All Forum Posts by: Nate Garrett

I posted this in another thread but I think it's worth sharing again. Not that Freddie and the Fed always get it right, but good research nonetheless:

Here are two recent studies regarding oil prices and the impact on the rental market that we think are useful to investors in Oklahoma City, Tulsa, Dallas, and Houston (or really any market in Oklahoma or Texas).

Oil Price Impacts and Multifamily Housing - Freddie Mac

How is Oklahoma real estate positioned in this oil downturn? - Kansas City Federal Reserve

Hi @Mike Miser. Although acquisition prices have increased significantly since the lows of 2012-2013, rents have also increased and low interest rates provide attractive financing options for single family rentals. 

See the graph below. The blue line is the national home price index and the red line is the rental index. The idea being that the best times to buy are when the blue line is significantly below the red line. Of course this is national data, and all real estate markets are local. So you must ask yourself if it's a good time to buy in your area. 

Oklahoma City and Tulsa are certainly exposed to the turmoil in the oil and gas industry, but the effect that low oil prices will have on rental rates and acquisition prices remains to be seen. We are not nearly as exposed as we were in the 80's, but we're still very much an energy state. If oil prices remain low, job losses will continue and I would expect to see another round of foreclosure inventory in our local markets. Rents will also likely be negatively affected, but to what degree is debatable. On the other hand, the extremely low interest rates on 30 year mortgages can't last forever and still provide a compelling reason to purchase rental properties in my mind.

Here are two recent articles regarding oil prices and the rental market that we think are useful to investors in Oklahoma City, Tulsa, Dallas, and Houston (or really any market in Oklahoma or Texas).

Oil Price Impacts and Multifamily Housing - Freddie Mac

How is Oklahoma real estate positioned in this oil downturn? - Kansas City Federal Reserve

@Jason K Green

I would reconsider buying a rental property in Tulsa with a market value of $40k. There are investors that specialize in that niche, but they typically manage the properties themselves and do most of the repairs themselves. Their cash flow is created not by the property but through the value of their property management and maintenance labors.

@Jason K Green

For what type of property? Cap rates can vary widely depending on location and investment type.

Class A multifamily has dipped below 5 in some large transactions recently in the Tulsa metro.

New construction single family (~150k purchase price) is hovering right around 5 cap. Cap rate goes up from there for older properties and those in less desirable locations.

However, CAP rate doesn't include capital expenditures, so a higher rate of return should not be assumed solely based on a higher CAP rate.

A junker will show a high cap rate on paper based on NOI vs purchase price, but when the required capital expenditures are included in the long term pro forma, the actualized internal rate of return goes way down.

Remember, there is a reason that institutional investors buy class A assets in desirable areas.

Hi @Kevin Curnyn and welcome to BP.

My advice would to buy high quality properties in desirable areas in the Tulsa metro. There are plenty of deals in Tulsa on class C-D properties that seem to offer deceptively high cash flow, but the rents are often over-stated, deferred maintenance is not included in the analysis, and the neighborhood may be declining in value. Nicer properties might not seem nearly as attractive on paper, but in the long term they will probably generate higher rates of return. Ask yourself this: what quality of properties do the hedge funds invest in?

For buy and hold, I would start with 3/2/2's in good school districts such as Jenks, Union, Broken Arrow, or Owasso. If you can get a full brick rental with a 30 year (architectural) roof your long term capital expenditures will be lower. There are other niche plays in midtown neighborhoods, but you really have to be familiar with the market there to buy right.

Best of luck and again, welcome!

Hi @Joel Kadlec

Not a recommendation on a specific company, but general advice on choosing a property management company:

Make sure you spend the time getting to know a prospective property manager. Go to their office, meet their staff, and ask lots of questions.

Property management is an ongoing business relationship. It's more akin to marriage than dating as you will be working with your property manager on an ongoing basis, hopefully for years to come.

The time spent upfront with both parties getting to know each other is a wise investment, both for you and your future property manager.

Best of luck in your search.

@John Lindemann

I agree. When it comes to drainage, passive solutions should be preferred to mechanical ones.

A sump pump will eventually fail and during a thunderstorm when you need it the most, the power goes out!

As for a recommendation, we have used both Edens and Metro structural in Tulsa and they do a good job. They specialize in foundation issues and I'm sure could take care of what you need.

I will also PM you the name and number of a dirt work guy that we have used.

Hi @John Lindemann and welcome to BP.

You may want to check out the restrictions on cash-out refi's. Investors are often surprised when they find out they can only borrow 70% of the appraised value after paying cash for the property and there is typically a 6 month waiting period. These are Fannie Mae guidelines so it would be pertinent to any conforming loan, but many local banks also adhere to similar guidelines.

Best wishes on your investing!

@Donnie Martens

I'll bet you're glad to be settled. Tulsa is a great area to invest in real estate. 

Study as much as you can, but don't get "paralysis by analysis". At some point, the best move you can make is to buy your first investment property, especially with the potential for interest rates to rise in the near future.

Best of luck to you in your investing.