Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
How do you see your market? Have sales or prices peaked? What are the unique characteristics affecting your market? Where do you see it in 1-2 years?
In Austin, sales are still high, but down a little from last year. Prices are still rising, days on market low, but holding steady at 42 on average. It's still a very healthy market, but not growing quite as fast as the past couple of years.
I see continued growth over the next couple of years, driven by quality job and population growth. There are speculative pockets that could move back some, but great locations have plenty of fuel to continue upward.
Investor · Chantilly, VA · Member since 2014 · 73 posts · 13 votes
12y
The valuations in Toronto are unbelievable. My wife and I were looking to invest there but quickly realized that it would be near impossible to actually make money. It seems the average residential buyer just doesn't seem to mind about the price - they see it as just going up and up and up. I hear very similar sentiments from there as I heard here in Virginia in 2005-06. There would be occasional rumors of a market top then everyone would go back to believing that prices would just go up forever. It took us years for prices to get back to normal in Virginia (where we live) after the crash in 07-08. Actually I'm not sure I could get more for my house than what I paid in 2007 - and that was a foreclosure. I hope Canada doesn't go through the same thing.
U.S. investors are the most optimistic they have been in the past 7 years, as the economy slowly continues to improve, according to a late-August poll by Gallup Inc.
How do you see your multifamily market? Have you seen a big variance in the multifamily market compared to the SFR where you have been investing?
Peter,
Multi-units in the areas in which we invest are overpriced - too much money, chasing too little return. In our local market we had a "new, inexperienced" group come in overtop of us on recent offer we made for 50 units (2 buildings). They paid approximately a ~6.0 CAP where one should have paid closer to an 8.0.
How do you see your multifamily market? Have you seen a big variance in the multifamily market compared to the SFR where you have been investing?
Peter,
Multi-units in the areas in which we invest are overpriced - too much money, chasing too little return. In our local market we had a "new, inexperienced" group come in overtop of us on recent offer we made for 50 units (2 buildings). They paid approximately a ~6.0 CAP where one should have paid closer to an 8.0.
This is a time for patience.
Maybe you should be selling to the 6 cap group, Roy. Then buy 'em back in a few years.
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
11y
Here in SW Florida sales have slightly slowed. However, cash buyers make up about 65%+ of the transactions. So, unlike 2008 when everyone got crushed even if the market slows we won't have a lot of owners in a bind. Back in 2004-2008 people with 40K a year income were buying 2M worth of RE. Thanksfully...those days are gone! After seeing what happened to a LOT of people back then I am cautious and use little leverage. I sleep well at night with a LTV less than 20%. One thing Florida and Texas have in their favor is the boomers retirements and wanting to move to warmer climates and states with no income tax.
Maybe you should be selling to the 6 cap group, Roy. Then buy 'em back in a few years.
Funny you should mention that Jon ... my partner and I had the very same discussion a few weeks ago. I've started modelling the cost benefit of selling a couple of our properties and reinvesting the proceeds elsewhere versus the cash-flow of retaining them.
Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
11y
I just sold a student apartment in Canada for that very reason - it was a sub 6% cap deal, and I just can't see any more appreciation out of it. Although the cashflow and ROI was still OK, my Return on Equity was becoming dismal. I can take that equity and invest it in better opportunities elsewhere in the US.
After the market cools in a few years, it may be worth circling back and picking up something similar again.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
11y
Multis in LA are at all time low inventory with all time high number of buyers. Not sure how long that could last but it is off the charts low inventory. They are building as fast as they can with infill tear downs. SFR seems to be stabilizing. I see stabilizing looming above 07 peaks. The trends look similar to 07 without the bogus borrowers this time.
Rental Property Investor · Anchorage, AK · Member since 2013 · 50 posts · 8 votes
11y
Are there a lot of cash buyers in Austin. In the Houston area there are "starter type homes" that are going for asking price which to me is indicative of the market having more to grow.
Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes
11y
Good question John.
