Ultimate South Plains Real Estate Investing Guide for 2024

BRRRR is an abbreviation of “Buy, Rehab, Rent, Refinance, Repeat”. BRRRR is a strategy for continuous growth. This plan hinges on your ability to extract money out when you refinance.

You enhance the value of the asset beyond the amount you spent acquiring and rehabbing the property. Next, you pocket the value you produced out of the asset in a “cash-out” mortgage refinance. This money is placed into the next investment asset, and so on. You add improving assets to the balance sheet and lease revenue to your cash flow.

When your investment property collection is large enough, you can contract out its management and generate passive income. Locate top South Plains real estate managers by using our directory.

Factors to Consider

Population Growth

Population rise or shrinking tells you if you can depend on reliable returns from long-term investments. If the population growth in a location is strong, then new renters are assuredly moving into the region. Businesses view this as promising community to move their company, and for employees to situate their households. An expanding population builds a stable foundation of renters who can survive rent raises, and a vibrant seller’s market if you want to sell any assets.

Property Taxes

Real estate taxes, regular maintenance expenditures, and insurance directly impact your returns. Rental property located in steep property tax areas will provide weaker returns. Areas with high property taxes aren’t considered a stable environment for short- and long-term investment and must be bypassed.

Price to Rent Ratio

Price to rent ratio (p/r) is a market indicator that tells you how much you can anticipate to collect as rent. If median property prices are high and median rents are low — a high p/r, it will take longer for an investment to recoup your costs and reach profitability. A high price-to-rent ratio informs you that you can set less rent in that community, a low ratio says that you can collect more.

Median Gross Rents

Median gross rents are a critical sign of the stability of a rental market. Median rents must be increasing to warrant your investment. Dropping rental rates are a red flag to long-term rental investors.

Median Population Age

The median population age that you are hunting for in a dynamic investment environment will be similar to the age of waged people. You’ll discover this to be factual in regions where workers are migrating. When working-age people are not entering the city to follow retirees, the median age will go up. This is not good for the impending financial market of that community.

Employment Base Diversity

A varied employment base is what a wise long-term rental property owner will search for. If there are only one or two significant hiring companies, and either of them moves or closes shop, it will lead you to lose paying customers and your property market rates to decline.

Unemployment Rate

It is a challenge to achieve a secure rental market when there is high unemployment. Unemployed individuals can’t be customers of yours and of related businesses, which creates a ripple effect throughout the market. Individuals who still keep their jobs can discover their hours and salaries reduced. Even people who are employed may find it a burden to pay rent on time.

Income Rates

Median household and per capita income data is a valuable indicator to help you navigate the places where the tenants you prefer are living. Existing salary figures will reveal to you if income raises will allow you to adjust rental charges to meet your income estimates.

Number of New Jobs Created

The more jobs are constantly being produced in a region, the more stable your tenant source will be. A larger amount of jobs mean new tenants. This ensures that you can retain a high occupancy rate and purchase more properties.

School Ratings

Local schools will make a significant effect on the housing market in their locality. Highly-respected schools are a prerequisite for companies that are considering relocating. Relocating businesses relocate and draw prospective renters. Homeowners who relocate to the area have a beneficial impact on home prices. For long-term investing, hunt for highly graded schools in a considered investment area.

Property Appreciation Rates

Property appreciation rates are an integral portion of your long-term investment plan. You need to ensure that the chances of your investment increasing in market worth in that community are likely. Small or dropping property appreciation rates will eliminate a market from being considered.

A short-term rental is a furnished unit where a tenant stays for shorter than four weeks. Short-term rental owners charge a steeper rate per night than in long-term rental business. Because of the high rotation of occupants, short-term rentals entail more recurring repairs and sanitation.

Short-term rentals are used by business travelers who are in the area for a couple of nights, those who are migrating and want short-term housing, and tourists. Ordinary property owners can rent their houses or condominiums on a short-term basis via sites such as AirBnB and VRBO. A convenient approach to enter real estate investing is to rent a property you already keep for short terms.

Short-term rental units require interacting with renters more frequently than long-term rentals. Because of this, landlords manage problems regularly. Give some thought to managing your liability with the help of one of the good real estate lawyers in South Plains TX.

Factors to Consider

Short-Term Rental Income

You need to determine how much income has to be earned to make your effort successful. Knowing the average amount of rent being charged in the area for short-term rentals will enable you to select a preferable location to invest.

Median Property Prices

You also need to decide the budget you can manage to invest. To find out whether a region has possibilities for investment, look at the median property prices. You can also employ median prices in targeted sections within the market to choose locations for investment.

