Phoenix. Las Vegas. Dallas? All of these cities have over the last few years seen a HUGE slew of investors and prospectors hoping to cash in on the perfect storm. Large amounts of affordable homes available for sale and high rental rates. But with investment bubbles all over the country bursting, how is it that Dallas still seems to be going strong? And are there any good deals left for property investors?
You might have read recently on our other blog that Billionaire B. Wayne Hughes, founder of Public Storage, purchased 200 investment properties in Dallas with the hopes of turning them into rental homes, and eventually selling them at a profit. In fact, his advisors as of March 2013 still believe that Dallas homes are undervalued by about 20-30%. But why?
In the end, it all comes down to the type of investors that we see in Dallas. It's not just small-time single person investment that is powering the huge economic growth that we're currently seeing, it's the large companies that continue to use Dallas as their home base that truly fuels the process. ExxonMobil. AT&T. Southwest Airlines. RadioShack. JCPenney. 7-Eleven. All of these companies have made a long-term investment in Dallas, and continue to move employees and operations here on a yearly basis, and this along with record-low mortgage rates is what we believe is causing the unprecedented 5% year-over-year equity growth that most Dallas properties are experiencing. If your mortgage rate is 3.5% (which is pretty common right now), and your equity growth rate is 5% - well, you do the math!
And while this is a good thing, it's also an issue. Investors all over the country, and even current residents of Dallas, are realizing that investing in a rental property in Dallas is a good idea. So now instead of just speculative investors from out of state purchasing homes, we also have home owners who would traditionally sell their homes here, renting them out through property management firms instead. And because mortgage rates are so low and rental rates so high, they can easily afford the payment on a second home.
So now, we simply don't have enough inventory for investors in traditional markets, and Realtors are scrambling to find homes for even your average first-time home buyer with most homes experiencing multiple-offer situations within the first few weeks of going on the market. We even recently had an agent here in Dallas who received 63 SEPARATE OFFERS on one home in one day. See the picture above. That's insane.
So what's the solution? Creativity. Foresight. Planning. With the growth of innovative technology that has pervaded the real estate industry over the last decade, it seems that some Realtors have forgotten the one major fundamental requirement that makes a great agent. And that is market knowledge. It's so easy now to let your clients do all the work for you; picking out their own properties on Zillow, Trulia and the 1000 online MLS sites, but what happened to the advisor role that Realtors are meant to play? Any agent can open doors and fill out a contract, but it takes a great agent to be able to read the market, track growth and accurately gauge where the next property investment area will be BEFORE it becomes a hot market. I think I know where it is, and I've already helped a few clients invest in homes with good results in this area, but only time will tell.
So my advice is bascially this. Yes, there are investment opportunities still left in Dallas, but they might not be where you think they are. Don't follow the herd, think long-term, and think like your customer. When the rental rates get too high in Area A, where is the next best option? That's where you'll find your growth market.