How to Buy Your First Rental Property in Houston

May 17, 2022 by Michael Brown

How to Buy Your First Rental Property in Houston

You might be looking for ways to expand your portfolio. Stocks and bonds are only scratching the surface for your financial future; there are more ways to create passive income that’ll help to diversify your sources of revenue.

If you’ve hoped to minimize the risk of losses in your life, your research has probably led to the notion of investing in real estate. Over the last few years, more Americans have turned to the acquisition of rental properties.

That shouldn’t be surprising, since the rental market has witnessed a dramatic shift during that time. The housing market has shifted in favor of sellers instead of buyers, and that’s inspired more people to keep renting or downsize their home and move to an apartment.

If you’re ready to take the plunge and purchase your first rental property in Houston, Texas, we have a few tips to get you started.

Becoming a Landlord

This is the first decision you’ll have to make. Becoming a landlord involves more work than just collecting the rent every month.

You’ll have to tackle many responsibilities, from generating listings and scheduling showings to  obtaining proper permits and tracking maintenance. If you intend for this to be an investment property, it’s in your interest to hire a property management company in Houston to shoulder the stress.

Green Residential can manage tenant screenings, evictions, and even ongoing repairs. This would allow you to focus on making a profit, as well as purchasing your next property.

Research Local Investment Properties

Multiple types of rental properties are available. You might search for a multi-family home, a single-family home, a condo, or even an apartment building, depending on your end goals for your property.

Once you’ve decided what you want to acquire, do some market research in the areas of Houston you’d prefer to buy. Study the demographics of the folks who rent in those neighborhoods as well as the kinds of property that may render the highest return.

You can talk to local wholesalers or look for buildings that are in foreclosure. These will require more financial backing up front, so it depends on your financial situation before you can make an offer.

Get Financially Situated

You need to secure your finances comfortably in advance. You might plan to put a down payment on a particular building or pay in cash.

Whichever is the case, you’ll have to put up more money in advance than a residential home would require. This is because your loan application is going to look different.

Lenders see more risk in this kind of loan, so they want to ensure their support for your investment business to become a landlord presents a fairly stable prospect.

Think about saving upwards of 30% to 40% of the building’s value. You’ll also need to organize the finances you’re apt to need for renovations, repairs, and ongoing business expenses.

Create a Business Plan

Becoming a landlord by investing in rental property is like any other business. It requires a strategic plan to confirm you’re likely to make a profit.

You’ll have to consider such facets as vacancies, market conditions, outlined objectives, and an evaluation of how you aim to achieve your goals – assuming you’re clear on what your specific goals are.

Although a business plan isn’t necessarily required to secure a loan, you ought to be prepared for the inherent financial responsibilities if your investment is going to succeed.

Apply for and Secure a Loan

Once you’ve done the research and identified the building or house you hope to acquire, you may secure your loan. Some loans are similar to residential home mortgages but have different requirements because of how you intend to utilize the property.

There are also other loan types such as blanket loans or portfolio loans. These are designed for individuals who intend to buy multiple properties over time.

Get quotes from multiple lenders and make sure not to agree to the first one who accepts your application. Compare interest rates and what each lender expected from you.

They may expect additional financial responsibilities that you might not be prepared to accept.

Configure Rent Prices

You have to determine rent prices for your units in order to calculate your expected profit. Various elements could impact what rent you could charge, such as:

  • Times of year your units may be vacant
  • The value of the included amenities
  • Larger events, such as a pandemic
  • Your overall operating expenses
  • Demographics
  • Rental markets in the surrounding neighborhoods
  • Competitor pricing in the area

First you have to determine your gross rent multiplier (GRM) by taking the total purchase price, and divide by your yearly gross rent. The 1% rule of rental property pricing states that your monthly gross rent should be greater than or equal to 1% of the total purchase price.

This might sound complicated, but there are many rental property calculators online to help you determine profitability. Do a brief online search to give yourself a relatively accurate sense of what you might expect.

Understand Landlords Laws and Tenant Rights

You could get yourself into serious trouble if you plunge into the rental property business without knowing the applicable laws. You have to be aware of your tenants’ rights, zoning laws, and Fair Housing Laws.

Some states even have their own particular set of housing laws, so you should make sure you know what they are, regardless of whether you’re purchasing in Houston or San Diego.

Streamlining the process to ensure you meet all regulations can be accomplished with the assistance of a property management company. Our experts have years of experience working with real estate investors all over Texas to make sure they don’t step into difficulties due to legal matters they didn’t follow.


Are you ready to purchase your first rental property? Go through this article to make sure you’ve created a list of everything you’ll need to start the process.

Perform due diligence by researching the market and working with an accountant. Most important, don’t risk profitability by trying to do it all on your own.

Get in contact with Green Residential to work with our professional team of property managers and make your investment a success.

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