While Austin and Dallas continue to make national headlines for their booming real estate markets, savvy investors are turning their attention to Texas’s secondary markets, according to Central Texas Real Estate Brokers. These emerging cities offer compelling opportunities for both seasoned investors and first-time buyers looking for sustainable growth and better value propositions.

The Rising Stars of Texas Real Estate

Texas’s secondary markets are experiencing a remarkable transformation, driven by factors ranging from corporate relocations to lifestyle preferences shifted by the pandemic. Cities like Waco, Tyler, and San Marcos are emerging as attractive alternatives to the state’s primary markets, offering a combination of affordability, quality of life, and strong economic fundamentals.

Waco: More Than Just Magnolia Market

Once primarily known for its Magnolia Market at the Silos, Waco has evolved into a robust economic center. The city’s population has grown by approximately 8% since 2020, with median home prices still hovering around $265,000 – significantly lower than Austin’s $525,000 average. Major developments include:

• The emergence of a vibrant technology sector, with several startups choosing Waco as their home base
• Baylor University’s expanding research programs attracting talent and investment
• A $1.5 billion investment in infrastructure improvements over the next decade

Tyler: The East Texas Economic Powerhouse

Tyler’s diversified economy and strategic location have positioned it as East Texas’s primary commercial hub. The city has seen steady population growth of about 5% annually since 2021, driven by:

• A thriving medical sector, with UT Health East Texas and CHRISTUS Trinity Mother Frances Health System expanding their facilities
• The development of new industrial parks attracting manufacturing companies
• A cost of living 15% below the national average
• Median home prices around $285,000, offering attractive yields for investors

San Marcos: The Innovation Corridor’s Rising Star

Positioned strategically between Austin and San Antonio, San Marcos is benefiting from the growth of the Texas Innovation Corridor. Texas State University’s presence provides a steady stream of educated workforce talent, while the city’s natural attractions and quality of life draw both young professionals and families. Key indicators include:

• Population growth exceeding 12% since 2020
• Major employers expanding operations, including Amazon and Texas State University
• Median home prices around $320,000, representing strong value compared to nearby Austin
• The San Marcos Regional Airport’s expansion creating new economic opportunities

Economic Indicators Supporting Investment

Several economic indicators suggest these secondary markets are poised for continued growth:

Job Market Strength All three cities have unemployment rates below the national average, with job growth in diverse sectors including healthcare, education, technology, and manufacturing. This employment diversity helps insulate these markets from industry-specific downturns.

Infrastructure Investment Significant infrastructure projects are underway in each market, including:

• New highway expansions improving connectivity
• Downtown revitalization projects
• Enhanced public transportation systems
• Updated water and utility systems supporting growth

Education and Workforce Development The presence of major universities and technical colleges in these cities ensures a steady pipeline of skilled workers, attracting employers and supporting long-term economic growth.

Real Estate Market Dynamics

These secondary markets offer several advantages for investors:

Affordability While primary markets have seen prices soar beyond many buyers’ reach, these secondary markets maintain relatively affordable entry points while showing steady appreciation.

Higher Yields Rental yields in these markets typically range from 6-8%, compared to 4-5% in primary markets, offering better cash flow opportunities for investors.

Growth Potential With continued population growth and economic development, these markets show strong potential for long-term appreciation without the volatile swings often seen in larger markets.

Investment Strategies to Consider

Different approaches can be successful in these markets:

Single-Family Rentals The strong job market and population growth create steady demand for rental properties, particularly in neighborhoods near major employers and universities.

Multi-Family Development Growing populations and relatively low construction costs make multi-family development attractive, especially in areas targeting young professionals and students.

Commercial Investment Retail and office spaces in growing districts offer opportunities for higher returns, particularly in areas undergoing revitalization.

Looking Ahead

While these secondary markets offer compelling opportunities, investors should consider several factors:

Due Diligence Research local zoning laws, development plans, and economic indicators specific to each market.

Timing Different submarkets within these cities may be at different stages of their growth cycle, affecting optimal entry points.

Local Partnerships Building relationships with local real estate professionals, property managers, and contractors is crucial for successful investment outcomes.

Conclusion

Texas’s secondary markets present a unique opportunity for investors seeking strong returns with lower entry points than primary markets. The combination of population growth, economic diversity, and quality of life improvements makes cities like Waco, Tyler, and San Marcos particularly attractive for long-term investment. As these markets continue to mature, early investors who position themselves strategically stand to benefit from both appreciation and steady cash flow opportunities.

The key to success in these markets lies in understanding their unique characteristics and growth drivers while maintaining a long-term perspective. With proper research and local market knowledge, investors can find valuable opportunities that may not be available in more saturated primary markets.