If I could give you just one investment advice, it would be this: don’t follow the hype. As experience confirms times and times again, when you learn about the trend, it’s already on the decline (and no longer worthy of your time and money). And I can almost hear you asking me about the alternatives. How to detect the right location at the right time? Where to run? Whom to ask?
Don’t push it. Keep reading and you’ll learn what neighborhoods in Dallas can offer you the biggest return on investment. But first, let’s take a quick look at why it’s a good idea to choose Dallas for investment in the first place.
Why Dallas?
Dallas is among the few American cities where renting is more reasonable than buying. Given this, it comes as no surprise why Dallas has the lowest homeownership rate in the country. So chances are good that you’ll never suffer from a lack of tenants.
In recent years, Dallas has built a reputation of hot startup hubs. No wonder why hundreds of young IT-specialists are moving to the city and drive the demand for rental properties.
The demand for rental accommodation in Dallas increased by 14% during the last year. It seems like the best time to purchase an income property has come.
Here’s what a local real estate expert Steve Hovland has to say in this regard:
“A well-rounded economy, combined with low entry prices and favorable supply and demand conditions make Dallas one of the best places to invest in rental real estate this year. Unlike many investment markets, investors in Dallas are moving up the quality scale, while traditional buyers are moving in the opposite direction. With cap rates above 6 percent and strong fundamentals, investors should reap short- and long-term gains.”
What neighborhoods to consider?
As I’ve said before, the best strategy you can follow is to swim against the stream. So don’t be surprised that some of the neighborhoods on the list don’t look like the most obvious choice (we’ve put them here on purpose).
Lochwood
Median rental price: $920/mo
Median purchase price: $399,000
According to statistics, real estate prices in Lochwood are 77.1% higher than in any other neighborhood in Texas. The majority of housing units in the area are single-family houses that were built in the ’60s. Lochwood is among the few parts of Dallas that have reasons to call itself a ‘greenbelt’. Located close to White Rock Lake and Lake Highlands, the place is great for those who prefer nature-like setting. If your landlord’s code of conduct contains a point of renting out to families, consider Lochwood as your golden ticket. This part of the city is especially popular among young families with kids and people between their 30s and 40s.
Munger Place
Median rental price: $1,070/mo
Median purchase price: $527,141
This neighborhood is deservedly considered one of the most beautiful parts of Dallas. It boasts a huge collection of Prairie-style homes and recognized by the US National Register of Historic Places. But what’s important for you as an investor is that 77% of local households are occupied by renters. If it doesn’t ring a bell, here is a hint – investing in rental properties in such areas ensures low vacancy rates and a higher return on investment. Although properties in similar locations might cost you more in terms of maintenance expenses, you’ll never have to wait for tenant applications for too long.
Bryan Place
Median rental price: $1,525/mo
Median purchase price: $313,244
Hidden in the shadow of skyscrapers, this stylish part of the city feels more like a huge private residence. The neighborhood can boast its close proximity to the downtown, beautiful landscape, eye-pleasing design, just to name a few. This place has even got a functioning neighborhood association that takes care of sanity and an array of issues related to the comfort and safety of local residents. According to statistics, the median rental cost in Bryan Place is higher than 90,3% of all the neighborhoods in Taxes, meaning you’ll make a lot of money by owning a rental property here. It might be hard to find a house for sale in the area, so if you stumble upon one – don’t miss your chance.
Oak Lawn
Median rental price: $1,733/mo
Median purchase price: $376,429
Located close to Downtown, Oak Lawn is as vibrant as it is diverse. With plenty of restaurants, boutiques, bars, and nightclubs, this neighborhood has something to offer for any taste and budget. Resale prices for local properties are relatively affordable, but they can make you a lot of money since the median rental price is 92% higher than in other parts of the city.
Lake Highlands
Median rental price: $1,139/mo
Median purchase price: $338,257
While half of the locals consider it a part of North Dallas, and another believes it’s Northeast, both camps seem to agree upon the fact that Lake Highland is one of the greatest parts of the city. Located near the city center, Lake Highlands primes a rare combination of a low cost of living and an above-city-average median income. The biggest part of properties in Lake Highlands are medium-sized or small single-family homes, but there are also high-rise apartments and modern apartment complexes. Although local vacancy rates are higher than in other parts of Dallas, things are about to change soon (and if you consider buying property here, you’d better do this before it gets trendy).
