Who saw the latest declining rent rankings?
Real Estate Agent · Austin, TX · Member since 2017 · 229 posts · 259 votes
Who saw the latest declining rent rankings?
Most Popular Reply
Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
7y@Beau Fannon Millennials would love to buy if they weren't crushed under student debts. Thankfully, I am not crushed under student or other consumer debt due to the largess of my parents and having studied in Canada (where I didn't have to mortgage my organs to get a quality education... lol).
Austin is severely over built and I'm very interested in seeing how this play outs. I love the city but it's becoming a pain driving during rush hour every time I go see my relatives.
28 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
at some point massive saturation in a market like Texas had to happen..
and I think one other thing.. is this prediction that mellenials don't want to own they prefer renting..
is not coming to pass as predicted.. Millenials are smart people once they figure out that rent is a waste of money
they will buy especially in areas of the country were you can get a decent home in a decent school district for 150 to 250k and in some areas that's a brand new home..
I know Austin is expensive by and large compared to other areas of Texas..
- Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes7y
When a city is delivering thousands of rental units each year, it takes a little time for demand to catch up with supply. My zip code of 78741 is a prime example of this. Tons of new units coming online, in an area that already had tons of multifamily units. We have seen rents decline in this area as well. Eventually the supply side will slow down, and demand will catch up. However, the lease up in these new properties is going to take longer than expected, and probably involve more concessions that expected. This is going to impact residential rentals as well, even if there is not perfect overlap in your target audience (renters).
- Real Estate Agent · Austin, TX · Member since 2017 · 229 posts · 259 votes7y
Originally posted by @Jay Hinrichs:
and I think one other thing.. is this prediction that mellenials don't want to own they prefer renting..
is not coming to pass as predicted.. Millenials are smart people once they figure out that rent is a waste of money
I wish my millennial brother and brother-in-law would get out of their renters mindsets. I hate to say buy it really is a true stereotype for many people my age. FYI, I'm the oldest millennial.
- Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes7y
What I like about my units is, I am in the dead center. Growing community with brand new 2/2 units going for $1,450 or higher. Older units of 2/2 apartments going for $800-1,000. My properties in the middle. Not old, certainly not new, but renting between $1,150-1,350 and still going very strong. I guess it all depends on where you live, like most anything else. But, I am seeing slightly declining prices in multi family properties. Perhaps it's the higher interest rates, perhaps it's the fact that winter is coming. It's like the stock market. Prices decline, buy more.
- Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes7y
@Beau Fannon Millennials would love to buy if they weren't crushed under student debts. Thankfully, I am not crushed under student or other consumer debt due to the largess of my parents and having studied in Canada (where I didn't have to mortgage my organs to get a quality education... lol).
Austin is severely over built and I'm very interested in seeing how this play outs. I love the city but it's becoming a pain driving during rush hour every time I go see my relatives.
- Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes7y
@Kris Wong 78741 is increasing in rents, it seems. It wasn't so long ago that one could easily get a 1 bedroom in the 600$ price range. Now one can barely get a studio. The former Lafeyette Landing Apartment community now called Alister on Burton drive was the cheapest and they are going through a rehab. Now the cheapest apartment there is $800 and that is on a not so good street. I have noticed a sizable rent increase in the area. A year or so ago I was managing a rental on burton at Silverado condos and we were getting $700 and I thought it was a good price. Now i see that its going for 825$. Too bad my client sold it. The newer product is facing headwinds such as the Lenox on Boardwalk. They are offering half a month's free rent. Most of the communities there are in the mid 90 to upper 90% occupied. I think Zillow is off a bit.
- Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes7y
@Aaron Gordy no doubt older, non-updated properties have room for forced appreciation in an area that is experiencing rapid gentrification. That's not "organic" rent growth. I have owned a duplex on Iroquois Ln. for over 3 years, and have not been able to increase rents at all, because the market wouldn't support it. In fact, I have heard of others on the same street that have had to lower their rents. Many owners in this area are not able to charge more rent in 2018 than they were in 2017, with no changes to the property.
- Rental Property Investor · Dallas, Austin · Member since 2018 · 246 posts · 213 votes7y
78741 and parts of 78745 still strong: you have to know the area well to truly understand if you will have strong rental demand. I am not surprised to see rents price decrease because it’s been evident with the saturation and new construction left and right; however, you can still cash flow in these 175k and less properties. Then of course we have your typical slowdown as the holidays get near us. Daily almost every listing is coming back on the market, price decreased or expired. I love it! I’m patiently waiting as the market in Austin begins to correct itself and price gouging isn’t going on. And don’t get me started on the saturation of crappy realtors. As a true Austinite it’s frustrating.
- Rental Property Investor · Dallas, Austin · Member since 2018 · 246 posts · 213 votes7y
Dallas was insane, especially in 2014 and 2015! It was all about Toyota moving here. Last year in July things began to shift. Many realtors began to freak out. I warned a lot of them to expect the same this past July. And now there are pockets where we are having 5.8 months of inventory. We are still in great position, the market correction has been needed.
- Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes7y
There is seasonality in renting for sure - if you end up with vacant rentals after the school start in autumn, you will see a decrease in inquiries and less traffic, and likely a reduction in rent.
But also the rents are, if not stagnant or decreasing, for sure not keeping up with the property tax increases and other expenses. We had to re-lease a property in Kyle in the middle of the "good season" and in order to get it rented fast, we actually had to lower the rent from previous tenant by $50 due to the many competing active properties on the market and the fact that many had very lax leasing standards.
I actually believe that we'll see a death spiral once the multiple OOS owners who bought rentals all around Austin in the hopes of major appreciation, without much due diligence, nor proper calculation of the cash flow will realise that their investition that was supposed to bring them few thousands dollars in the pocket in cash flow in reality it costs them several thousands every year and increasing, they will rush to cash out the appreciation and step on each other on the way to exists. It will just take 2-4 years of ownership before this fire sale will start, maybe sooner if they get screwed by an undesirable tenant or a few months of vacancy. My take - we'll see that starting in May next year, after they will get their tax return from their CPA, leading to an increased level of inventory of OOS owner listings on the market and the beginning of the cooldown.
- Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes7y
@Kris Wong Hey man I had to go look at the street to see on the mls. I have rental property in the area and have been able to raise the rent but it was a big remodel. 1905 woodlands. I have a client in the area that has been able to raise the rent on her house too so when I saw that post i was like wow..really... at 2005 iroquis they tried to get $1300 but wasn't able to get it so they lowered it $1095. But at 2015 iroquis they were able to get $1300 with similar floor plan. From your location you might want to consider airbnb. My ex has a duplex on burleson that she does airbnb and does well on. The apartments able to raise the rent in the area. The rents are rising in the area. The social at the corner of oltorf and burleson is sitting at 96%.
- Rental Property Investor · Austin, TX · Member since 2016 · 361 posts · 394 votes7y
@Aaron Gordy interesting to hear that AirBnB was successful in the specific area. There were a couple in my neighborhood that did well, but we're right next to South Shore. Fortunately I've had the same tenants in that property that I placed when I bought it. Sounds like experiences all over the map. We have a 3/2 duplex unit in 78758 that we leased with no problem at $1595 last summer. We just had to lease it at $1400. I couldn't believe it.
- Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes7y
@Kris Wong78758 is the domain. I haven't done any research in that area for a couple of months but its hard to digest that rents are decreasing in that area especially when the domain is expanding substantially with office buildings and more employees/employers like facebook. https://www.statesman.com/business/20180906/sources-facebook-to-lease-entire-17-story-tower-at-austins-domain/1 I do know that there are more apartments that came on the market there but the house supply is still the same for the most part except for little infill projects. Maybe folks are opting to move to apartments instead of houses or duplexes. I have seen some new class a apartments and the finish out is amazing and its like living in a resort. That is very interesting info, Kris. Thanks!
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Kris Wong:
@Aaron Gordy interesting to hear that AirBnB was successful in the specific area. There were a couple in my neighborhood that did well, but we're right next to South Shore. Fortunately I've had the same tenants in that property that I placed when I bought it. Sounds like experiences all over the map. We have a 3/2 duplex unit in 78758 that we leased with no problem at $1595 last summer. We just had to lease it at $1400. I couldn't believe it.
when so many people buy with the idea of about 200 a month cash flow.. and then to lower rent.. that's a tough one.. but it happens in all cycles..
you simply have supply and demand at play here.. you cant have hundreds of thousands of folks who 10 years ago never thought of being a landlord to now that's all they think about.. as the investing strategies change with the times and the last 10 years is been all about cash flow only.. and keep in mind OOS investors totally prop up markets.. Just like when I was in the Timber business when Japan was going strong they paid about double for the same logs the local mills were buying for 100 years.. that lasted for about 5 years until their economy crashed but man was it good for those 5 years if you knew what you were doing and could get the logs to the export markets.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Costin I.:
There is seasonality in renting for sure - if you end up with vacant rentals after the school start in autumn, you will see a decrease in inquiries and less traffic, and likely a reduction in rent.
But also the rents are, if not stagnant or decreasing, for sure not keeping up with the property tax increases and other expenses. We had to re-lease a property in Kyle in the middle of the "good season" and in order to get it rented fast, we actually had to lower the rent from previous tenant by $50 due to the many competing active properties on the market and the fact that many had very lax leasing standards.