Price Per Square Foot

Price per square foot provides a general idea of market values when analyzing comparable properties. A home with open entryways and vaulted ceilings cannot be contrasted with a traditional-style residential unit with more floor space. If you take this into account, the price per square foot can give you a general estimation 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 a need in the region for more short-term rentals. A location that needs new rental properties will have a high occupancy level. If property owners in the city are having problems filling their existing properties, you will have trouble finding renters for yours.

Short-Term Rental Cash-on-Cash Return

Cash-on-cash return is a method to determine the profitability of an investment. Divide the Net Operating Income (NOI) by the total amount of cash used. The percentage you get is your cash-on-cash return. High cash-on-cash return means that you will recoup your funds faster and the investment will earn more profit. When you take a loan for part of the investment budget and spend less of your own money, you will realize a higher cash-on-cash return.

Average Short-Term Rental Capitalization (Cap) Rates

Average short-term rental capitalization (cap) levels are generally employed by real estate investors to calculate the value of rentals. In general, the less a property will cost (or is worth), the higher the cap rate will be. If investment real estate properties in a region have low cap rates, they usually will cost more money. The cap rate is computed by dividing the Net Operating Income (NOI) by the listing price or market worth. This gives you a ratio that is the annual return, or cap rate.

Local Attractions

Short-term tenants are commonly tourists who visit an area to enjoy a recurrent significant event or visit unique locations. If a city has places that regularly produce exciting events, such as sports coliseums, universities or colleges, entertainment venues, and theme parks, it can attract visitors from other areas on a constant basis. Popular vacation spots are found in mountain and coastal areas, along rivers, and national or state parks.

The fix and flip investment plan entails purchasing a property that requires repairs or renovation, creating more value by enhancing the property, and then liquidating it for its full market worth. The essentials to a successful fix and flip are to pay a lower price for the house than its present worth and to carefully compute the amount needed to make it saleable.

Look into the values so that you know the actual After Repair Value (ARV). Choose a region that has a low average Days On Market (DOM) metric. As a “house flipper”, you will need to put up for sale the upgraded house right away in order to avoid upkeep spendings that will diminish your returns.

Help compelled real property owners in locating your company by featuring it in our directory of the best South Plains cash house buyers and top South Plains real estate investment firms.

Additionally, look for real estate bird dogs in South Plains TX. Experts listed on our website will help you by rapidly discovering potentially profitable projects ahead of them being marketed.

Factors to Consider

Median Home Price

Median real estate value data is a crucial gauge for evaluating a prospective investment location. You are searching for median prices that are low enough to suggest investment possibilities in the region. You must have inexpensive real estate for a lucrative fix and flip.

When area data shows a sudden decrease in real estate market values, this can highlight the accessibility of possible short sale real estate. Investors who work with short sale processors in South Plains TX receive continual notifications regarding possible investment properties. You’ll uncover additional information about short sales in our article ⁠— How to Buy Short Sale Real Estate.

Property Appreciation Rate

Dynamics means the track that median home market worth is going. Steady upward movement in median values demonstrates a strong investment environment. Volatile price fluctuations aren’t good, even if it is a substantial and sudden growth. You could end up buying high and liquidating low in an unreliable market.

Average Renovation Costs

Look carefully at the possible repair expenses so you will be aware whether you can achieve your targets. The time it will require for acquiring permits and the local government’s regulations for a permit request will also influence your decision. You need to be aware if you will be required to employ other specialists, like architects or engineers, so you can be prepared for those costs.

Population Growth

Population information will inform you if there is a growing necessity for homes that you can produce. Flat or reducing population growth is a sign of a sluggish environment with not a good amount of buyers to justify your risk.

Median Population Age

The median residents’ age is a clear sign of the supply of preferred homebuyers. The median age better not be less or higher than the age of the regular worker. A high number of such residents reflects a substantial pool of homebuyers. Older individuals are planning to downsize, or move into senior-citizen or assisted living communities.

Unemployment Rate

If you stumble upon a market demonstrating a low unemployment rate, it is a solid indication of profitable investment possibilities. An unemployment rate that is lower than the country’s median is good. A really good investment city will have an unemployment rate less than the state’s average. Jobless individuals won’t be able to acquire your houses.

Income Rates

Median household and per capita income numbers advise you if you can get qualified buyers in that place for your residential properties. When home buyers buy a house, they typically need to obtain financing for the home purchase. Their income will determine the amount they can afford and if they can purchase a home. Median income will let you determine if the standard homebuyer can afford the houses you are going to market. Specifically, income growth is important if you are looking to expand your investment business. Building costs and home prices rise from time to time, and you need to know that your target clients’ wages will also get higher.

