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Dallas Vs Austin Real Estate Investment  

Dallas and Austin are big cities on the real estate investment map. In fact, Austin has ranked as the top US city for property investment, with Dallas very close behind. But how do the two cities compare for investors? Read on to learn the ins and outs of this question.

skylines of Dallas and Texas competing who is the best market for property investment
Written by Victor Steffen
  / April 24, 2023

Victor Steffen is a seasoned Realtor and real estate investor in central Texas with years of experience and over 130 deals closed in the last 12 months.

Dallas Vs Austin Real Estate Investment Comparison

Home values in both Dallas and Austin have depreciated somewhat over time. Nevertheless, both cities are flourishing as very attractive places to live. The populations in both cities continue to grow, showing that there are plenty of buyers and renters looking to move to them.

From an investment standpoint, this presents a pretty clear conclusion. There is plenty of opportunity for real estate investment in both cities. Homes sell for less in Dallas, meaning they are easier to acquire but there may be less profit in them. In Austin, higher prices mean a larger outlay to acquire property but the returns may be worth it.

A comparison of these two cities is important for real estate investors. They are both very good cities for investment, but the strategies for doing so would be somewhat different.

Photo of Dallas skyline for Dallas vs Austin real estate investment

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Market Analysis: Dallas Real Estate

The Dallas real estate market is a seller’s market, with home prices going up by almost 10% between 2021-2022. But a deep dive into the available information will reveal some tempting deals. Texas is a popular state for young people looking to progress their careers and enjoy affordable living costs. With its vast size, real estate prices vary greatly between cities and areas, with Dallas being one of the most popular cities.

Though there has been a recent upturn in house prices, the general trend in Dallas for the longer term has been a depreciation. It has always had a strong market, however, because there are great rates for businesses in the city and plenty of career opportunities for residents. There are 1.3 million people there and the annual job growth rate is currently 7.4%.

The average listing price for properties in Dallas is in the region of $410,000, with an average rent of $1,475. Of course, different neighborhoods can have significantly different prices so you need to gain a strong understanding of local markets. For commercial properties, the vacancy rate is around 20% and commercial rents can net you between $13 and $35 per square foot. Property types vary, but Dallas is a great place for multifamily investment, with population growth among the highest in the country.

There is plenty of investment potential in Dallas. Depending on the area of the city you target, real estate values can be very accessible and offer good returns on investment. Whether you are looking at domestic or commercial real estate investment, the key is to understand local markets and target a local that works for you. An investor-friendly real estate agent can be a powerful resource for this.

The most popular neighborhoods in Dallas include:

  • Uptown – the heart of the city with entertainment venues, shopping and plenty of culture
  • Bishops Arts District – a hipster-friendly neighborhood with fantastic eateries and art galleries
  • Oak Lawn – the place to be for the LGBT+ community with a vibrant night-life and beautiful homes
  • University Park – an affluent suburb centered around Southern Methodist University
  • Preston Hollow – the home of the Dallas elite with a 150s-suburb vibe
  • Lakewood – an architectural paradise with lots of rolling hills and abundant wildlife

Market Analysis: Austin Real Estate

Austin generally has a higher cost of living than Dallas, and a big part of this is housing costs. This means there is plenty of profit potential for real estate investors who do their due diligence and find good opportunities. The balance of affordability, employment opportunities and quality of life actually make Austin one of the top places to live in America, so it is no surprise that house prices are higher than in Dallas.

Job growth in Austin has reached 15% over the last 10 years. It is the home of big companies like Google, Amazon and Facebook, and the new headquarters of Tesla Motors was recently established there. These features are important for real estate investors – the city attracts big business, bringing in affluent people who are likely to help drive real estate prices upwards long-term.

At present, the median price for homes in Austin is around $649,000 and rents come in at around $1,715. These numbers are higher than for Dallas, but they are far from being the highest in the US. For people looking to move into the area, housing costs are still considered relatively low considering the opportunity and quality of life on offer. Population demographics are very similar between Dallas and Austin, but vacancy rates are different. Commercial vacancies in Austin are around the 10% mark, with office space costing between $28 and $53 per square foot. Again, for investors, the key is moving beyond the surface and getting into local markets. This is where value for real estate investment is found, and investor-friendly real estate agents are a powerful tool.

The investment potential in Austin is also strong, with strategies revolving around targeting areas where real estate is likely to grow. This will depend on local markets and commercial investment, so local market knowledge is pivotal to success.

At present, popular markets in Austin include:

  • Clarksville – a historic part of the city filled with landmarks, beautiful homes and idyllic parks
  • Rosedale & Allendale – a great location for older people who enjoy a slower, quieter lifestyle
  • Hyde Park & North Loop – an outdoorsy suburb with beautiful architecture and plenty of culture
  • Mueller – the family neighborhood with plenty of green space and close proximity to great entertainment venues
  • Franklin Park – a solid option for professional 30-somethings

What Factors Affect Real Estate Investment In Dallas And Austin?

