Dallas, Texas is one of the fastest growing metropolitan areas in the country, with a large, diverse, and growing economy. With home prices below the national average and strong cash flow potential, Dallas has many characteristics that promote 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 major cities and one small town: Dallas and Fort Worth, with the smaller city of Arlington separating them. Together, the Dallas metro area has a population that is growing well above the national average. The median age of Dallas residents is just under 33, which is when home buying peaks and household formation age, indicating a strong and sustained demand for housing in the region.
Dallas’ large and diverse economy helps insulate it from economic downturns. The region has major medical and educational facilities and a large airline presence anchored by American Airlines and Southwest Airlines. The unemployment rate is low but slightly above the national average and has increased slightly in recent times.
Despite strong demand and a strong economy, investment conditions in Dallas remain attractive. As of this writing, the median sale price in the Dallas area is just over $400,000, which is relatively close to the national average but lower than cities with similar sized economies.
It is important to note that while prices in Dallas have remained relatively stable over the past few months, the pace of growth has slowed significantly. This is to be expected given the macroeconomic climate, but it should be noted that appreciation for Dallas as a whole is expected to be modest to slightly negative over the next few months.
Rent growth and cash flow
Rent growth has followed similar trends to housing, but varies slightly from city to city in the metropolitan area. Rents in Arlington, for example, have held steady for the past six months, while rents in Dallas and Fort Worth have fallen slightly. Some decline in rents is not a concern, given the rapid rate of rent growth in recent years, and most data indicates that rent declines will be minimal.
When looking at the cash flow outlook for Dallas, it varies significantly by location within the metropolitan area. Areas near Fort Worth and south of Dallas have rent-to-price ratios (a good indicator of cash flow) near 1%, which is a good sign for cash flow potential. However, North Dallas and most of the area between Dallas and Fort Worth have rent-to-price ratios that suggest cash flow will be hard to come by. Overall, the cash outlook is strong for a metropolitan area of this size!
Inventory and market health
Looking ahead, there are signs that while the Dallas housing market has eased, it’s still on pretty solid ground. New listings are down, and while inventory is up from its pandemic lows, it has actually fallen in recent months. This indicates a market with fairly strong competition for properties and possibly even a seller’s market.
Additionally, although days on the market (DOM) are almost back to pre-pandemic levels, they have fallen in the most recent reading. A new data point does not trend, so it will be an important metric to watch in the coming months.
Overall, Dallas is a robust overall market for real estate investors. It has a reasonable price, strong cash flow potential, and a solid economy to support future growth. As the national real estate market experiences a correction, Dallas is holding up relatively well. Prices have been relatively stable and leading leading indicators suggest the market will be one of the most stable housing markets in the country over the next few months.
Victor Steffen, an investor-friendly real estate agent in the Dallas area, said, “The investors we’re seeing winning right now are looking at BEAF properties. BEAF stands for appreciation driven profitability. Our most successful investors target areas where the population is growing, the number of jobs is growing, and median incomes are rising. We are targeting an entry price 10-20% lower than the previous market high, and we want to see today’s rental rate cover the 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 source B+ or even A grade turnkey inventory. one of those rare market cycles where investors are among the last market players. We can buy prime assets at a discount without competing with a dozen retail buyers. »
If you want to learn more about investing in Dallas, partner with a local investor-friendly real estate agent, like Victor Steffen, who can guide you through strategies, tactics, and neighborhoods to focus on.
here’s how contact Steffen on Agent Finder:
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Steffen ranked #22 out of 86,000 agents at EXP Realty by sales volume and #5 in the state of Texas. He and his wife are active real estate investors, owning a variety of cash-producing assets, including rental units per room, long, medium and short term rentals. They plan to continue to grow their portfolio with a focus on new build assets and 20-50 unit complexes in 2023.
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Note by BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.