Number of New Jobs Created

Finding out how many jobs appear annually in the community can add to your confidence in a region’s economy. A growing job market communicates that a larger number of prospective home buyers are receptive to purchasing a home there. Qualified skilled employees looking into buying real estate and deciding to settle choose migrating to areas where they won’t be jobless.

Hard Money Loan Rates

Those who purchase, repair, and flip investment homes prefer to engage hard money instead of regular real estate financing. This lets investors to quickly purchase undervalued properties. Research South Plains hard money lending companies and study lenders’ charges.

Investors who aren’t experienced in regard to hard money loans can uncover what they should understand with our detailed explanation for newbies — How Does a Hard Money Loan Work?.

Wholesaling is a real estate investment approach that requires finding properties that are attractive to real estate investors and signing a sale and purchase agreement. When a real estate investor who wants the property is spotted, the purchase contract is sold to them for a fee. The owner sells the property to the investor instead of the wholesaler. The real estate wholesaler does not sell the property — they sell the contract to buy one.

The wholesaling mode of investing involves the employment of a title insurance firm that understands wholesale transactions and is informed about and engaged in double close transactions. Discover South Plains title companies that specialize in real estate property investments by utilizing our directory.

Our in-depth guide to wholesaling can be viewed here: A-to-Z Guide to Property Wholesaling. When you opt for wholesaling, add your investment project on our list of the best investment property wholesalers in South Plains TX. That will allow any possible customers to find you and initiate a contact.

Factors to Consider

Median Home Prices

Median home prices are essential to finding markets where houses are selling in your investors’ purchase price range. Below average median prices are a good indicator that there are plenty of houses that might be purchased for less than market worth, which real estate investors have to have.

A rapid depreciation in the price of property may cause the sudden availability of properties with negative equity that are wanted by wholesalers. Short sale wholesalers frequently gain perks using this method. Nonetheless, it also produces a legal risk. Learn more about wholesaling short sales with our comprehensive guide. When you’ve chosen to attempt wholesaling these properties, make sure to hire someone on the directory of the best short sale legal advice experts in South Plains TX and the best foreclosure law offices in South Plains TX to help you.

Property Appreciation Rate

Median home purchase price fluctuations clearly illustrate the housing value in the market. Investors who want to resell their investment properties in the future, such as long-term rental landlords, require a location where property values are growing. Both long- and short-term investors will stay away from a city where housing values are depreciating.

Population Growth

Population growth statistics are something that your prospective investors will be aware of. If they see that the population is growing, they will decide that additional housing is required. This combines both leased and resale real estate. If a population isn’t expanding, it does not require more housing and real estate investors will look somewhere else.

Median Population Age

Real estate investors want to be a part of a reliable real estate market where there is a sufficient pool of tenants, newbie homebuyers, and upwardly mobile locals purchasing more expensive homes. In order for this to take place, there needs to be a strong employment market of potential tenants and homeowners. That is why the region’s median age should be the age of skilled workers in the employment market.

Income Rates

The median household and per capita income should be on the upswing in a vibrant real estate market that real estate investors want to work in. If tenants’ and home purchasers’ incomes are improving, they can manage rising rental rates and residential property purchase prices. Real estate investors stay out of locations with declining population income growth indicators.

Unemployment Rate

Investors whom you approach to close your contracts will deem unemployment numbers to be an essential bit of information. Renters in high unemployment markets have a challenging time staying current with rent and many will miss payments completely. Long-term real estate investors who depend on consistent lease payments will lose money in these communities. High unemployment creates unease that will prevent interested investors from buying a house. This is a problem for short-term investors purchasing wholesalers’ agreements to fix and resell a home.

Number of New Jobs Created

Learning how frequently new jobs are generated in the region can help you determine if the house is positioned in a robust housing market. Additional jobs created attract an abundance of employees who need houses to lease and purchase. Long-term real estate investors, like landlords, and short-term investors which include rehabbers, are drawn to communities with strong job production rates.

Average Renovation Costs

Renovation expenses will be important to many real estate investors, as they typically acquire cheap distressed houses to renovate. Short-term investors, like home flippers, won’t reach profitability when the purchase price and the rehab expenses equal to more than the After Repair Value (ARV) of the property. Give priority status to lower average renovation costs.