I actually believe that we'll see a death spiral once the multiple OOS owners who bought rentals all around Austin in the hopes of major appreciation, without much due diligence, nor proper calculation of the cash flow will realise that their investition that was supposed to bring them few thousands dollars in the pocket in cash flow in reality it costs them several thousands every year and increasing, they will rush to cash out the appreciation and step on each other on the way to exists. It will just take 2-4 years of ownership before this fire sale will start, maybe sooner if they get screwed by an undesirable tenant or a few months of vacancy. My take - we'll see that starting in May next year, after they will get their tax return from their CPA, leading to an increased level of inventory of OOS owner listings on the market and the beginning of the cooldown.
as it relates to OOS investors buying in Texas this has been a common theme over the last 2 or 3 decades.. IE tax's rising so much after the fact IE after they bought that cash flow goes way down or natural or negative.. Bruce Norris gave a good talk on this he bought a bunch of Texas rentals and only held them a short time once he figured out they were not going to be sustainable because of prop tax's
Plus when you live in CA HIGH income tax.. and invest in Texas NO income tax but very high property tax's you kind of get double whammied.. you really need that appreciation to bail you out..
- Broker/Investor · Georgetown, TX · Member since 2011 · 249 posts · 146 votes7y
I've managed a portfolio of executive homes in Teravista for 6+ years and have been unable to maintain the initial ROI as assessments have risen at a rate that rents won't keep up with. There have been so many luxury apartments built within a 3 mile radius it has diluted the market. Just a normal cycle I suppose. Time to sell and reallocate the investment.
- Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes7y
Originally posted by @Lexi Teifke:
@Omar Khan Not saying that you are wrong here by any means just curious as I thought the exact opposite. What makes you say Austin is severely over built? I'm seeing very low vacancy rates compared to other parts of the country. Would love to be informed here. Thanks for your time. Have a great day everyone.
Supply increasing more than demand. Austin is a very attractive city to live and invest but in certain pockets there are supply issues.
- Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes7y
We're definitely moving away from the crazy-hot market we've had the last 6 years or so, but I suspect Zillow's numbers are a bit off (their data in Austin is also less accurate because our sales prices aren't public information). I'm still steadily increasing rent, although admittedly from a low base.
- Georgetown, TX · Member since 2016 · 96 posts · 74 votes7y
I’m not incredibly familiar with this website or their sources but the Austin Board of Realtors posted this article to their FB page.
http://austin.culturemap.com/news/real-estate/10-1...
It says apartment rents have been flat all year but predicts a resurgence in demand for apartments as the city grows along and interest rates rise.
- Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes7y
@Lexi Teifke - First, it's "my" prediction (with a value of zero). Second, is not a prediction for a crash in May next year, but starting next year, likely in May (as a result of the tax returns revealing the true picture of the investments status). And is based on what we experienced ourselves, with our rentals, and having to renew leases without the ability to raise the rents to keep up with property taxes increases and general expenses increases, because of the market saturation with active rentals. That, and the assumption most investors did not calculate their operating expenses properly (see the other conversation on NOI vs NAI), and the real net annual income being much different from expectations. That difference after a couple years of losses will become a cruel reality pushing them to sell and look for greener pastures.
If that happens, there will be a glut of property on the market and a self feeding cycle, with the expected result of sale prices dropping. As a property owner, if you have decent equity, probably you'll not be affected, unless you end up underwater. As an investor who bought on expectation of appreciation, with little to no to negative cash flow, you'll be pressured to sell to get out or will have to absorb the losses (thus the self feeding cycle).
Yes, in previous housing crisis Austin fared pretty good, but it was because prices didn't go crazy around here either. I don't think you can say the same this time - market is/was crazy hot, on par with markets like Seattle, Florida, etc, with double digits appreciation, bidding wars, shacks held together by termite spit selling for hundreds of thousands, etc.
In short, I see a stagnation in rents, leading to a rush for exits. I hope I'm wrong.
- Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes7y
@Lexi Teifke Yes, time will tell. I'm not doing anything much different - like you, I have a long term mindset and don't factor the appreciation anywhere in my calculations as you don't know where things will stand 15-30 years from now. For the immediate future I'm not worried much as my properties have at least 30% equity; I tightened my investing criteria and I'm increasing the reserves.
If nothing happens, heck, we'll all be happy; if it happens, I hope to be on a stable position and maybe even positioned to pick up some good bargains.
Maybe you can share some secrets on how you still find great deals in Austin MSA?
- Investor · Austin, TX · Member since 2013 · 662 posts · 1k+ votes7y
If your buying at market rate and within 5 miles of the capital then you are a candidate for real stress. It is becoming noticeable that a lot of properties are lowering sale prices. It could be that sellers were overly optimistic and are asking too much or we might be getting to equilibrium of sellers and buyers. I think a pause is coming but to call it a correction is way too early to tell.
As far as rents go, if your asking $1200 and below I think those rents will be safe and steady. Getting above $1200 we are seeing longer market times but in reality still better than normal market conditions. It is just that we have been operating in abnormal good environment for the past 10years.
If your purchasing for buy and hold and your NOT cash flow positive now then you are going to feel the pressure for the next several years. However, population is still increasing so if you make it through any rough spots in the short term you should do fine. Baby Boomers are leaving colder states for warmer ones, jobs are still available here in Texas, property values are still very competitive compared to the east and west coast and interest rate are still very manageable.
Population growth in America is 1%, meaning America is growing at 3.2 million more people per year and Texas is still getting more than most states. Cheers.
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