Texas VS California
for Multifamily Investing

In order to ensure a consistent and high return on their investment, investors look for a range of reasons to invest in a given state. Texas is one of the most popular states for real estate investors since it offers them a variety of possibilities. Multifamily investing in California real estate was a no-brainer for many years. Every year, a half-million more people need accommodation. And they primarily desired to reside in San Francisco or Los Angeles, both of which are already overcrowded; rents and home prices skyrocketed, and investors couldn’t pass up the opportunity. The plot has changed now. California’s population grew by zero percent in 2019, with 200,000 individuals leaving due to high housing costs and a scarcity of new jobs.

Before investing in multifamily real estate, there are a few things to consider. Today, we’ll compare these factors in Texas and California to determine which state is the greatest for multifamily investing opportunities.

california for multifamily investing
DEMOGRAPHICS
Factors like your age, gender, median income, and demography influence your investment decisions. Consider whether the population of the area where you want to invest is increasing or decreasing if you’re a landlord who relies on rental income. If the economy is growing, future renters will be in higher demand, and occupancy rates will climb. You’ll notice greater rentals and a better return on your investment as a result. Rental units may become vacant if a city’s population declines. In a state like Texas, there will always be a rental market. However, for a variety of reasons, a considerable number of people from other states, such as California, have recently relocated to Texas. According to Stacker’s report, the majority of residents who left the nation’s most populous state in 2019 relocated to Texas, the second most populous state in the country. According to Stacker, 82,235 Californians relocated to Texas 2019. Among these include high living costs, taxation, a scarcity of useable land, anti-landlord legislation, high home prices, severe employment competition, and other difficulties. You’ll be able to deal with all of these issues if you live in Texas. In 2021, Texas had a population of 30 million people, up 2% from 2020. California’s population was 39 million people in 2021, down 0.76 percent from the previous year. Texas has a median household income in the United States, at $61,874, whereas California has the sixth-highest median household income, at $80,440. The cost of living in California is among the highest in the country. According to the Texas Relocation Report, more than half a million people have moved to Texas for the sixth year in a row. As a result, the answer is a resounding yes to the question of whether Texas is a good place to invest in rental real estate.

FINANCIAL CONDITIONS 

The state of the economy is critical when it comes to multifamily investing. When a city or town experiences a surge in job growth, the population expands, and rental property demand rises as more people relocate to the area where the jobs are. In an ironic twist, as the economy worsens and unemployment rises, homeowners will be more likely to become tenants in search of more affordable housing. After all, everyone needs a place to live. Texas is the place to go if you’re seeking for a great rental market. The unemployment rate in California is 6.5 percent, whereas it is 6.3 percent in Texas. The robust economy of Texas has resulted in a booming job market. The general economic situation is favorable for a multitude of reasons.

The state’s oil and gas boom, which has made it famous, is the most well-known. The strong economy of the city is powered by the presence of many Fortune 500 corporations, IT firms, and a wide range of work opportunities. The healthcare business, manufacturing companies, and prestigious universities and colleges are all involved. It’s also a great area to look for secure blue-collar jobs that support the country’s foundation and backbone. The high cost of living in California has prompted some to relocate to lower-priced states. Increased demand for unemployment insurance and social welfare programs, as well as decreased revenue from income taxes, add to the fiscal pressure on states. Texas, on the other hand, has a higher number of entry-level jobs, resulting in lower rates of youth unemployment.

INCOME TAX IS PAID BY PROPERTY INVESTORS.

The absence of a state income tax is another element of Texas that makes real estate investing so tempting. As a result, investing in Texas rental property will save you money while also improving your earnings. You’d have to pay federal taxes, of course. As a result, it’s vital to be aware of all possible ways to reduce your tax liability.

In California, all property owners must pay taxes based on the value of their homes or businesses. General levies, voter-approved debt, and special assessments are all included in these tax bills, which are paid twice a year. Many homeowners pay their property taxes using an escrow account, in which the mortgage lender holds a portion of the monthly payment for projected taxes and pays the bill when it is due. Several voter referendums have controlled property valuations and annual increases in California’s property tax system.

A STATE THAT IS LANDLORD FRIENDLY

What makes people want to buy real estate in Texas? It’s a win-win situation for landlords. When determining whether or not to invest in rental properties in a specific state, this is the most crucial element to consider. If you don’t have the law on your side when it comes to landlord-tenant disputes, signing a lease might not be worth it. Texas is known for being pro-landlord, feeling that the landlord should have some control over their property, and with good reason: the property is yours, and you paid for it, not the tenant.

You’re probably already aware of some of the challenges that might arise between landlords and tenants if you’re not new to the game. One of the most challenging challenges when renting in a non-landlord-friendly jurisdiction is persuading authorities to favor the tenant in eviction situations. When a renter fails to pay their rent, for example, the goal is to evict the tenant as soon as possible so that you do not get further behind on your payments. If your state isn’t kind to landlords, though, this might take months and cost you a lot of money in legal fees and time. It’s a frustrating situation.

Because of comprehensive state rent control rules and severe restrictions on serving notices and evictions, California is one of the least landlord-friendly states in the country. Tenants in California enjoy various safeguards and entitlements that tenants in other states do not have.

FAQ

Factors like your age, gender, median income, and demography influence your investment decisions. Consider whether the population of the area where you want to invest is increasing or decreasing if you’re a landlord who relies on rental income.

When determining whether or not to invest in rental properties in a specific state, this is the most crucial element to consider. If you don’t have the law on your side when it comes to landlord-tenant disputes, signing a lease might not be worth it. Texas is known for being pro-landlord.

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MarketSpace Capital, LLC is a Houston, Texas-based private equity real estate development firm focused on ground up developments and value-add investments throughout the United States.

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Disclaimer: *For sold properties, actual sales price is reported. For active investments, the Estimated Current Value is based on the Managing Member’s estimate of current value. Recent acquisitions are generally valued at the acquisition price. Values may be internally prepared. This web-page/website is for informational purposes only and is qualified in its entirety by reference to the Confidential Private Placement Memorandum (as modified or supplemented from time to time, the “Memorandum”) of any offering of MarketSpace Capital.