Real estate investment in Dallas, Austin and anywhere else is impacted by a number of factors. These affect real estate prices, demand, interest in local areas and more. The first of these factors is economic indicators. The cost of living is pretty similar between Dallas and Austin in all areas except housing costs, which are substantially higher in Austin. This means the overall cost of living in Austin is around 28% higher than in Dallas, but median income levels close this gap. The average household income in Dallas is between $54-55,000, while in Austin it is closer to $81,000. This is a difference of around 40%, so it is clear that many people will see both Dallas and Austin as great places to go for the cost of living. This means high demand, which is a good sign for real estate investors.

Other factors to consider include:

  • Demographic trends – Austin has a younger median age of just 23.7 years, while in Dallas it is 32.5. Gender distribution is approximately 50/50 in both, but there is a larger Hispanic population in Dallas while the largest population in Austin is white. In any case, there is lots of diversity in both cities. This gives you a good idea of your target market and helps understand what people will be looking for.
  • Employment opportunities – Dallas and Austin both offer plenty of opportunity with regards to employment. Both are major players in the tech industry, with an average 10-year job growth rate of over 20%. With huge global corporations present in both cities, the employment market is another good indicator of the target market for real estate in the cities.
  • Infrastructure and transportation – both Dallas and Austin are very car-centric cities. Committee times in Dallas and Austin can be on the long side, but both cities also offer good options for buses, light rails, street cars and trolleys as well. Scooter-share and bike-share programs are also present. Good infrastructure can help connect neighborhoods to push house prices upwards, so look out for developments here.
  • Legal and regulatory factors – the State of Texas works to promote a business-friendly operating environment. Thus, there are tax incentives from state and local governments, with financing assistance and many services aimed at helping succeed in Texas. This extends to both Dallas and Austin.

How Do Dallas and Austin Real Estate Investment Opportunities compare?

Investment opportunities for real estate in Dallas and Austin are an exciting prospect, but it’s important to understand that there are differences. Expected ROI and cap rates are different, and there are contrasts in rental demand and rental rates. You will need to analyze these factors to evaluate which has the better growth potential for your portfolio.

How do ROI and cap rates compare between Dallas and Austin?

In Dallas, there has been a recent surge in median home appreciation of 13.8% in 12 months. This has been more modest in Austin, at around 3.8%. However, home appreciation over the last 5 and 10 years has been higher in Austin. Growth rates tend to be higher for lower-value properties in Dallas, while the opposite is true in Austin.

Meanwhile, with strong rental demand in both cities, there is a concurrent rise in rental prices. Overall, there is good potential for a substantial ROI on real estate investment in both cities if you target the right properties and use the right strategies.

What are the differences in rental demand and rental rates in both cities?

Average rent in Dallas currently sits between $1,800 and $1,900. In Austin, it is in the range of $2,100 and $2,200. In both cities, around 50% of homes are rented, though the figure is a little higher in Dallas. This indicates strong rental demand in both cities, due to the number of students and young professionals. Many types of properties are available to rent, and both cities are fantastic for multi-family homes. Just bear in mind the reasons why people rent in certain areas, including:

  • Good transport links
  • Proximity to places of work/education
  • Nightlife
  • Shopping

If you are looking to build your rental portfolio, you need to understand local markets and analyze potential for that audience. An investor-friendly real estate agent can help with this.

Which city offers better growth potential and appreciation?

In Dallas, sales volumes for single-family homes are on a downward trend, but there are increases in other property types. Sales prices are on the rise and the housing stock is looking good. In Austin, there have been recent price drops and inventory gains so now may be a good time to invest in real estate there.

These current trends are affected by factors like lingering problems from the pandemic and the recent high inflation. Long-term, both cities share common factors that impact real estate potential and they both have a lot going for them. With prices higher in Austin, many investors may find Dallas more accessible. But, overall, there is perhaps a little more long-term profit potential from Austin, though both cities are a great prospect.

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What Financing Options Are Available For Investors In Dallas And Austin?

There are many mortgages available for real estate investment in Texas. However, mortgage rates for investment properties are usually higher than for owner-occupied properties. Nevertheless, there are great profits to be enjoyed from property investment in both Dallas and Austin.

Options to consider include:

  • Conventional loans – these can sometimes be used for investment properties, usually with a minimum down payment of 15%.
  • Government-backed loans – these are available for multi-unit properties if you choose to live in one of the units. Sometimes, these loans are available with no down payment.
  • Portfolio loans – lenders set their own rules, but these loans can be used to finance multiple properties and may permit smaller down payments. Interest rates are usually higher with these loans.

Your capacity to be a landlord will be considered, so previous property management experience is helpful. If you are investing in rental properties, you may want to hire someone to be your property manager.

