I Screened 325 Tenant-Occupied Houston Rentals. None of Them Clear the Test.

By Steve Waller · September 10, 2026

What we pulled

Every active single-family listing in Harris, Fort Bend, Montgomery, Brazoria and Galveston counties between $100,000 and $400,000 carrying the MLS disclosure Tenant Occupied. That disclosure is the only field in the system that tells you a tenant is already in the house — there is no occupancy filter. It returned 325 listings.

Then we valued them. Median closed price per square foot from sales inside each subject property's own subdivision, held to plus or minus twenty percent of its square footage and fifteen years of its year built. 1,800 closed sales across 25 subdivisions. Rent came from 2,496 leases closed in those same subdivisions in the last twelve months, matched on size.

Why the valuation method decides everything

A ZIP-code price per square foot is not a comparable set. In northwest Harris and Fort Bend the ZIP average is carried by newer master-planned sections, and a 1990s subdivision inside that same ZIP trades at close to half of it. We have watched that shortcut produce a 43% valuation error on a single file — an after-repair value that would have justified paying $44,000 more than the property supported.

The same trap runs the other way on size. One property in this set is a 2,482 square foot house in a subdivision where every closed sale is under 1,800 square feet and built in the early 1980s. Applying that subdivision's price per foot across the size gap would have produced a valuation roughly $140,000 too high. We reported no value on it rather than a wrong one.

What came back

Twenty-six of the 325 had a deep enough comparable set to value honestly. Three were dropped for the opposite reason — one had a single closed sale in its subdivision in twelve months, which is not a market.

Then the test: purchase price against 75% of after-repair value, less a make-ready allowance by vintage, less three percent closing.

Zero of the 325 clear it at the asking price. Gross yields on the survivors ran 9.1% to 12.6%, which sounds fine until you notice that yield is not the constraint.

The four that are close

Four came within $35,000 of the supported offer, which is a negotiation rather than a wall. Broad strokes only here — the property-level figures are licensed data we send on request rather than publish:

• A 2013 build in Katy, just over 2,200 square feet, carrying the deepest comparable set of the four.
• A 1981 house in Crosby, just over 2,000 square feet, and the widest equity position in the set in percentage terms.
• A 2005 build in north Harris County, near 2,400 square feet, sitting at 104 days on market with the owner still finishing upgrades.
• A 2017 build in Spring, the largest and newest of the four, and two days on market — so there is no seller fatigue to work with yet.

What kills the rest

Taxes, not rent. New Caney, Katy and Fort Bend MUD districts run 3.0% to 3.4% and will pull a ten percent gross yield under 1.00 debt service coverage on their own. Pull the actual district rate before you model anything in those areas.

The listing file, not the spreadsheet. Three properties ranked inside the top ten on the numbers and came off the board only after reading the agent remarks. All three are short sales. One requires the buyer to assume a solar panel loan to reach the asking price. No amount of comparable-sale work substitutes for reading the file.

The lease you are inheriting. A tenant in place is genuine value — no vacancy, no turn cost, income from the month you close. It is also a cap. A below-market lease running into 2027 is your return for the whole hold, not the market rent the comparables suggest. Get the lease and a signed estoppel before that number goes into an underwriting file.

The structural conclusion

A tenant-occupied rental listed on the open market is priced for a retail buyer who wants the income stream, and sellers are pricing all of that convenience into the ask and then some. If you need equity at close, this is not the channel. If you need cash flow and you can negotiate, a handful of them are worth a conversation.

If you want the list

We hold the full board — all twenty-six properties with MLS numbers, our after-repair value, the comparable count behind it, the supported offer, the comped rent and the gross yield. It is not published here because it is licensed MLS data, but we will send it to an investor who asks.

Use the Request Financing form and say you want the tenant-occupied board, or reply to this and we will send it over. If you have a property of your own you want run through the same method, send the address — that costs you nothing.

Sources

• Houston Association of Realtors MLS — active listings and closed sales, accessed 10 September 2026

Market data is from public sources and is provided for information only. Nothing here is an offer of credit, a rate quote, or investment advice. Financing is subject to underwriting, lender approval, appraisal or valuation, title, insurance, property eligibility and program availability.

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