by conventional mortgage lenders aren’t equal in every market. Private loan rates can be moderately higher than conventional loan rates because of the larger risk dealt with by private mortgage lenders.

Profitable investors continuously review the mortgage interest rates in their market set by private and traditional mortgage firms.

Demographics

If mortgage note buyers are choosing where to purchase notes, they review the demographic dynamics from reviewed markets. Note investors can interpret a lot by reviewing the size of the population, how many citizens are working, the amount they make, and how old the people are.
A youthful growing community with a strong job market can provide a reliable income flow for long-term note investors hunting for performing mortgage notes.

The identical region might also be appropriate for non-performing note investors and their exit strategy. When foreclosure is called for, the foreclosed house is more conveniently sold in a good property market.

Property Values

Lenders need to see as much home equity in the collateral property as possible. This enhances the possibility that a possible foreclosure liquidation will make the lender whole. As loan payments reduce the balance owed, and the value of the property goes up, the homeowner’s equity grows.

Property Taxes

Many borrowers pay property taxes via lenders in monthly portions while sending their mortgage loan payments. The mortgage lender passes on the taxes to the Government to make sure the taxes are submitted on time. If loan payments are not being made, the lender will have to either pay the taxes themselves, or they become delinquent. Tax liens leapfrog over any other liens.

If a market has a record of rising tax rates, the combined home payments in that area are consistently increasing. Borrowers who are having difficulty making their loan payments may drop farther behind and ultimately default.

Real Estate Market Strength

An active real estate market with strong value growth is helpful for all types of mortgage note investors. The investors can be assured that, when required, a repossessed property can be liquidated for an amount that is profitable.

A vibrant market may also be a lucrative place for initiating mortgage notes. It’s a supplementary stage of a note buyer’s career.

A REIT, or Real Estate Investment Trust, means a business that invests in income-producing properties. Before REITs appeared, investing in properties was considered too costly for most citizens. Shares in REITs are not too costly to the majority of investors.

Investing in a REIT is a kind of passive investing. REITs handle investors’ risk with a varied collection of real estate. Shares in a REIT may be unloaded when it’s agreeable for you. However, REIT investors don’t have the option to select individual properties or markets. Their investment is limited to the investment properties chosen by their REIT.

Real estate investment funds are essentially mutual funds that specialize in real estate companies, such as REITs. The fund doesn’t own real estate — it holds shares in real estate companies. These funds make it possible for a wider variety of people to invest in real estate. Fund members may not collect usual disbursements like REIT shareholders do. The return to investors is produced by appreciation in the value of the stock.

Investors can select a fund that concentrates on particular segments of the real estate business but not particular markets for individual property investment. As passive investors, fund shareholders are glad to let the administration of the fund handle all investment choices.