For residential rental property owners looking to secure a high return on their investments, San Antonio, TX seems to be one of the best places to go for at present. A recent RentCafe study reveals that the rental market of the Alamo City will remain one of the most competitive in the country in the year ahead and beyond.
The same study reports that although the real estate market of the city has experienced a somewhat significant slowdown over the last two quarters of 2022, the San Antonio rental market stays hot and intensely competitive in terms of supply-demand. At six percent, the vacancy rate is extremely low and there are as many as 12 potential renters for every San Antonio rental property on the market (!), the same study reveals.
Analyzing data from the previous year, National Association of Realtors (NAR) has also listed the Alamo City rental market as one of the hottest and most lucrative rental markets for rental property investors. The report takes several factors into account and we’ll discuss them in detail later into the article. However, the gist is that if you’re looking for a highly profitable residential rental market to invest in, San Antonio, Texas may just be the right answer for you.
However, once you’ve chosen San Antonio as the location for investing in residential rentals, you still need to take another important decision: whether you will self-manage your property/properties or should you go for the services of a professional property manager. As we shall discuss later, there are several benefits to the latter and unless you have the time, knowledge and the right expertise to manage rentals, it is often in your best interest that you leave the job to the professionals.
Why Is San Antonio, TX Is a Great Rental Market for Investors
I. Favorable Demographics
The strong job market (more on that later) in San Antonio, coupled with its reasonably low cost of living, has translated into a large new influx of new residents in the city. Reports say that as many as 20,000 people are moving to the Alamo City on a year-by-year basis for the last 5 years and the trend is predicted to continue in the near future. In fact, this remarkable surge in population has already made this Texas city the 6th largest in the country.
And with this growth in population, the demand for quality rentals has skyrocketed as well. The current supply is continuously falling short of demand and this is most prominently evident with regard to middle-of-the-market type rental assets. This means that landlords can expect excellent profit margins as the rental market in the city continues to remain extremely strong and competitive.
A Predominantly Young Demographic
According to data, individuals in their twenties make up the largest demographic of the migrating population in San Antonio. Apart from the healthy job markets and especially, the availability of high-income jobs, the large number of military bases in the area (San Antonio is also known as the ‘Military city’ of the US) is another reason for the city’s young and diverse demographic profile. In addition to the active duty military personnel, JBSA (Joint Base San Antonio) recruits up to 140,000 new students annually and this understandably brings up the demand for short- and long-term rentals in the city.
II. Job Growth Trends in San Antonio
One of the strong points about San Antonio, TX economy is that it is diversified across several verticals including healthcare, energy, cybersecurity, tourism and more. In addition to the military bases mentioned, the city is also home to energy giants like Valero energy and Eagle Ford Shale; H-E-B grocery; USAA financial services group; and many others. At the same time, San Antonio is also taking large strides in recent years in attracting IT giants like Rackspace. When it comes to the cybersecurity sector, the U.S. Defense Department has recently announced that it will create 1,000 new and high-profile cybersecurity positions in the city. Further, the industrial and the airport hub of the Port San Antonio will create 5,000 new positions during the next 5 years.
In fact, the future job growth in San Antonio is predicted to be 39.8% over the next ten years, thus surpassing the national average of about 33%. Another notable factor about the city’s burgeoning job market is that during the 2015-2020 time bracket, the San Antonio -New Braunfels metro area had seen the highest growth in high-paying six-figure jobs among all other Texas cities. During this period, there was a whopping 163% increase in six-figure jobs in the Alamo City. And although no current data is available regarding this metric for the current years, various related reports suggest that San Antonio is regularly outperforming other Texas cities in terms of new high-paying positions.
In terms of rental market, this means that, in addition to mid-market type assets, there is also an increasingly high demand for quality rentals in more fashionable and upmarket neighborhoods of the city.
III. Affordability Factors in the Rental Market
San Antonio, Texas offers a great choice for people looking for an attractive mix of quality living and affordability. The overall cost of living in the city is measured at 89.8, meaning it is 10.2% lower than the national average. In comparison, the cost of living is significantly higher in other nearby Texas cities like Austin (129.8). San Antonio, TX average cost of living is in fact lower than the overall Texas average of 94.2. Couple this with the strong and growing economy of the place and one can see why the Alamo City presents itself as a highly attractive choice for individuals looking to migrate and settle to another city and state. Here, one can enjoy all the bests of city life while still retaining considerable saving potentials.
Higher Average Rent Prices Compared to National Average
Although overall cost of living is lower in San Antonio compared to other metropolitan cities in the US, the highly competitive rental market means that the average rent prices are higher than the national average. According to recent stats, the median rent in the Alamo City currently stands at $1,602, thus higher than the national average of $1,460. The city has also recorded a rather high 3% year-over-year change in rent prices.
On the other hand, the median home value in the city ($227,680) is significantly lower than other major Texas real estate markets such as Dallas ($293,846), Austin ($410, 323), and Houston ($255,188). This means that rental property investors at San Antonio can expect great returns on their investments. In fact, this is also the reason why NAR had listed the city as one of “hidden gems” for residential rental investors. The appreciation is based on factors like supply and demand, median rent to median family income ($56,173 per year at San Antonio) ratio, resilient home values, robust real estate market fundamentals, etc.
IV. Professional Property Management Services in San Antonio
All the above being said, all investors must keep it in mind that is one thing to own a potentially lucrative rental property, but to turn it into a rental success is often a different ball game. Managing rentals entails a number of specialized (and often, painstaking) tasks such as property listing, effective tenant screening and selection, drafting rental lease documents, taking care of the maintenance and repairs of the property, rent collection, maintaining effective communication with clients, dealing with potential conflicts or eviction issues, and many more.
Benefits of Using a Professional Property Manager
This is why engaging the services of a professional property manager can often become highly beneficial to landlords and rental property owners. All reputable property management services recruit highly experienced personnel who are adept at all the different aspects of managing a rental property, whether we’re talking single-family homes, multi-family apartments or something else. Moreover, property managers today are knowledgeable about all the cutting edge property management tech tools that make the task of handling a property much effective, smoother and hassle-free.
In a nutshell, below are the benefits you can expect when hiring a professional property management service with good reputation and track record:
• Securing quality tenants
• Drafting, signing and terminating of leases in a hassle-free manner
• Accurate rental pricing
• Effective marketing
• Consistent rent collection, monthly accounting, and financial reporting
• Higher tenant retention and occupancy rates
• Compliance with local rental regulations
• Minimizing legal issues
• Smooth dealing with conflicts and evictions
• Creating a positive experience for landlords and tenants
• Cost-effective maintenance & repairs
• Keeping the property in pristine condition
• Rental success at zero time and zero stress
V. Conclusion
A robust economy with creation of enough high-paying jobs, good standard of living at affordable prices, rapid population growth due to new influx of residents, a highly competitive rental market (with 94% occupancy rates, increasing demand, and steadily upward rent prices)—all these and more make San Antonio, TX the ideal place to invest in residential rental properties at present.
Moreover with the rising interest rates, home ownership will become increasingly difficult for most people to achieve in the coming years. This paves way for highly competitive rental market scenarios, such as that of San Antonio, TX, and these will continue to become even more ruthless. That said, most rental property investors will be better off engaging professional property management services to exploit the situation to their advantage and thus maximize returns on their investment.
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