Real Estate Market Affordability Forecast

The Home Buying Institute notes that home prices in Dallas rose by more than 9% over the last year.  They predict that the housing market in Dallas-Fort Worth will remain strong, largely attributable to low supply and high demand due, in part, to the population growth of the area.  The United States Census Bureau reported that “By metropolitan area, Dallas-Fort Worth-Arlington, Texas, had the largest numeric growth with a gain of 131,767 (1.8 percent) in 2018”.

What Does it Mean for Dallas-Fort Worth Sellers?

The uneven proportion between the supply and demand makes it a seller’s market. Simply put, it is a great time to sell with a growing number of people looking to move to DFW.

What Does it Mean for Dallas-Fort Worth Buyers?

Despite the rising prices of real estate properties, buyers can always take advantage of favorable mortgage rates and this may be a good time to take advantage of the incentives and valuable deals that lenders are offering.

Out-of-State Buyers Driving the Demand for Real Estate Market

The trends suggest that more out-of-state buyers will drive the demand in the real estate market. New graduates often relocate to the Lone Star State for the opportunities ahead. Home to a numerous Fortune500 companies, Dallas-Fort Worth provides opportunities for both recent graduates and for established professionals.

Even though DFW home prices have increased over the last few years, this area is still cost-effective.

• Low Cost of Living: In comparison with other urban centers such as San Francisco and New York, it is relatively inexpensive to live in Dallas-Fort Worth.
• Opportunities to Explore: 22 Fortune 500 companies headquarter in Dallas, so there is a diversity regarding job growth and prospects.
• Ideal for Retirement: Due to its affordable properties, convenient public transportation, and state-of-the-art healthcare system, many people choose to retire in Dallas.
• Diversity: According to this report, Dallas is among the five most diverse cities in the US. It takes pride in the diverse culture, art, and camaraderie. The professional sports teams in Dallas include Texas Rangers, Dallas Mavericks, NHL Dallas Stars, and the Dallas Cowboys. They contribute about $5.5 billion to the economy of the city each year.

What About the Rental Market?

The high demand / low inventory ratio of single-family dwellings position has fueled increases in rental rates that have outstripped wage growth.  That, coupled with an unemployment rate of more than double the previous year (7.10% in November 2020 versus 3.10% in November 2019), raises some concern about whether rental prices can be sustained and also whether the tenants hit hardest in the economic strain of the pandemic can meet their rent.  Some of this concern has been offset by new government stimulus benefits and the City of Dallas Emergency Short Term Rental Assistance program.

Owners of rental properties who do not currently engage a property management firm should consider doing so to provide assistance with tenant screening and signing, rent collection, lease renewals, and all other aspects of property management.

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Simultaneously, the alternative work arrangements and classes going online pushed a spike in relocation rates. It is important to consider the real estate market situation in whatever area you’re considering investing in. The battle against the deadly virus is also far from over. As a real estate investor, you must be well-equipped with accurate data concerning the global pandemic’s impact.

Before we kick off a whole new year, here are the effects of the previous year and expectations for 2021:

Long-term Impact of 2020 on Real Estate Demand

When calculating how the last year would affect the real estate demand in 2021, we need first to look into the supply inventory. Acquiring months’ supply of inventory data can provide a clear picture of the current market conditions. Knowing the volume of transactions, fluctuation of prices, and mortgage interests allow you to come up with an estimate on when properties can sell.

Every six months serves as a scale with a moderate price appreciation, which is normal and balanced if the prices increase by 2% to 3%. Texas has not reached a balanced market since 2008. In the past year, Austin reached 2.1 months of inventory. Lower months’ supply of inventory indicates a higher demand and a spike in property pricing.

Texas property prices are at an all-time high, with the median listing price at $359,739. In comparison, the average pricing all over the US starts at $345,500. While there is a slight difference with the average prices, experts find it a practical reason for people to look for other options. As a result, a growing number of Texans expect to lean towards property rentals instead.

Thus, higher occupancy rates for rental units will make sense for the Texas real estate market in 2021.

How Does This Affect You?

