If you are an investor on the west or east coast, you should consider investing in the Midwest and specifically Oklahoma. We speak with out of state investors daily about opportunities in Tulsa and Oklahoma City. Investors need to work harder to find good deals than they did five years ago due to the more competitive real estate market. The primary markets continue to be extremely competitive and the bigger players/investors are starting to move towards the secondary and even the tertiary markets.
Oklahoma is a tertiary market, however it is moving towards secondary market status.
Since we manage over 500 units in Oklahoma (We own 125, and manage the rest for other investors) we have some insight into the market, returns and asset classes. Below are some thoughts and trends on the 3 main asset classes in residential real estate.
Single Family Rentals
The 3 main types of SFR investors are 1. Investors using their primary residence as an investment property when they move to another home 2. High net-worth individuals such as doctors, attorneys, executives looking to strategically place money for return, safety and tax benefits. These individuals cannot afford to spend their time buying, selling and managing their assets. Typically these are A & B assets that provide an average return of 4% to 8%, which isn’t bad considering the depreciation value they receive. 3. Low income housing, which can provide some income value but is much tougher to manage and obtain good returns. Out of state investors need to be careful of low-income rental opportunities.
Investors at all levels have pursued multifamily properties larger than 20 units for over 15 years. Large investors, real estate funds and syndications have been playing in this space for some time and smaller investors are looking for opportunities and ways to capitalize as well. Although they are harder to manage they are attractive because it is easier to place large sums of money to work and faster. Cap rates have fallen in the multifamily sector because of the growth and competition.
5-20 Unit (Tweener market)
This is a market that is not sought after by the larger investors and real estate funds because of the size and the time consumption. These properties are not a target for most real estate investors because of the larger cash outlay and complexity of the deal. Given these factors, there is less competition for smaller multi unit properties, which could provide an opportunity for high net worth individuals or smaller localized syndications. There are some pros and cons. Properties over 4 units cost more to insure, the properties are typically older (deferred maintenance), financing is more difficult and they are much harder to manage than SFR but the upside is the potential for a higher return and finding better deals than SFR and larger multi family properties.
If you’re looking for investment property opportunities and/or property manager in Tulsa, Oklahoma, we hope you will give us a call. We’d love the opportunity to talk to you and let you know what we can do to help manage your property in the Tulsa market. Please contact us at Renters Place and we’ll show you what makes us different when it comes to Tulsa property management.
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