The Texas Real Estate Investor’s Guide: Strategies, Legalities & Steps to Build Wealth the Right Way

Adriana Perez
Oct 25
5 min read

By Adriana C. Perez, REALTOR® | Surge Realty | The Trochilidae Group

Texas offers one of the most dynamic and diverse real-estate markets in the nation. Whether you’re eyeing Houston’s urban redevelopment zones, small-town rentals, or suburban fix-and-flips, the potential is real, but so are the rules.

This guide breaks down every major investment strategy and shows you exactly how to move forward legally, ethically, and profitably under Texas law and REALTOR® standards.

As a licensed Texas REALTOR® (#829146), my role is to help you build wealth the right way, staying compliant with TREC, NAR, and HAR.

1. Buy & Hold – Rental Properties

Goal:

Build long-term wealth through cash flow + appreciation.

Why It Works:

Rental income covers expenses while property value grows. Depreciation and interest deductions lower taxable income.

What’s Legal to Do (as a Realtor):

I will use promulgated TREC forms for purchases.
I will provide Information About Brokerage Services (IABS) and Consumer Protection Notice.
I will comply with TREC Advertising Rules §535.155.
I will never give tax/legal advice, refer to CPA or attorney.

Steps:

Identify growth markets (Houston Metro, Austin, DFW).
Analyze rent-to-value ratios and property taxes.
Run cash-flow projections (rent – mortgage – tax – insurance – maintenance).
Use inspection and option period strategically.
Close, insure, and hire or become a compliant property manager.
Team: Realtor • Lender • Attorney • Inspector • Contractor • CPA • Property Manager

2. Fix & Flip

Goal:

Buy under-market, renovate, resell fast.

Key Legal Points:

Use TREC 1-4 Family Residential Contract.
Ensure all advertising lists your broker’s name per TREC §535.154.
Disclose material defects and your license status if you own the property.

Steps:

Find distressed properties (MLS, auctions, wholesalers).
Get repair estimates + After-Repair Value (ARV).
Secure financing (hard-money, cash, or short-term loan).
Manage renovation → inspection → listing.
Price for market absorption rate, speed = profit.
Pro Tip: Keep contingency reserves 10–20% for overruns.

3. BRRRR – Buy • Rehab • Rent • Refinance • Repeat

Goal:

Scale a rental portfolio using recycled equity.

Steps:

Buy undervalued property.
Rehabilitate → document expenses.
Lease to quality tenants.
Refinance at new appraised value to pull capital out.
Repeat.

Compliance Note:

All financing and refinance disclosures must meet TREC advertising and fiduciary duties; avoid any misrepresentation of ROI.

4. Wholesaling / Contract Assignments

Goal:

Contract a deal and assign it for a fee.

Texas Legalities:

Covered by Texas Occupations Code §1101.0045.
Must disclose you are assigning, not selling property.
You may not market property you don’t own without proper disclosure or license authority.

Best Practice:

Always have an attorney draft the assignment agreement and ensure seller/buyer both sign acknowledgment.

5. Syndication / Joint Ventures

Goal:

Pool investor funds to purchase larger assets.

Warning:

Syndications can be deemed securities, get a securities attorney.
As yourbRealtor, my legal role is limited to property acquisition and representation, not raising investor capital.

Steps:

Form an LLC or LP with operating agreement.
Hire securities attorney to draft offering documents.
Conduct due diligence, close deal, manage asset.

References:

NAR Article 11 – Competency & Disclosure
Texas Business Organizations Code

6. Lease-Options & Seller Financing

Goal:

Offer creative purchase terms to broaden buyer pool.

Legal Checkpoints:

Must comply with Texas Property Code §5.061 et seq. (executory contracts).
Provide clear written option, price, and time frame.
For seller financing, consult attorney for note + deed of trust compliance with Dodd-Frank Act.

Tip:

Require legal review of all seller-finance paperwork; disclose licensee ownership interest if applicable.

7. The 1031 Exchange – Deferring Taxes to Build Wealth Faster

Goal:

Exchange one investment property for another and defer capital gains taxes, allowing you to reinvest all proceeds into your next deal instead of losing 15–20% to taxes.

