West Texas Real Estate Investing - Hot or Not?
I am sure that you are like me, and no matter whether you are on social media like Facebook or YouTube or scrolling through the forums of an investing site like BiggerPockets, you keep coming across posts about investing in real estate in West Texas. Specifically, Lubbock, Texas. Today we are going to break down all of the hype and answer your most-asked questions as to whether it is a good place to invest in and why it is so hyped up online among investors, agents, and investment lenders alike.
The main reasons Lubbock is such a phenomenal place to invest in real estate have to do with the driving forces of the local economy, as well as the fact that it is somewhat of an "island" market. The real estate market here has consistently shown year over year appreciation for recorded history, and finally, the market is not over-saturated or grossly unpenetrable like the east and west coast market, DFW, and Austin.
What Fuels Lubbock Real Estate Investments
The economy in Lubbock, Texas is consistently among the strongest in the state of Texas being that it is driven and fueled by a multitude of industries that keep it from being dependent on just one and seeing losses any time markets or industries crash. Driving industries of the Lubbock economy include healthcare, education, and agriculture which we will dive into further.
The healthcare industry in Lubbock, Texas employs more than 17,000 people with annual payrolls of more than $543,300,000 and an impact on the local economy of more than $735,600,000. Serving more than 1.2 million patients in the region, Covenant Healthcare is the premier healthcare provider in the area, being founded more than 100 years ago as St. Joseph's Health originally. Lubbock is a healthcare destination, and offers the most comprehensive healthcare available between Dallas, Texas and Phoenix, Arizona, so a large number of patients are coming in from Arizona, New Mexico, Oklahoma, and other parts of Texas in order to receive the best possible patient care. These individuals often need places to stay while they are in Lubbock (Lubbock short term rentals) or decide to end up moving here and purchase homes and investment real estate themselves.
In addition to Covenant Health Systems and Covenant School of Nursing, Lubbock is home to the Texas Tech University Health Sciences Center (TTUHSC), University Medical Center (UMC), TTUHSC School of Medicine, TTUHSC School of Nursing, and TTUHSC School of Allied Health. With this powerful array of healthcare providers and educational facilities, a large number of healthcare providers receive their educations here in Lubbock prior to moving off to continue their careers elsewhere or begin working at one of the local hospitals. Many of these healthcare workers are in on the little-known secret of Lubbock real estate, and are investors themselves in this strong real estate market.
Other than healthcare, education is a massive part of the local economy that continues to drive growth, real estate development, and fuels the creation of new jobs. Home to Texas Tech University and its affiliated professional/graduate schools as mentioned above, Lubbock Christian University, and Wayland Baptist University, Lubbock is an education hub that draws in students not only from across the state of Texas and United States, but all across the world. With one of the most diverse student bodies of all division one universities, Texas Tech has students currently enrolled hailing from more than 120 different countries around the world.
Being home to so many healthcare workers is a fantastic opportunity for real estate investors looking for a strong renter pool. Many of these healthcare workers choose to rent due to the amount of time they spend at work each week. This is great for landlords since less time spent in rentals means less wear and tear, and lower maintenance and repair costs in the long run.
With Texas Tech alone having more than 40,000 students actively enrolled and dorms that house 7,400 students, that leaves more than 34,000 other students in need of housing during there time at school. Freshmen are required to live on campus normally, but with the growing sizes of incoming classes in addition to requirements placed on the school by the state due to covid health risks, more and more students are being required to find housing off campus. This is a huge opportunity for real estate investors looking for tenants that could potentially occupy their property for 3 - 5 years. Additionally, investors who focus and specialize in student rentals will be happy to know that most of these rent by the bedroom, allowing landlords to collect higher rents on average than they would on the same property located outside of a college town.
Being in the heart of West Texas and a hub for commerce and industry (hence the name "The Hub City"), Lubbock is the pulsing lifeline for much of the United States and Texas agricultural industry. Not only that, but more than 80% of cotton produced in the state of Texas is grown and produced in Lubbock County. With the surrounding counties producing the large majority of the rest of the state's cotton crop, much of the revenue produced has a large impact on Lubbock since it is spent there.
Additionally, something that is not often discussed is the impact of the vineyard and wine industry on the Lubbock economy. While the Texas hill country gets the fame and glory for having wineries and tasting rooms, it is a little known fact that the majority of wine grapes produced in the state of Texas to be sold as wine out of the hill country wineries is actually grown right here in West Texas (the High Plains AVA). This brings money to Lubbock from all over the state of Texas, and is a quickly growing industry bringing in jobs from not only central Texas, but also wine and vineyard experts from California seeking refuge somewhere that is more business-friendly.
Lubbock is an Island
Something that has been noticed by economists and real estate experts alike over the last 90 years is the resilience of the Lubbock market to global and nationwide market shifts. When national markets have bad days, Lubbock sees a much smaller dip.
This is true of the 2008 - 2009 market crash as well. While many larger cities across the country and state of Texas saw the housing bubble pop, Lubbock experienced a small blip on the upward trend of appreciation and market activity. Due to the relative insulation of the market from the rest of the state and country due to its somewhat remote location, real estate in Lubbock saw very little negative impact and investors continued purchasing properties with little to no hiccups.
Experienced investors across the country took note of this when reviewing market statistics and data, and have since seized the opportunity to acquire cash flow producing assets in Lubbock in order to hedge their risk in case of another market adjustment in the future. The smart investor chooses a stable market such as Lubbock to not only protect their capital, but also to grow it.
The consisten appreciation that Lubbock has experienced for recorded history has clocked in between 2 - 5% annually, which is a slightly wider range than that of the rest of the nation. This is to be expected given the lower risk of investing in the Lubbock real estate market, but on average in the long run they still perform very similarly.
Being able to invest in a market with assets that provide strong cash flow in addition to predictable, reliable appreciation is something that is hard to come by, and another reason that Lubbock, Texas real estate investment property is one of the assets in the portfolio of the sophisticated real estate investor.
Low Barrier to Entry
Getting started investing in the Lubbock real estate market is a whole lot easier than most other places. With lower upfront costs comes a lower barrier to entry, and where good deals are -- money follows.
Not only is this advantageous for locals who want to invest locally and begin building a portfolio of cash flowing investments, but it is also a great opportunity for others living far away who wish to make their money work for them somewhere with a lower cost of living and higher return on capital. The annualized returns capable of being produced by a $250,000 investment in Lubbock, Texas are not even comparable to the much smaller capacity when investing the same amount somewhere such as Los Angeles, Seattle, or New York.
The ability to make your capital go ten times further is a huge reason that Lubbock is so hot right now, and why so many investors are making the choice to invest long distance in West Texas. Me personally, more than 80% of my clients are out of state and looking to invest here in Lubbock due to the above-mentioned reasons.
The ability to invest remotely and completely digitally has revolutionized real estate investing and made it 10x more accessible. Video walkthroughs, digital signing and notarization, and remote closings all make investing from a long distance just as easy as investing down the street from you.
In conclusion, the West Texas (more specifically, Lubbock) real estate market is as hot if not more hot than the hype that you are seeing online. It is not a pile of cash waiting to be snagged by the first investors to make it out here, but more of a gold mine of investment vehicles waiting for the discerning investor to come along and make a wise choice of what, when, and how to buy. Best of luck to any and all that are new to real estate and getting into real estate investing, and do not hesitate to let me know if there is ever anything in the world I can do to help you or answer any more of your questions.