The market expects tremendous competition in scoring affordable properties for people considering relocating to Texas or acquiring a starter home. Make sure that you begin your search as early as today to find the right home for you. With Herman Boswell Property Management’s help, you can gain better insight and assess a plethora of options suitable for your budget and needs. You can access property listings around Texas, which includes both new construction and up-and-coming developments.

The Future of Mortgage Interest Rates

While assessing the mortgage interest rates over the last years, it is typical for a 30-year fixed-rate mortgage to cover 1.75% of the 10-year U.S. Treasury bond. As you know, a year of US Treasury bonds amounts to 0.7%. The addition of 1.75% to the 10-year Treasury results in a 2.45% mortgage interest rate. This inflation accounts for the mortgage interest rates of today.

Granted that we enter an economic recession when the crisis continues, the federal law mandates industries to decrease the rates to 2.5%. This opportunity aims to provide homeowners the ability to bounce back. Many experts anticipated this would happen in 2020, but mortgage forbearance risks can agitate the market.

Millennials and Gen Z: The New Generation of Buyers

Millennials and Gen Z’s are the frontiers of the preceding generations and play a fundamental role in the real estate market’s future. The oldest generation of millennials will turn 40 in 2021. They account for a considerable portion of trade-up buyers that have lived long enough to measure their equity gains. In contrast, younger millennials go forward to their “roaring 20s”. They are gradually building their properties and assets similar to older Gen Zs (24-year-olds) this year.

The recent data revealed that Millennials and Gen Z gamble with more significant debts to take advantage of low mortgage rates. Despite the soaring prices of 2020 property listings, they (38%) did not seem to hesitate to make down payments. In other words, they are lowering their mortgage budget, and their home search standards are never in question when looking for properties. Most of them are motivated to live in neighborhoods with expensive properties to guarantee safety and security. The remaining percentage of the people surveyed would prefer to lower their budget to earn more savings.

2021 Outlook for the Real Estate Market

The following factors imply that the downturn of the Texas real estate market is not likely happening this year:

1. Over the years, the population of Texas has continuously increased. Texas population growth was peaked between 2000 and 2018, reaching over 7.4 million residents and homeowners. The primary reason behind this increase is associated with economic growth in the state and vast opportunities. Although the 2020 pandemic has affected Texas’s migration rates, its actual impact will likely come to fruition in 2021.

1. Oil and technology are the cornerstones to the success of the Texas economy throughout the years. The past year prompted oil industries to decrease prices, which can potentially cause the economy’s downfall. However, Texas has been showing gradual recovery with its modest economic growth over the past months. Studies found that the unemployment rate decreased from 13.5% in April to 8.3% in September.
2. Although Texas is declared one of the top states to provide plenty of job opportunities in 2020, the job growth rate rates significantly slowed down. Compared to the 2019 data (2.3% growth), its job growth rate is down to 1.6%. This growth rate will likely continue in 2021 as one of the adverse effects of the pandemic.
3. According to the Market Recovery Index, a vast portion of Texas’ housing market surpassed the benchmark for recovery from the COVID-19 pandemic.

Your rental properties represent a significant investment.  Protect that investment with a property management firm you can depend on.  Contact Herman Boswell Property Management.

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Most landlords know the qualities that make an ideal tenant, but what does it take to attract them?  Factors such as the location, landscape, and property amenities can be the make-or-break.  Landlords can gain a competitive edge and increase their chances of attracting excellent tenants if they have the following features of their rental properties:

Location

The first thing that tenants consider when looking for a place is its location. Many people look for rental properties near schools, business districts, transportation, and shopping malls. So, if you are looking to invest in a rental property, you want to look for these features. If your rental property is in an area with high demand, you can ask for higher rent.  Some prospective tenants will prioritize location over anything else and are willing to compromise on other amenities.

Safety and Security

More tenants are willing to live in your rental property if the area is safe and secure. With that in mind, location goes hand-in-hand with safety. The rental property must be in a safe environment with a low crime rate. The property should also have security devices and many landlords install alarm service systems in the premises.

Sufficient Parking Space

No one wants to spend a long time finding a parking spot after a long day at work or if they have groceries or other packages in the car. Parking spaces can be a pressing issue in properties located in urban areas. The streets are often busy, and some sites do not allow off-street parking.