Tax Considerations for Real Estate Investment

The State of Texas does not impose capital gains tax on selling property in Texas. This makes it a very attractive state for real estate investors. However, you will still be taxed by the federal government on any capital gains made from real estate investment. However, you may be able to avoid capital gains on residential sales if:

  • You qualify for an exemption
  • You use the money to reinvest in other property using a 1031 exchange

The typical rate of capital gains tax from the federal government is 15%. This increases to 20% if you earn capital gains of more than:

  • $40,400 for single people
  • $80,800 for married people

The precise rules around capital gains tax can become complex as there are distinctions between short- and long-term capital gains. It is wise to consult a tax professional in Texas to advise on the tax implications that apply to your portfolio and your circumstances.

What Are The Best Real Estate Investment Strategies In Both Cities?

There are many strategies in real estate investing and it’s important to use the right one for the situation. When investing in property in Dallas or Austin, some of the strategies at your disposal include:

  • Value investing – this is where you seek out properties that are selling below their true market value and aim to resell quickly for a higher price.
  • Growth investing – in this approach, you look for properties that are likely to appreciate in value over the medium-long term. Real estate market trends are an important consideration, and you might invest further in improvements to make a property value increase.
  • Income investing – this is where you invest in property to rent it out to tenants for a long-term, passive income.

Deciding on the correct strategy for Dallas or Austin depends on the local market in the area where you are looking to invest. If there is a strong trend for appreciation, a growth investing strategy may be best. Recent trends in Dallas may make this a good strategy for 2023. Dallas may also present good opportunities for income investing since demand in the rental market is high.

The same strategies could also work for the right properties in Austin. As stated, there are similar trends between the two cities. And there are many other strategies to consider as well. Due diligence and careful planning are important, and we must reiterate the importance of local market knowledge. Investor-friendly real estate agents can be a major help with these things.

What Are The Risks And Challenges For Real Estate Investors In Dallas And Austin?

Real estate investors in Dallas and Austin need to be aware of the challenges they will face. If investment were easy, everyone would be doing it. There are many factors that can cause problems for investors in Texas, including:

  • Market saturation – areas where real estate markets are strong tend to be hotspots for investors, so competition becomes high.
  • Economic downturns – you need to keep up with economic news to try and strategize for changes in the wider economy.
  • Local economic risks – both cities are prone to fluctuation in real estate markets. Follow local news and try to predict things that might have positive and negative impacts.
  • Natural disasters – Dallas and Austin are in parts of the world where natural disasters happen. Wildfires, tornadoes and earthquakes can happen here, and these can be a threat to your housing stock.
  • Changing regulations – this is a common concern no matter where you invest. Changes in government or in the desires of local people can lead to regulatory changes that affect real estate investors.

Real Estate Market Outlook in Dallas and Austin

Dallas is experiencing a surge in demand and prices for real estate at present. This reflects a general trend in the long-term. Austin, meanwhile, has slowed in real estate appreciation in recent times, but the long-term trend has been a steady rise in property values.

Overall, the forecast for coming years is for continuing growth in the cities. They both continue to attract big business from one of the world’s leading business sectors: tech. And local governments continue to make quality provisions for businesses while keeping the cost of living and quality of life in good balance for residents.

All of this means superb potential for real estate investors who make the right decisions. Analysis of local markets is essential, but there are plenty of opportunities to access the excellent ROI available to property investors in both cities. As long as you deploy the right strategies in the right neighborhoods, the outlook for the market in both cities is very good.

Dallas vs Austin Real Estate Investment: Which Is the Best?

Generally speaking, Austin is seen as a more desirable place to live than Dallas. This may mean a greater chance of success for real estate investors who can afford the higher property prices in the city. However, at present, Dallas is viewed as one of the leading prospects for property investors in the USA. This is because of its recent surge in real estate values and demand for housing in all its forms.

If you are looking to make short-term gains, Dallas may be the better option at present. But Austin might have greater long-term potential for your portfolio. Ultimately, the answer is extremely subjective. There are many variables to consider and it requires careful analysis to make a decision.

If you need help with this, the local market knowledge of investor-friendly real estate agents in Texas can be invaluable.

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Frequently asked questions

How Do Dallas and Austin Real Estate Investment Opportunities compare?

Real estate values are higher in Austin, but there is a good level of appreciation in both cities. The rental market in Dallas is slightly bigger, but ultimately both cities offer superb investment opportunities if you make the right choices.

What Are The Best Real Estate Investment Strategies In Both Cities?

The best real estate investment strategies depend on your circumstances and the neighborhoods you are looking at. Value investing can be good if you find the right property, while growth investing is a good strategy to take advantage of property appreciation. Income investing is also good as the rental markets are strong.

Positive Cashflow in Appreciating Markets

Ready to invest in central Texas real estate?

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