Why The Houston Housing Market Always Comes Back Stronger | Real Estate Road Trip Ep. 2

– Hey, it’s Greg Rand. Welcome to Real Estate
Road Trip, Houston-style. Got ourselves another
mule for the trip. We ran around Houston. Found a couple of secrets
we’re gonna reveal to you about real estate
investment opportunities. This is American real estate
meets American muscle cars. Thanks for watching. (relaxed country music) (engine revving) So I’ve been doing this
for a really long time. For the last 15 years, it’s
been my mission in life to analyze markets
around America and figure out where
lift is coming in. Lift is a term that
we use for where if a market is elevating
because of certain factors, then it has extra lift. There’s other factors
that make the market even a better investment ’cause our philosophy
is different than a lot of other people’s. When you hear investing
in the housing market, a lot of times people
automatically think buying a half-priced
foreclosure, buying a junker, fixing
it up, and flipping it. I have no interest
in any of that. The houses we buy are
in perfect condition or even brand new condition. We look for the opportunities
where the market is taking off. And so here we are in Houston. It’s a great example. But the funny thing
about Houston is that people are always trying
to count Houston out. I mean, if you look at
the Houston Chronicle, article after article after
article, going back 10 years, oh, oil prices are down. Houston’s done. Housing market’s done. Oh, we had a big hurricane. Had a lot of flooding. That sucked. And Houston is done. (chuckling) Right? So all the people in Houston who were worried
about the hurricane, who were worried
about job losses had an extra worry layered
onto their consciousness, which was that
the housing market was gonna plummet and stay down. Everyone loves to
call the market out. Everyone loves to call
Houston down and out. And every single time,
it comes fighting back. Every single time because all that short-term
pain that flares up is just put to rest by
all the long-term gain. So we found three
markets around Houston that we think have extra lift. So Texas has lift, Houston
has lift, resilient lift, and there are three
pockets that we discovered in and around Houston that have something
pretty special going on. I’m gonna share
’em with you today. (upbeat country music) Our first stop is we’re
heading up to the Woodlands, a part of the Houston area
that’s got a little secret that people around
here know about but folks around the
country probably don’t. People are very quick to
call Houston a dead market every time the oil prices
drop below the median level. I’ve heard it for years. It happened back in the 1980s. When the oil prices
dropped several years ago, they thought Houston was
over but Houston’s changed. Houston got very diversified. But there’s a corridor
called the Energy Corridor to the west of the city that has had some trouble
in its real estate market because the energy jobs are
very heavy in that market and when the energy
industry is not hiring and when jobs are tight and when there may
need to be layoffs for no other reason but that
the oil prices are down, revenues are down, that corridor hasn’t
seen as much growth. But something else really
interesting happened and that is the
giant Exxon-Mobile consolidated 10,000 employees from campuses all
over the country, some here, several elsewhere, brought them all
into a new facility that we’re gonna
head to right now. And what’s happened is the
real estate market has exploded in Woodland, Texas because
energy prices are down and because, in
response to that, Exxon-Mobile
consolidated employees. Let’s go check it out. So we’re making a left
on Energy Drive right now and we’re pulling into this
new massive corporate campus, Exxon-Mobile. I love when you
see short-term pain but inherent in that
is long-term gain. Don’t believe headlines
when you read them. Look deeper. Try to find out what’s
actually happening. So you have a situation
where all the indicators would be negative, right? The market is down. The economic driver is down. Why would you want
to invest in housing? Well because of that exact fact, a different part of
Houston is getting lit up, no pun intended. This is a beautiful area and now we’re getting into
the residential real estate. We’re talking about a bike ride from that 10,000
employment facility to some pretty
lovely neighborhoods. Alright, so now we’re literally
a mile and a quarter away from 10,000 high-paying jobs
over at that Exxon facility. You see the neighborhood
around me here. These are the kind of houses
that I love to buy, alright? They’re in great condition. They’re in a place where you
can picture after school, there’ll be kids playing in
this park and on this block. And these are gonna
be in high demand because they’re so close
to where the jobs are. They’re nice, safe
neighborhoods. We drove past some
lovely, brand new retail on the way through. This is the kind of
stuff that I look for. Show me a great
house near a great uplifting, economic
activity and opportunity and you’re not gonna lose if you think about
long-term investing. What if I told you there
was a place in Texas where you couldn’t have a
beer while you had your steak and how that had a
suppressing effect on the real estate market? We’re going to Valley
Ranch, stop number two. (engine revving) This is a place that was a
dry town, maybe a dry county. In other words, you couldn’t
get a beer with your steak. You couldn’t get a glass of
wine with your salmon, right? And so what that means is
there’s no good restaurants. Restaurants can’t make a living if they can’t see you booze
along with your dinner. And so this was a town that
had its real estate values, i.e., the demand to live here, was suppressed by
something very real, which is that nightlife
matters to a lot of people, the whole foodie trend
matters to a lot of people, and you weren’t
gonna have that here. And so I would imagine
that for years, there were people probably
pounding their fists saying we want beers! And they weren’t getting any
traction with the politics because that wasn’t
the right message. Then some visionary
people came together and launched something called
the Restaurant Initiative. The Restaurant Initiative is
different than we want booze. But what that tells me, as a guy from the
outside looking in, is that visionary developers connected with visionary
politicians and said look, if we reposition this, not as we want booze but we
want a restaurant lifestyle, that signaled two things. First of all, they got approved so now this is no longer
