Dallas, Texas, is one of the fastest-growing metropolitan areas in the country, with a large, diverse and growing economy. With home prices well below the national average and solid cash flow potential, Dallas has several characteristics that support favorable long-term conditions for real estate investors.
Population and Labor Market
Located in Northeast Texas, the Dallas metropolitan area is actually made up of two large cities and one smaller city: Dallas and Fort Worth, and then the smaller city of Arlington that lies between them. Combined, the population of the Dallas metropolitan area is growing well above the national average. The median age of residents in Dallas is under 33, which is around peak home buying and domestic formation Age – which indicates strong and sustainable demand for housing in the area.
Dallas’ large and diverse economy helps insulate it from economic downturns. The area has large medical and educational institutions and a significant airline presence anchored by American Airlines and Southwest Airlines. The unemployment rate is low but slightly above the national average and has increased of late.
House prices
Despite strong demand and a strong economy, the investment climate in Dallas remains attractive. As of this writing, the median sale price in the Dallas area is just above $400,000 – relatively close to the national average but less than cities with a similar size economy.
It is important to note that while prices in Dallas have remained relatively flat over the past several months, the pace of growth has slowed significantly. This is to be expected given the macroeconomic environment, but it is worth noting that overall appreciation in Dallas is likely to be modest or even slightly negative in the coming months.
rent growth and cash flow
Rent growth has followed the same pattern as housing, but varies slightly from city to city within a metropolitan area. For example, rents in Arlington have held steady over the past six months, while those in Dallas and Fort Worth have decreased marginally. Given the rapid pace of rent increases in recent years, some decline in rents is not concerning, and most data supports that the decline in rents will be minimal.
Looking at the cash flow potential for Dallas, it varies greatly by location within the metropolitan area. Rent-to-value ratios (a good proxy for cash flow) near Fort Worth and south of Dallas are closer to 1% — which is a good sign for cash flow potential. However, northern Dallas and much of the area between Dallas and Fort Worth have rent-to-value ratios that suggest cash flow will be difficult to find. Overall, solid cash flow potential for a metro area of this size!
Inventory and Market Health
Looking ahead, there are signs that although the housing market in Dallas has loosened – it is still on fairly strong ground. New listings are declining, and although inventory is above its pandemic low, it has actually fallen over the past several months. This indicates a very strong competitive market for properties and perhaps a seller’s market as well.
Additionally, although Days on Market (DOM) have almost returned to pre-pandemic levels, they fell in the most recent reading. A new data point does not create a trend, so this will be an important metric to watch in the coming months.
winning strategies
Overall, Dallas is a strong all-round market for real estate investors. It has a reasonable price point, solid cash flow potential, and a strong economy to support future growth. While the national housing market is experiencing a recovery, Dallas is holding up relatively well. Prices have remained relatively flat, and leading leading indicators suggest that the market will be one of the more stable housing markets in the country in the coming months.
“The investors we’re seeing win over right now are leaning into BEAF properties,” says Victor Stephan, an investor-friendly real estate agent in the Dallas area. BEAF stands for Break-Even Appreciation-Focused. Our Most Successful Investors Targeting areas with a growing population, increasing number of jobs and rising average incomes. We target an entry price 10-20% below previous market highs, and we cover today’s lease rates to PITI At this point in the market cycle, when most retail buyers are sitting on the sidelines, our investors have more opportunity than ever to pick up high-quality B+ or even A-grade, turnkey inventory . This is one of those rare market cycles where investors are some of the last players in the market. We can buy ‘blue chip’ assets at a discount without having to compete with a dozen retail buyers.”
If you’re interested in learning more about investing in Dallas, partner with a local investor-friendly real estate agent like Victor Stephan, who can Which strategies, tactics and neighborhoods to focus on will guide you.
Here’s how to contact Stephen on Agent Finder:
- Search “Dallas, Texas”
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Stephen is ranked #22 among EXP Realty’s 86,000 agents by sales volume and #5 in the state of Texas. He and his wife are active real estate investors who own a variety of cash-generating properties, including rental housing, long, medium and short term rentals. They plan to continue building their portfolio in 2023 with an emphasis on new construction properties and 20-50 unit complexes.
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Use Agent Finder to connect with local market experts like Victor Steffen, Kim Meredith-Hampton, and Matthew Nicklin.
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Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
