Dallas Apartments Here Is A Positive Way To Look At Them
If you are afraid to invest in Dallas apartments, than listen to this. The vacancy rate for apartments in our country has gone sky high because of all the apartments available listed for rent on the market. There are simply too many apartments for lease. Let’s go over the fundamentals. If there are way too many apartments on the market, (and this goes for Dallas apartments as well), that are available for rent in comparison to how many people actually want to rent one, then rent rates are going to plummet and that is exactly what is going on with Dallas apartments and other apartments across the country. However, this creates opportunity within Dallas investment property.
There are investment opportunities here by the way but I would like to go over the issue a little before I get into that. The first thing that shouldn’t be going on is new property development for the construction of new apartments. Brand new apartments are under construction in the northern suburbs of Dallas. Yes, this will make great Dallas investment property; however, for right now it’s just compounding the problem of high vacancy rates for Dallas rental property and other property across the country. If you were a land lord before vacancies rose than you have to deal with the issue at hand. However, for those of us that are looking to invest in rental property the time may be just right.
As an investor looking in at the issue I can’t help but look at all the opportunity in what seems like a mess. If apartments in Dallas are having vacancy issues (vacancy is high) that only means that the apartment complex is worth less. That goes for all the complexes of apartments in Dallas, the properties for sale and the properties that are not for sale. When an investor observes apartment complexes on the market, they should look at the vacancy of the investment property as well as the lease rate. Chances are the rent is lower than what the owners would like it to be. Don’t run away now, an investment opportunity may be here and Dallas investment property like this is not here forever. This could be one of many hidden investment opportunities staring you in the face. After you have looked over the vacancy rate and the rent the tenant pays, make an offer. This is different than residential property, this is Dallas rental property so make an offer based how much return on investment you want to make each year assuming the rent will never increase from what they are today.
I think we can agree on a few things here and that is rent is low and vacancy is higher than normal. SO, looking at Dallas investment property, and particularly Dallas apartments, one might anticipate that the Dallas rental property market will return to normal which means that rent will return to normal (go up) and vacancy will return to normal (go down) which will in turn raise your return on investment. Lets look closer.
Since I don’t know you I’ll use me in this quick and over simplified illustration of a way to buy apartments in this economy.
I’m looking to buy into Dallas Texas property. Let’s say I bought a few Dallas apartments and accomplished a 9% ROI (return on investment) per year. And one day the market normalized and I decide to raise rents 5% which will simultaneously raise my ROI to 14%. Well we can already see that in this case my property was worth the price I bought it for when I bought it in a hurting rental market. I know that the increase of rent has hypothetically added value to my property. Let’s spin a little “history repeats itself” on this scenario. Now that the market looks nice and shiny, an investor that was hiding when the market looked dark and scary is out looking to buy Dallas rental property and comes across one of my Dallas apartments.
Before I finish this example we should have a quick reminder of what properties for sale naturally achieve in a recovered real estate market and in this case its income property.
When a real estate market recovers it tends to demand more money to buy the same property even though the rent has remained the same which makes the return on investment lower for the new “buyer.”
If a buyer in a scary real estate market can buy Dallas apartments and achieve an 11% ROI then most likely that property will only return, say, 8% to the new buyer in a recovered real estate market. Also, it’s easier to find the bargains in a hurting real estate market.
On the “sellers” side of things they get more money in their pocket without increasing rent. On the “buyers” side of things they pay more and there by decrease there ROI. Why? In this case it’s because there is more demand in the market for my Dallas apartments or Dallas rental property.
The conclusion to our example; if the investor buys my Dallas apartment at 8% ROI (lower than my 9% because the deals are starting to go away) then I will make a nice profit. Believe it or not, this is what many investors are doing right now as I write this. New property developments such as the 26,000 new Dallas apartments and other Dallas rental property are going up in the northern suburbs of Dallas right now. This is devaluing existing property for sale since the apartment supply is already too much.
This in turn is one of many investment opportunities presenting itself among Dallas investment property and more specifically Dallas apartments and other Dallas rental property.
Filed Under Income Property, Investing |
Tagged With Dallas apartments, Dallas investment property, Dallas property, Dallas real estate, Dallas rental property, Dallas Texas property, investment property Dallas, property appreciation, vacancy rate
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5 Responses to “Dallas Apartments Here Is A Positive Way To Look At Them”
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