Being a real estate investor is hard work, and with recent market fluctuations linked to the COVID-19 pandemic, the situation has become even more challenging. After a brief period in which homes seemed unusually affordable – the result of historically low interest rates – in the last few months, home prices have actually skyrocketed. Buyers are paying well over market value for properties and major investment firms are in competition with individual buyers who are just looking for a place to call home. And, in a similar manner, small investors are finding themselves in an expanding struggle to keep up with these big time landlords.
Even before this recent market shift, it was hard for small investors to keep up with large landlords, in terms of amenities, pricing, and other services, but what does Houston’s rental landscape look like now that it’s faced with these added pressures? Whether your goal is to increase rental profitability, successfully secure new units, or attract tenants despite high vacancy rates, being a small investor comes with challenges that can be hard to overcome. With the right support and resources, however, there are pathways to success.
Know Your Market
Before you can make any decisions about how to navigate the Houston real estate market, it’s important that you fully understand current conditions. Compared to many other cities, including other areas of Texas, Houston has seen smaller housing price increases despite being an appealing destination for families due to employment opportunities, educational offerings, and overall lifestyle. That’s good news, right? In theory, lower prices mean small investors are more likely to be able to afford to buy in Houston, but it’s not always that easy.
Although lower prices may make some units more accessible to small investors, it also means large investment groups have the ability to scoop up huge swaths of property. In the Houston suburb of Conroe, for example, Fundrise bought the entire Amber Pines subdivision last winter, in what’s becoming a common move. Whatever your financial resources, then, it may be wise to emphasize solo properties, duplexes, or other scattered residences rather than larger multifamily arrangements as the core of your investment strategy, if you’re looking to buy right now.
Another approach to consider as a small investor working in Houston right now is to steer clear of new purchases altogether. Rental vacancies, while high in other parts of the country, are actually quite low in Houston currently, with occupancy over 90%. Obviously this is strong motivation to buy more properties because you’ll likely be able to fill them, but how long would it take you to go from purchase to lease? The prep takes time, effort, and, of course, more money, that might be better used to attend to your current properties.
Rather than buying and preparing new properties, this might be a good time to emphasize service, while also optimizing your properties to manage rent increases. Rental prices have been going up given high occupancy rates, but if people are going to pay more for housing, they want to see a difference. This can be as simple as hiring a property management company to oversee your rentals and ensure that they’re running efficiently or it may mean starting planned renovations, building new amenities, or working on a business plan for expansion for when the market cools down. Buying new properties isn’t the only way to focus on your organization’s growth.
Learn What You Can Withstand
During the pandemic, many real estate groups, both large and small, were faced with new challenges – specifically the financial pressure that emerged when tenants lost their jobs and eviction moratoriums helped them stay put. This was a necessary step that surely helped keep a devastating pandemic from getting even worse, but many small landlords complained that it was financially untenable.
Of course, the reality of the eviction moratorium and, ultimately, the challenges people regularly face in terms of affording rent, is that it isn’t without supports. There have long been aid programs that can help people afford their rent without leaving landlords in a lurch. Though this is also a good time to evaluate what, as a small investor, you can tolerate while still staying in the green, and how to work with these aid programs, it’s also critical that you look for new income evaluation and confirmation tools. The idea is to ensure that incoming tenants earn enough money to afford their rent, but also to better understand tenant income streams, a task which has been complicated by remote work, freelancing, and other complicated professional arrangements.
Small And Smart
As a small investor, you’ll always be navigating the real estate sector differently than huge firms that own hundreds or even thousands of units, but being small isn’t a bad thing. At least, it doesn’t have to be a bad thing as long as you play your cards right. If you find a way to be small and smart at the same time, you can still be hugely successful.
One of the key advantages you have as a small investor is that you can really focus on your properties and tenants, building community, trust, and loyalty in ways that large landlords really can’t. And this is something that you can do whether you’re working with tenants directly or through a property manager. Big landlords often overlook the importance of this, and it drives tenant turnover, which cuts into profits. When you take care of your tenants, though, you minimize advertising, screening, and other costs and ensure a more stable income stream.
If you’re ready to make your small residential property investments a big business, the right support is vital. Contact Green Residential today to learn more about our services and why, with over forty years of Houston-area experience, we’re the right choice for you and your tenants. Our deep roots in the city mean that we’re invested in helping it grow and thrive – and that commitment extends to your business. When you entrust us with your properties and your tenants, we take that seriously. Let’s take your business to the next level, together.