More and more Killeen-Fort Hood area homeowners are choosing to rent their homes instead of selling them when it is time to move. There are various reasons for the trend, but there is no doubt it has caused a boom in the local residential property management industry.
Stalwarts and new players in the property management game are all reaping the benefits.
“Between June 2010 and December 2011, the rental market picked up exponentially because of troops ETSing,” said Tom Curler, certified property manager at the Jim Wright Company in Killeen. “And it has picked up again. By comparison, in January to July, we were taking in about five to six houses a month. Now were are taking in five to six per week. Sometimes I take in three in a day. So that market has grown four-fold.”
“I can only speak for our company, but I believe we are a reflection of what is happening throughout the community,” he added.
The people at Shine Team Realtors agree. Brothers Scott and Steven Shine opened a separate, but complementary, management company along with their cousin, Rodney Shine. After decades as an area leader in home sales, the three veterans established Shine Residential Management in January, independent from Shine Team Realtors.
“What we noticed was there were a number of people who were coming in and wanted to sell their house, but when we did the market analysis, their home’s value had not appreciated to the point where they could sell their home, incur all the expenses and still break even,” said Rodney Shine. “A lot of people do not realize there are a lot more costs associated with selling a house than there is when buying a house.”
Shine explained exactly how he helps clients decide if they should rent or sell.
“We assess the value of the property,” he said. “We explain the management fees. There is no industry standard, but it usually comes to about 10 percent. We compare that to their monthly payment. We compare market rental values minus the management fees minus their mortgage payment. This gives them their net cash flow for the property.”
It is not always easy for a homeowner to decide if selling or leasing their home is the right move. Dr. Jim Gaines, research economist at the Real Estate Center at Texas A&M University explained the main reasons a homeowner might choose to lease.
“There are a lot of variables,” Gaines said. “Some people simply do not want to sell their homes because they might want to come back and live in it in the future. Some people go into buying their home with the idea that it could be an investment property in the future.
“I have seen military guys who own homes in many different places for investment purposes.”
Gaines said the explosion in Killeen is likely caused by an influx of soldiers who have to rent their homes because selling them would lead to a loss.
“These people simply can’t afford to sell because it could lead to a significant financial hit,” he said. “Let’s say you are a soldier who bought a house two years ago. You find out you have to relocate. Lets assume your appreciation rate was between 3 and 4 percent, but the sale will cost you 8 to 10 percent. It doesn’t take a rocket scientist to see that the homeowner does not have enough equity to break even at that point.”
Gaines said homeowners have to think about these things from the beginning.
“You have to have an exit strategy,” he said.
Just Rentals LLC in Killeen anticipated this trend when they opened 10 years ago. Property manager Justin Fenton said the company chose to focus exclusively on rental properties and rental property management. He said their business is currently about 70 percent renters and 30 percent homeowners.
“Basically, it’s a steady income,” Fenton said. “It is a very lucrative business. How hard you work is how much you make. People are always going to need somewhere to rent. The housing market is feast or famine. So this is the steadier market.”
Just Rentals managed about 30 properties when it opened. Today, it manages around 300.
“We’ve seen significant growth in the last year,” Fenton said.
Curler said the Jim Wright Company’s property management division has added 300 new residential properties in the past year alone.
“In June 2010, we managed around 2,200 properties and had about 60 vacancies a month,” he said. “By December 2011, that number was 2,500 with 500 vacancies a month. As soon as January hit, we started renting 100 additional units a month compared to the previous year.”
At the end of the day, Shine said property management and home sales take the same skill-set to succeed. And he said his company did not get into property management to make a quick buck.
“This was not something we did because we thought there would be a profit stream immediately,” he said. “We felt we could offer solid management. We believe we provide the best service possible so our clients can keep their homes. And when their home hopefully gets to the point where its appreciation exceeds the cost of selling it, we would turn it over to our sales team.”
Gaines said the trend is not just local. He said many homeowners across Texas are suddenly considering renting their homes instead of selling them.
“That has been a shift in the market as a result of the housing collapse, poor economy and other factors,” he said. “There are several real estate companies that never touched rental properties in the past that are now going into property management.”