Note investing professionals purchase a loan from lenders when they can get the loan for less than the balance owed. By doing so, the purchaser becomes the mortgage lender to the original lender’s client.

Performing loans mean mortgage loans where the homeowner is regularly on time with their loan payments. Performing loans give stable income for you. Some mortgage note investors prefer non-performing loans because when he or she can’t successfully re-negotiate the loan, they can always take the property at foreclosure for a below market price.

Ultimately, you could have many mortgage notes and have a hard time finding additional time to handle them on your own. At that stage, you may want to utilize our catalogue of South Plains top mortgage servicers and reclassify your notes as passive investments.

Should you choose to employ this plan, add your venture to our directory of promissory note buyers in South Plains TX. Joining will help you become more visible to lenders offering lucrative opportunities to note investors like yourself.

Factors to Consider

Foreclosure Rates

Mortgage note investors hunting for valuable mortgage loans to purchase will prefer to find low foreclosure rates in the area. High rates could indicate opportunities for non-performing mortgage note investors, but they should be careful. The locale should be active enough so that note investors can complete foreclosure and liquidate collateral properties if called for.

Foreclosure Laws

It’s important for note investors to study the foreclosure laws in their state. Are you faced with a Deed of Trust or a mortgage? A mortgage dictates that the lender goes to court for permission to start foreclosure. You merely need to file a notice and proceed with foreclosure steps if you’re working with a Deed of Trust.

Mortgage Interest Rates

The interest rate is memorialized in the mortgage loan notes that are purchased by mortgage note investors. This is a significant determinant in the returns that lenders earn. Interest rates affect the plans of both kinds of mortgage note investors.

The mortgage rates set by conventional lenders aren’t identical in every market. The higher risk assumed by private lenders is reflected in higher interest rates for their mortgage loans compared to traditional mortgage loans.

A mortgage note investor should know the private as well as traditional mortgage loan rates in their markets all the time.

Demographics

An effective note investment strategy uses a research of the market by utilizing demographic information. It is important to determine if a suitable number of residents in the community will continue to have good paying employment and wages in the future.
Performing note buyers want clients who will pay on time, creating a consistent revenue stream of mortgage payments.

Non-performing note investors are looking at similar elements for different reasons. In the event that foreclosure is called for, the foreclosed house is more easily sold in a strong property market.

Property Values

The greater the equity that a homeowner has in their property, the better it is for their mortgage lender. If the lender has to foreclose on a mortgage loan without much equity, the foreclosure sale may not even repay the balance invested in the note. As mortgage loan payments decrease the amount owed, and the value of the property increases, the homeowner’s equity goes up too.

Property Taxes

Usually borrowers pay real estate taxes to mortgage lenders in monthly installments while sending their loan payments. The lender passes on the payments to the Government to make certain the taxes are submitted on time. If loan payments are not current, the mortgage lender will have to either pay the taxes themselves, or the taxes become delinquent. When property taxes are past due, the municipality’s lien supersedes any other liens to the head of the line and is satisfied first.

If a municipality has a history of growing property tax rates, the total house payments in that area are consistently expanding. This makes it difficult for financially strapped borrowers to stay current, so the loan could become delinquent.

Real Estate Market Strength

An active real estate market showing strong value appreciation is helpful for all types of note investors. As foreclosure is a critical element of mortgage note investment strategy, growing real estate values are crucial to finding a desirable investment market.

A strong market could also be a good community for creating mortgage notes. This is a profitable stream of revenue for experienced investors.

A trust investing in income-generating real estate properties and that sells shares to others is a REIT — Real Estate Investment Trust. Before REITs existed, real estate investing was too costly for the majority of people. Most investors currently are able to invest in a REIT.

REIT investing is called passive investing. Investment risk is spread throughout a portfolio of real estate. Shares can be liquidated when it’s agreeable for you. Participants in a REIT are not allowed to advise or pick real estate properties for investment. You are confined to the REIT’s portfolio of real estate properties for investment.

Real estate investment funds are basically mutual funds focusing on real estate firms, such as REITs. The investment assets are not owned by the fund — they are possessed by the firms in which the fund invests. Investment funds may be an affordable way to incorporate real estate in your allotment of assets without unnecessary risks. Where REITs are meant to disburse dividends to its shareholders, funds do not. The value of a fund to someone is the anticipated appreciation of the worth of the fund’s shares.

You can pick a fund that focuses on a targeted kind of real estate you are expert in, but you do not get to choose the geographical area of every real estate investment. As passive investors, fund shareholders are content to permit the management team of the fund make all investment determinations.