High days on market for rentals in Houston market

9 Replies | Houston, Texas

I am looking at rentals on Har.com and I just see so many rentals available on the market all over inside the loop (Midtown, Montrose, Third Ward, etc.). I also see high days on market for many rentals on Har.com (100-140+ days on market!).

If I were to invest in a multifamily or SFH inside the loop, how do I compete against all of these available rentals and all of the apartment buildings in the area? I can lower the rents but by how much (and if I were to lower too much it would not be good either right?)? I just don't see how you can make money from rentals in the area with all of the existing rentals, high days on market, etc.

Anyone have any insight/advice? I am scared if I buy a rental property that it will not rent out well and I will lose money in this market even if it meets the 1% rule, etc. 

Hi Bryan,

Hope you are well.  We lease and manage properties in Houston and surroundings and I can tell you that the market now, is much better in leasing than it was a few months (4-5) ago.  This is the time when a whole lot of activity and inventory gets moved.  Summer time a lot of the listings go, but a lot get moved as well.  

On another note, I can tell you that properties priced $2000 and above have suffered tremendously over the last 2-3 years.  Many of the Oil jobs were moved out of Houston and were replaced with medical and technology jobs that simply don't pay as high as the oil industry.  This has caused some of the higher priced rental properties to suffer in price.  Whereas we would lease a home for $2400, we may only get closer to $2100.   There is a lot of construction in the midtown section and many people turned to leasing, so there is a lot of inventory and will need to price accordingly.

On the other hand properties leasing from $1000-$1800 are doing very well and move relatively quickly, so depending on your investment levels, this is what we are seeing here.

6 months ago, I had 8%-9% vacancy, I am down to about 3%.  I hope this addresses some of the concerns. We are moving a whole lot of properties right now.

Hi @Bryan T.

I fully agree with you regarding the rental availability. I think it will be even harder next year due to the amount of new construction and rehabs going on. I do not want to sound sceptical but a lot of small investor and new investors will lose money. The purchase price to rent ratio does not make sense. All new investors are betting on appreciation and no cash flow. Maybe I'm wrong and rent prices will go up and people will make a lot of money on their investments. I personally stick hard to my rules of purchasing investment properties. I have made a few offers for the last year, couple got except but did not close. My advice is save money. Cash is King and you can get some good deals from wholesalers but have to move fast. If you figure it out do let me know.

Good luck

Yavor

Rentals and Homes for Sale are very high, agreed.   Well priced, ATTRACTIVE looking homes do seem to be selling well w/ low DOM. 

I suspect people know the market is high now if they try to sell, and they're testing the waters.  Lots and lots of inventory out there.  Interesting and suspicious at the same time...

Originally posted by @Bryan T. :

I am looking at rentals on Har.com and I just see so many rentals available on the market all over inside the loop (Midtown, Montrose, Third Ward, etc.). I also see high days on market for many rentals on Har.com (100-140+ days on market!).

If I were to invest in a multifamily or SFH inside the loop, how do I compete against all of these available rentals and all of the apartment buildings in the area? I can lower the rents but by how much (and if I were to lower too much it would not be good either right?)? I just don't see how you can make money from rentals in the area with all of the existing rentals, high days on market, etc.

Anyone have any insight/advice? I am scared if I buy a rental property that it will not rent out well and I will lose money in this market even if it meets the 1% rule, etc. 

 Many of my midtown/montrose listings are 100, 200, 500+ days old.  Yet we stay almost totally full.   Why?  Because the larger ones (20, 30, 50+ units) almost always have at least 1 unit.  So rather than keep changing the status of a listing to "Sold" then listing a new unit -- which would take someone all day every day to keep up with -- we just leave the listing up.

So when you see my "unit #1" for 500 days, that's basically just a generic listing for the PROPERTY vs a specific unit.  Even smaller properties that are typically full I'll leave something up.  Why?  Because we almost always have something coming up.  Or something just down the street.

Trust me.  There is ZERO issue leasing in midtown/montrose.  So I suspect if you see old listings, they're people doing what I just said I did


(PS:  HAR does not like this.  They want you to constantly close out units and post new units.  So from time to time when a listing gets really old, I'll just close it and post a copy to restart the DOM)

Originally posted by @Bryan T. :

I am looking at rentals on Har.com and I just see so many rentals available on the market all over inside the loop (Midtown, Montrose, Third Ward, etc.). I also see high days on market for many rentals on Har.com (100-140+ days on market!).

If I were to invest in a multifamily or SFH inside the loop, how do I compete against all of these available rentals and all of the apartment buildings in the area? I can lower the rents but by how much (and if I were to lower too much it would not be good either right?)? I just don't see how you can make money from rentals in the area with all of the existing rentals, high days on market, etc.

Anyone have any insight/advice? I am scared if I buy a rental property that it will not rent out well and I will lose money in this market even if it meets the 1% rule, etc. 

 Another point:  I wouldn't worry about other listings keeping you from making money.  What's going to keep you from making money is the STUPID prices people are asking for for Montrose and midtown units.  Thankfully I still get a "good" deal every now and then (based on todays standards, not based on pricing even a few years ago).  i.e., if you pay over $100k/door for class C in Montrose you ***WILL NOT MAKE MONEY*** yet I see people paying that or way over ever day.  


Boggles my mind. 

@Bryan T. , I also noticed that there is plenty of leasing competetion in my area. I purchased a fee simple townhome in Montie Beach and there were many other investors in the same complex with similar units for sale or lease. When fixing up my unit I opted to shoot for being the best unit available, rather than the average unit available, kind of ignoring the concept of shooting for being average. This was part by design and part by accident (my Realtor talked me into improving more than I orignally planned and more stuff was broken than I thought). It turned out my Realtor was right. It leased quickly because it was the best looking unit. The nearly identical unit literally attached to mine did not lease, even at a lower price point, because it was not up to date. Renters want nice stuff, too, just like owners. If you buy a commodity type property like I did, with no floor plan differentiation, you have to be prepared to have the nicest unit or the lowest price, I think. Also, my outstanding Realtor showed the house 17 times and held open houses. He worked his rear off. 

Originally posted by @Bryan T. :

Thanks for all of your replies. What about this listing that is currently 140 days old that I just found on Har.com? 

https://www.har.com/s/535Acff3132

It is located in the 3rd ward, but why have they not leased it in 4+ months and are losing money on it? 

Well for 1 it’s a 3/1. There are plenty on newer 3/2 in area just south of 610 that a builder is building to rent. 3/1 in this area will have higher days on market and lower rent even though this interior rehab was done well.