Uptown
Median rental price: $1,603/mo
Median purchase price: $434,257
One of the few pedestrian-friendly places in the city. Uptown is planned and built by the cannons of new urbanism. It is characterized by multi-use developments, large accessible public space, and emphasis on pedestrians and public transportation. The majority of building in uptown are relatively new and were constructed in the late 20th and early 21st centuries. The neighborhood is experiencing a constant influx of young and educated professionals, who are attracted to the urban and communal lifestyles. Business continuously migrates to Uptown, increasing the demand and consequently price for the commercial property, driving up the price for residential property as well. The neighborhood is upscale, hip, and promises good investments to return on any property investment.
Downtown Dallas
Median rental price: $1,857/mo
Median purchase price: $200,000
Downtown seems to be an old and well-established neighborhood with few surprises for real estate investors. However, with the recent trend for new urbanization downtown is undergoing a transition, new high-rise condos and apartment complexes emerge on the Dallas skyline. Main Street was redeveloped and became the core of the new residential lifestyle, with new restaurants and hotels. The rapid development of public transportation and expansion light rail lines made downtown a new logistics center and the desired neighborhood for those who want to avoid exhaustive commute from the suburbs. The commercial property in Downtown is losing its price since businesses tend to migrate to the developments in Uptown. In contrast, residential properties remain stable and show growth. Renting out the apartment in this area has a great potential to generate substantial income.
Lakewood
Median rental price: $1,886/mo
Median purchase price: $800,000
Lakewood is a cozy suburb in the far east of Dallas. The neighborhood is the top destination for safe and comfortable living. The area has the lowest crime rate in all Dallas County. Excellent public schools make it a great place to start a family and raise kids. There are a lot of green spaces, hiking trails, boathouses, and botanical gardens. This friendly suburb also has many impressive real estate properties, various cottages of different sizes and styles. This laid-back neighborhood is one of the most comfortable arrangements that the city could offer you. Despite the fact that median rent in the area is not that high, while the median home value is not exactly low, numerous investors buy property in Lakewood, relying on the stable local real estate and the job market. They might be right.
Victory Park
Median rental price: $1,831/mo
Median purchase price: $653,257
Victory Park is a master-planned community envisioned and developed by Ross Perot Jr. The neighborhood was built around the American Airlines Center, the main entertainment venue of the city, hosting major sports games, concerts, and shows. The area was planned with widened sidewalks and two-way avenues. The idea behind the development was to create a new urban lifestyle, which would be pedestrian-friendly, inclusive, less expensive, and more diverse. The district is primarily composed of big condominium developments and multi-family homes. The Uptown is within walking distance, while you can get anywhere in the city using DART Orange or Green line. The ambitious plans of Ross Perot Jr were stalled by the recession, but recent number suggests that investments are coming back to the neighborhood which might become Dallas new big thing.
Cedars
Median rental price: $1,800/mo
Median purchase price: $425,000
Cedars is a typical middle-class neighborhood with everything readily available for a comfortable lifestyle of families. You can find all kinds of property in the area from artsy new apartments and lofts to duplexes and single-family homes. Old City Park is the stronghold of the old Dallas elite with Victorian cottages and mansions with large cedars lining on the streets. In recent years, the neighborhood is undergoing a tectonic transformation. The introduction of new means of transportation, brand new DART Cedars Station, facilitated the influx of young professionals who crave urban living. At the same time, the construction of the Dallas Police Headquarters boosted security in the area, lowering the crime rate and enhancing communities’ trust in the neighborhood’s property.
No matter if you’re planning to buy your first income property or just add another one to those you already have, Dallas is a great location for that purpose. Given its strong economy and constant population growth, there are grounds to believe that investing in Big D will make your pockets bigger. As local rents are going up, smart investors like you should at least consider purchasing properties here. If you want a more safe bet and prefer more established housing markets with a reputation – explore my take on Boston, Chicago, Los Angeles, and Miami.
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