I'm willing to bet that Garland is 12 to 24 months from peaking. Though long-term DFW is a great market... I was buying in DFW from 2007 to 2011. Now, I'm focused on South East markets, which are still in expansion phase. This free market cycle monitor report might be helpful. It's one of my favorite reports.
Atlanta, GA · Member since 2014 · 32 posts · 6 votes
11y
@David C. My company is based in Texas and Atlanta was the first city outside of Texas that they affiliated with because of their belief in our expanding market. Depending on what neighborhood in Atlanta you are in (mostly north of I-20 with the exception of a few suburbs on the south side), the market for flips is tremendous. All of our properties within those areas sell within 24-48 hours.
Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes
11y
Thanks David. Atlanta is close to a peak (probably 12 months or so if not already peaked). It's competitive to get good deals and prices have been increasing dramatically.
Feel free to take a look at my recent Linkedin article for more info on market cycles:
Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes
11y
David,
I would say Tampa might be a bit better market, although I haven't invested here yet.
Based on a few market cycle reports, it looks like Tampa already peak and will probably be close to a recession phase. Feel free to take a look at the latest Marcus & Millichap multifamily research report (available free with signup) for more info:
Apartment completions will outpace growing rental housing demand in Tampa Bay, leading to an increase in the vacancy rate this year. Despite the expected rise in vacancy to a level closer to long-term trends than the low readings posted recently, demand drivers in the metro remain vigorous and are growing stronger as new units come online. Employers in Tampa Bay have been adding more than 6,000 jobs per quarter since hiring resumed four years ago, and an average 1,900 new households were also formed quarterly over that stretch. As hiring accelerates, multifamily developers may indeed step up the pace of building, not slow it down. Other factors are also supporting an extended run of strong rental housing operations. A decline in the local homeownership rate for a variety of reasons, including foreclosures, has expanded the renter pool. Also, although thousands of apartments were completed over the past two years, rental inventory remains less than the level prior to the conversion boom, when the metro also had 120,000 fewer households.
The surge in apartment construction is also providing an outlet for some of the equity pursuing acquisitions in the metro. Some new complexes are being sold during lease-up and, in some instances, prior to completion and commanding prices of more than $200,000 per unit. New construction is also elevating interest in properties at all price points and quality levels across the market. Specifically, investor demand remains keen for 1990s or early-2000s properties that can be upgraded and re-leased at rents closer to those charged on new construction. Including these assets, cap rates on the wide range of properties that offer opportunities to add value start in the mid-6 percent range, with attainable terminal cap rates starting roughly 100 basis points higher. While local investors and larger equity players compete to acquire aspects in their respective spheres, debt capital has also become more abundant and competitive. The universe of lenders is expanding to offer borrowers additional options on terms and other forms of debt to meet specific capital needs to complete an acquisition.
2014 Annual Apartment Forecast
Employment: Employers will create 33,500 jobs in 2014 to expand payrolls 2.8 percent, exceeding last year’s gain of nearly 30,000 positions. With the projected increase, nearly 127,000 jobs will have been created since payrolls resumed growing in early 2010.
Construction: Builders will place in service 4,400 units in the market this year, exceeding the 1,917 apartments brought online in 2013. Developers are also on pace to draw permits for approximately 6,200 units of multifamily housing during 2014, a 25 percent rise from last year.
Vacancy: Slightly higher vacancy will be the near-term norm as new rentals increase across the metro to fulfill growing demand. The delivery of new rentals will exceed net absorption of more than 3,100 rentals in 2014, raising vacancy 50 basis points to 6.3 percent; a decrease of 30 basis points occurred last year.
Rents: The average rent will rise for the fifth consecutive year in 2014, advancing 2.5 percent to $915 per month, though new construction may lift concessions. In 2013, a gain of 2.4 percent was recorded.
Investor · Bay Area, CA · Member since 2014 · 207 posts · 190 votes
11y
@Account Closed , thanks for the feedback, I am seeing marketing materials from some syndicators promoting Atlanta apartment with pretty optimistic projection. I wonder how it will end in a few years....
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