Renovations

You can attract more people to rent your property if the space looks polished and organized. Even when the property has had several tenants staying in it over the years, it should not feel that way. Performing upgrades and renovations can make the property more attractive and functional. Kitchens and bathrooms are the rooms most often renovated.

Bonus Facilities: Backyard or Balcony Access

Some tenants prefer a property that has a designated place to sit back and relax. If your property has a backyard or balcony access, it can increase the chances of attracting more tenants. More often than not, places with these features can cost more, especially within urban areas.

Property Inclusive of Appliances

Appliances are another valuable bonus that tenants tend to look for. Most renters do not want to invest in major appliances. Installing new appliances including central air conditioning and a washer and dryer can attract higher-quality tenants.

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To provide a positive rental experience, you should be aware of landlord-tenant laws and fulfill your obligations as a landlord.  It’s also very important that you know the rights you have as a landlord. These rights include:

Right to Collect Rent from Tenants

As part of the rental agreement, all landlords have the right to collect rental payments from their tenants.

In addition to the rental amount, late fees may also be collectable.  Late fees are penalties collected when tenant does not pay the rent within the negotiated timeframe. Per Texas law, you can collect late fees if any portion of the rent remains unpaid two full days after it was due. However, landlords can only collect a late fee stipulated in the written lease.

According to Senate Bill 1414, landlords overdue fees must be reasonable.

• Pre-arranged late fees should not exceed 12% of the rent’s total cost for a property unit with four units or less.
• Pre-arranged late fees should not exceed 10% of the rent’s total cost for a unit in a property with more than four units.
• Pre-arranged late fees should not exceed the landlord’s uncertain damages related to the late payment of rent, including direct or indirect expenses, direct or indirect costs, or overhead associated with the collection of late payment.

Payment Methods

There are no specific payment methods required for both tenants and landlords to use. However, landlords can declare their preferred means of payment in the leasing agreement.

Landlords should notify the tenants in advance if they want to transition to a new payment method. Setting a requirement to pay online is considered an amendment to the lease. This arrangement can either be performed at the start of the new lease period or upon the written agreement of both parties.

When the lease agreement does not express a particular payment method, landlords cannot refuse any payment type. Tenants that pay their rent in cash must receive a receipt.

Right to Raise the Rental Costs

The law does not prohibit landlords from raising the rental costs in the event of lease renewal. Rent increases cannot be implemented until the lease term ends.

You can anticipate local rent control ordinances in Texas after the declaration of a state of disaster. Housing emergency regulations are usually approved by the governor before the adjustments in rent prices apply.

It is also important to note that landlords cannot increase the rent as a form of retaliation for their tenants exercising their rights. These right include tenants requesting repairs, making complaints about the unit, or joining a tenant organization.

Right to Evict Tenants

Landlords can practice their right to evict tenants, especially those who refuse to pay rent. Before you evict a tenant, you should be aware of the appropriate eviction proceedings in Texas. This process allows you to collect the remainder of the unpaid rent or any other costs associated with the eviction.

The following involves the legal terms typically utilized during eviction proceedings. As a landlord, it is essential to know these terms to determine their role in the process.

Forcible Detainer.  This process refers to tenants who stay within the rental property after the landlord revoked their right to stay. Whether their lease expired or was forfeited, they cannot dwell inside the rental property.

Hold-over Tenant.  Hold-over tenant is the term used to describe a tenant who remains at the rental unit without notifying the landlord.

Notice to Quit or Vacate.  Tenants should receive a notice to vacate from their landlord. According to the law, landlords must notify their tenants before starting the eviction process. Tenants need warning of the issues that arise and given some time to make changes.

Tenancy-at-Will.  This explanation refers to the leasing agreement between a tenant and a landlord bound without adequate documents. Put simply, tenancy-at-will is a verbal agreement. More often than not, this arrangement occurs with family members, relatives, close friends to the landlord.  Even if the lease is merely a verbal agreement, the law requires a formal eviction process before the tenant can leave.