a dry town or dry county so the restaurants
are coming in. But it also signals to
all kinds of developers that you’ve got a
development-friendly government. You look out this window over
here, you see new retail. You see new restaurants. You see new apartments. And then you go a quarter
of a mile in any direction and there’s housing
neighborhoods and those housing neighborhoods
are becoming more valuable ’cause if you lived out here but you didn’t have
any of this around you, your neighborhood
wasn’t as desirable as other neighborhoods
in the next town over or the next county over. So I think you’re looking
at a place right now because of a political movement, the values are gonna
get pressed up. People are gonna be attracted in and if you own a single family
home in this marketplace, you’re gonna win. So those were our
two suburban markets. Now we’re headed back
into the city again. We’ve got a neighborhood
right in the center of Houston downtown that’s going
through a gentrification. Those are always winners
so let’s go check it out. (engine revving) (upbeat country music) Here we are in downtown
Houston or just outside of it. We just had some
authentic Texas barbecue and we’re headed to
a neighborhood in
the university area that I’m told fits
the same description as so many other neighborhoods inside or just outside
of inner cities. Places that had become
tough neighborhoods and then were
becoming gentrified. Gentrified as in hipsters
are moving in, right? Hipsters are great. You watch what hipsters do, you watch a couple
coffee shops go in, a couple of beards
start showing up. They like going
into neighborhoods that are on their
way back up again and this is the kind
of thing that exists all over America in
cities everywhere. So we’re gonna give
you an example of one and hoping that maybe you’ll
be able to find one of those near where you are. (engine revving) We’re just outside
of downtown Houston and we’re following Rich Drake in the car in front of us here. Rich is gonna show
us a neighborhood that I think is reflective
of something probably exists in almost any city in America and that is a neighborhood
that has become, for one reason or
another, kind of blighted and now is turning
itself around again. – Look to the left here. These apartments were
not here a year ago and this was a pipe
storage facility with some grass
growing over the fence. It was horrible. – Now what was happening
with the train station, Rich, that we just drove past? – So this is the light rail and it’s just recently been
extended down this way. It actually dead ends
down here a little ways but a lot of people
are using it. This will take you downtown. It’ll take you to all the
stadiums, things like that. So a lot of people can
get to games and such without having to park and
drive and deal with it. – That’s another
thing that I look for, whenever there’s an extension. So how long ago
did the light rail come further out
to this location? – Oh, I’d say they’ve been
done with it about a year. – So these houses
and the neighborhoods to our left over here, have they become
more valuable already because of the turnaround in
the some of the blighted area plus the commutability
to downtown? – You know, 10 years ago, these were buying in very
much disrepair for 30 grand and selling fixed
up for 79.5, 89.9. They’re over 200 now. – Over 200 now? Why don’t we hop out of the car? Let’s hop out of the car,
do the rest of this live. Alright, so this is Rich Drake. He’s the CEO of Renters
Warehouse in Houston. They’re a property
management company and real estate investment
brokerage company. He was filling us in in the car. And so give me the
profile of a typical three bedroom, two bath
house in this area. What would it cost somebody and what kind of yield
would they generate? – You know, there’s
very few two bathrooms. Most of them are three-ones. The ones that have three-two
or four-two are very valuable. 10 years ago, we were
buying ’em wholesale in the 20s and 30s and fix ’em up, rent ’em for 795 or sell ’em for 70, 80,000. Today, we’re paying 70 for
a completely trashed house and turning it around and
selling it for 130, 140. – After you fix it up? – After it’s fixed up or you could rent
it for 1,250, 1,300. – So we’re going to
this event tonight and you’ve got 500 of
your closest friends coming out.
– Just a couple. Free food and free
beer, it works. Most people are there
for the free beer. The rest are here to see you. The other three.
(chuckling) – So 497 are here for the beer
and three to come hear me. That’s awesome. – It’s people who
finally get the picture that single family’s become
this real asset class and institutions are looking. I’m very interested to
hear what you have to say tonight about that. But they’re figuring out that the yields we get
on rental property, if you could do
that consistently
in the stock market, you’d be a billionaire because you’d be the genius and own the biggest
hedge fund in the world. But here, we can routinely
get double digit returns up to 20% without really
any effort at all. That’s what people
have to understand. – Let’s go to the country club. – Let’s do it.
– Alright. – We’ve got another
fella back here. This is Greg Rand,
otherwise known as the chief strategy officer
for Renters Warehouse USA. – Nice to see you. Thank you very much for
having me, everybody. I’m excited about this. So Houston is an interesting
city when it comes to media. Back when oil prices went down, back in, wait, was it 2012,
13, something like that, 11, whatever it was, and
the stories back then were Houston’s over, Houston is only the
energy industry and
so it’s over, right? And I saw that and
I’m thinking to myself is the energy industry the
only industry in Houston? So I looked it up and it’s not. It’s an important one. It’s not the only one. It’s still here. It’s always gonna be here. Let me tell you what
actually has been happening in the housing market
nationally and then in Houston for the last several years. The green line is Houston. So here is where they
said oil prices are down, Houston’s over. Here’s where they said oh, all those idiotic headlines
I showed you before, they happened along
this chain right here. That little steep right here. I think we’re gonna be
in a not so steep period until we sort of do
this for a while. Me being honest about the fact that that shouldn’t continue. You wouldn’t want it to
because if that went up too much further, it would
have to give some back. We don’t want to give any back. Thank you very much. Appreciate it. – Thank you, sir. (engine revving) (upbeat country music)

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