Good Value-Add Opportunities Available in Houston
Digested from Oil Prices Cause Dip in Multifamily Market, But Value-Add Opportunities Remain Strong in REBusiness Online (7/15/16) by Booth, Clifford
Houstons multifamily-housing market has slowed over the last two years due to rock-bottom oil prices. The areas rent growth and occupancy rate are below the national average, and job growth has slowed to a trickle.
But theres some good news for Houstons multifamily-housing sector: There are value-add opportunities in Class B and Class C developments. Last year, Westmount Realty Capital acquired two properties built in the 1980s, and after interior and exterior upgrades, occupancy rates increased.
Houstons petrochemical industry has remained strong, so investors interested in purchasing value-add multifamily-housing developments are wise to focus on the eastern and southern metro areas, writes Clifford Booth, president and CEO of Westmount, in the July issue of Texas Real Estate Business. First-year returns for these properties after upgrades range from 6 to 9 percent.
Value-add projects are most successful in markets where there is a wide range between the average rental price of a new Class A apartment compared to Class B or Class C units, Booth writes.