Why are so many investors hot on Dallas apartments? Why are more people choosing to become landlords instead of selling their homes after moving to a new one?
It might have something to do with demand for rentals and rates inching skyward. In fact, RentRange has Dallas/Fort Worth ranked at the No. 9 spot for year-over-year rental rate increases for single-family residences, and Dallas is posting huge gains in rental rates for apartments.
That, of course, might have some people saying this:
Well, they better get used to it. If you’re hoping to see some affordable apartments getting built in Dallas, you may have to wait a while. Luxury developments are the majority of what’s going up in West Dallas, North Oak Cliff, and North Dallas, as companies such as Transwestern and Trammell Crow Co. are buying up former industrial sites and plunking down pricey rentals in areas that are gradually gentrifying thanks to cultural amenities.
And they just keep coming, as Steve Brown notes in his piece about The Mark at Midtown Park. It’s an apartment community along North Central Expressway and Meadow Road, just a hop, skip, and jump from Royal Oaks Country Club developed by Dallas businessman Carl Wescott, designed by BGO Architects, and built by Balfour Beatty Construction. It looks a little something like this:
As Eric Nicholson noted in his piece for the Dallas Observer, not all of these buildings are stunning feats of architectural genius. In fact, they all kind of look the same. Critiques aside, isn’t it interesting that rents are going up, up, and away, and yet developers seemingly can’t build enough units? That’s a great recipe for any investor.
This isn’t news to CandysDirt.com readers, as just last week we told you how hot North Texas is with investors. And BiggerPockets just released a new survey of data from the first six months of 2014 showing that Dallas was the No. 1 metro for real estate investing:
Dallas, TX tops the list of real estate markets over the period studied, exhibiting strong price appreciation, while remaining a market in which investors saw strong rents relative to property values. Investors in Dallas stood to earn an almost 20% unleveraged return for residential real estate investments before expenses.
So how much have rents increased for those who haven’t made the decision to buy? In Dallas/Fort Worth, rents have increased 14 percent between third quarter 2014 and the same period this year.
The RentRange data shows that cities in the South and West generally had the greatest increases in home rental rates, while cities in the Midwest and Northeast experienced smaller increases. California and Florida were particularly strong, accounting for seven of the top 10 markets on the list. However, when looking at yield, markets in the Central U.S. and Midwest often generated higher yields than many markets in California and Florida.
“We continue to see substantial opportunity in real estate investing, but strengthening real estate markets in many regions require investors to be more informed before buying an investment property and rehabilitating it in order to achieve their desired return ,” said RentRange CEO Walter Charnoff. “While, not surprisingly, California and Florida are experiencing the largest rental rate increases, further analysis reveals that markets in Alabama, Texas, Kansas and Ohio actually produce a much higher average yield.”
What are you seeing in your area? Are rents getting too damn high?