Why It Works:

Section 1031 of the IRS Code lets investors defer taxes on capital gains when the proceeds from a sale are reinvested into another “like-kind” property.
In plain terms: sell, reinvest within strict timeframes, and pay no tax today.

Legal Framework

Governed by Internal Revenue Code §1031 and 26 CFR §1.1031.
Must involve investment or business-use property, not your personal residence or flips held for resale.
Realtors can represent the purchase and sale but cannot act as the Qualified Intermediary (QI).
Texas REALTORS® must still follow TREC’s IABS disclosure rules and NAR’s fiduciary standards.

Step-by-Step Exchange Process

Step Action. Deadline.

Hire a Qualified Intermediary (QI) QI prepares the exchange documents and holds proceeds from the sale in escrow. Before closing sale.
Sell Your Property. The sale funds go directly to the QI, not to you.
Identify Replacement Property. You can identify up to three properties (or more if under value limits) within 45 days.
Close on Replacement. Must close on one or more identified properties within 180 days
Report the Exchange. File IRS Form 8824 with your tax return by tax deadline.

Key Investor Tips

“Like-kind” = any real property held for investment, not necessarily same type (e.g., swap land for multifamily).
You can combine strategies (e.g., 1031 a flip into a rental).
Keep every receipt, IRS documentation is strict.
You can do a reverse exchange (buy first, sell later) or delayed exchange, but only through a QI.
Eventually, when you sell without exchanging again, taxes are due, unless you plan to “swap ‘til you drop.”

Compliance for Texas REALTORS®

I will always include appropriate TREC forms for both sale and replacement purchase.
I will provide IABS and Consumer Protection Notice at first substantive contact.
I will never handle or advise on QI escrow, refer to a Certified Exchange Specialist (CES®).

Common QIs in Texas include:

IPX1031
Asset Preservation, Inc.
Exeter 1031 Exchange Services

Forms & Links

IRS Form 8824, Like-Kind Exchanges
TREC Contract Forms, For sale and replacement properties
Texas REALTORS® Addendum for 1031 Exchange (TXR 1922)

Pro Tip from Adriana

“Smart investors don’t just make money, they keep it in play. A well-timed 1031 exchange can double your buying power without paying capital gains twice.”

Compliance & Professional Standards

Requirement

Governing Body

Reference

Use of promulgated forms TREC trec.texas.gov/forms

Advertising & Broker Identification TREC §535.154 & §535.155

Fiduciary Duties & Ethical Conduct

NAR Code of Ethics

Market Data & MLS Integrity

HAR www.har.com

Quick Investor Checklist

Define your strategy (Flip, Hold, BRRRR, Etc.)
Get pre-qualified or proof of funds
Run comps and rehab numbers
Use TREC-approved contract
Inspect, budget + plan exit
File entity (LLC) + open separate bank account
Keep all brokerage records 4 years (TREC Rule §535.223)
Disclose licensee status in personal deals
Consult CPA for depreciation / 1031 exchange
1031 exchange

Build YourTexas Investor Team

Realtor (me 😉) – Market, negotiate, ensure compliance
Lender – Finance or refinance
Attorney – Entity setup, contracts, seller finance, QI
Contractor / Inspector – Rehab & risk control
CPA / Bookkeeper – Tax & cash-flow management
Property Manager – Tenant relations & maintenance

Why Texas Now

Strong job growth & in-migration (Houston, Austin, DFW, San Antonio)
No state income tax
Favorable landlord laws
Constant demand for workforce and single-family rentals

Let’s Build Your Portfolio!

If you’re serious about becoming a real-estate investor in Texas, let’s strategize.

Schedule your Investor Consultation: thetrochilidae.com

Download the Free Investor Checklist (PDF) coming soon.

Legal Disclaimer

This content is for educational purposes only and does not constitute legal, financial, or tax advice. Always consult licensed professionals before making investment decisions.

Ph. 409-927-0881

Adrianaatsurge@gmail.com

Consumer Protection Notice

| Information About Brokerage Services (IABS)