January 2018 rent per square foot maintains the flat trend in rent seen in the last quarter of 2017. While December 2017 square foot rents registered 78¢, January 2017 returned to the 76¢ per square foot realized in November and October of 2017.
This overview utilizes NTREIS data on leased properties in Abilene, Texas. This data provides 13 months of data spanning January 2017 to January 2018, allowing the user to look across these months at changes in rental prices, days on market and inventory available town wide, both by school district and by ZIP code. The percentage changes calculated in this table compare the current month’s statistics to an average of the last 12-months and the data from the same month in the 2017.
Flat is the most succinct way to describe area rents. Town wide rents fall .00037/sqft/month. In AISD, rents fall an infinitesimal .00026/sqft/month over the last five years. In WISD, rents fell by .00091/sqft/mo over the same period. To frame that on a monthly basis, it would take 11 months to lose 1¢ per square foot in WISD, but 38 months – more than three years – for AISD rents to fall 1¢ per square foot.
To appreciate these flat rents, a graph of real (inflation-adjusted) rent per square foot was devised for five years of data spanning December 2012 through December 2017. Over this 5-year period, we see the marginal decline in rents in AISD and town wide. The trend for Wylie ISD is faster and some of this has to do with age. The average Wylie rental is 20 years old and the average Abilene ISD home is 50 years old. Like a new car, rent houses lose their appeal fastest in their early years.
With flat-to-declining rent, it is difficult for new investors to rationalize building new and this acts as a barrier to entry, keeping our housing stock in check. Outlier projects that benefit from random factors like TDHCA tax credits, being the first apartment complex in WISD, or proximity to our universities are able to realize revenue that make new investment prudent. Investors that are willing to gamble and bring something novel to Abilene – like Napa Cottages – are able to charge rents that make the investment worthwhile.
Rather than bemoan the absence of rent appreciation for rentals, the glass-half-full Abilene real estate investor can appreciate the stability afforded by the Abilene rental market. Accepting that, the landlord is left to focus on managing costs to improve their margin.
First, the landlord must enter the deal at a good price. My mom – who was also a landlord – liked to paraphrase the marriage adage: buy in haste, repent at leisure. In a flat market like ours, buyers need to be aggressive when buying and go for bottom dollar on price.
Second, landlords need to recognize the quality of the property dictates the quality of the tenant and the speed at which they rent. Our local Chip and Joanna team – Niki and Jon Grant – are in the business of flipping houses. They use the leftovers from their house flips to rehab rentals and make them something special. Tastefully recycling leftover paint and tile from their flip projects have allowed them to take ugly rentals bought at aggressive prices and rent them at strong rents within days of hitting the market.
Third, manage your expenses. Landlording is a sunk cost operation – there are few variable expenses. Be proactive with maintenance to manage the potential of a cataclysmic expense.
Lastly, flat Abilene rent should not be assumed by the landlord as a given. Those occasional outlier projects have an nth-ordered impact on the rental market as a whole. Wylie ISD has a new elementary school and 500 new housing lots ready for development with another 500 waiting in the wings. In a town with meager population growth, it will be interesting to see how choices between Abilene ISD and Wylie ISD are made and how rents follow.
According to NTREIS, 72 single-family homes leased in January 2018 which is 10 units below the annual average. These units leased at, on average, for 76¢/square foot and measured 1,451 square feet. Consequently, these leases are estimated to deliver a value of $79,780 to the Abilene economy in January 2018. Considering the coming 12 months and leases executed during January 2018, these leases potentially account for a $957,358 annual contribution to Abilene’s economy.