Writ of Possession.  Writ of possession is typically the final stage of the eviction proceedings. It is when the court orders the authorities to remove the tenant in the property, return unsettled rental costs, or retrieve the landlord’s property from the tenant.

Eviction Process

Here are the steps you need to take before evicting a tenant from your rental property:

1. Inform the tenant by sending them the Notice to Vacate. Landlords can give up to 3 days to let the tenant move out before filing the eviction suit.
2. After filing the eviction suit, expect the eviction hearing to commence after at least ten days.
3. Once the judgment is issued, there will be no action taken for the next five days. This time frame allows either party to appeal. When the tenant decides to appeal, another hearing begins after a week.

Upon the final judgment, landlords can ask for the tenant’s writ of possession. Tenants receive a full-day notice before authorities remove their stuff from the rental property.

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When property managers handle repetitive tasks, they ease your burden to focus on more critical landlord duties. This reprieve allows you to concentrate on significant repairs and legal issues that require your immediate attention. Most of all, you get to explore new ventures or possible expansion opportunities, making project managers worth an investment.

Property managers can be a significant asset to landlords. Consider the following factors to determine if working with a property manager is the right move for you.

Expanding your Property Portfolio Means More Properties to Handle

As your property investment grows, you tend to manage more rental properties and units. You may obtain properties at different locations, some of which might not be near to you.  Arising issues can be challenging to handle alone and from afar.

Moreover, not all landlords who undertake this venture might can devote enough time to manage day-to-day tasks. Whether you have properties at different locations or are too busy with your other commitments, property managers are here to help. They can manage tasks such as collecting rent, handling tenant complaints, performing maintenance duties, and more. This opportunity allows you to concentrate on the steps you need to take to expand your property investment.

Property Managers Can Help You Manage Turnover Rates

High tenant turnover can affect your profit as a landlord. When more tenants leave, you need to allocate a budget for acquiring a new one. It takes a certain amount of time to advertise a property, run background checks on applicants, prepare necessary documents, and show the new tenant their unit.

The more time you let your property vacant, the more money you lose.

Working with a property manager can help you resolve this issue. They have extensive experience in handling rental properties and tenants. They have the right resources to advertise your available units across several channels. It is also their job to perform strict tenant screening and background checks to acquire a reliable tenant. Property managers can handle background and reference checks, as well as employment and income verification.

Property managers can also perform the following tasks to eliminate high tenant turnover:

Make the Property More Attractive to Tenants. Seasoned property managers have a clear understanding of the type of units that are sought after. This understanding allows them to determine the improvements needed to attract more tenants.

Set a Reasonable Rental Rate: As industry experts, property managers can help you come up with an optimal rental rate. They have access to the local real estate market, data on competing units, and other property management tools to help you make an informed decision.

Minimize Tenant Turnover.   Property managers can help you improve tenant retention by facilitating routine maintenance and repairs. You can also pay close attention to your tenants’ needs when you have a right hand by your side. Addressing all the concerns and inquiries in a timely fashion increases the chances of them staying.

Get Expert Help

You can always use a property management expert to handle instances with which you are unfamiliar. Working with a property manager allows you to differentiate a good tenant from a bad one. Right off the bat, they can see the red flags. They also have enough tools to verify crucial information about potential tenants.

A portion of property management goes into lease enforcement. Landlords have to make sure that both parties follow the terms of the lease. Property managers can assist you in dealing with difficult or non-compliant tenants. Once a tenant breaks a rule, property managers will immediately step in to deal with it.

They Keep You Out of Legal Trouble

As a landlord, it is your responsibility to study all the obligations and responsibilities you have. You should also be very familiar with the specific state laws surrounding property rental. Property managers can enlighten you about these topics and provide you with useful advice. There are a lot of technicalities involved, so it’s best to talk to an expert.

The Bottom Line

Suppose you are a landlord who is just starting in the industry; learning what to do as you go can be risky. Not everyone knows how to acquire suitable tenants, charge reasonable rent, and maintain properties. When things go wrong, it can cost you time and money.

Working with property managers allows you to prevent the pitfalls of managing rental properties. They have the experience, resources, and knowledge to handle everything it takes to succeed.

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