NRV Real Estate and Covid Pt. 2: Migration from City Centers

In this, the second of a 2 part series, I want to share some research we’ve done on what we can expect in the future for the NRV real estate market based on experts’ predictions about how Covid is effecting where people choose to work and live. Click here to read Pt. 1 about the impact Covid has had on the university system specifically connected to Virginia Tech and Radford.

As I wrote in Pt. 1, when March 2020 arrived and we realized that Covid-19 was here to stay, our expectations were that the virus would finally stop the historic real estate market we have experienced. Paired with that, our assumption was that potential unemployment and uncertainty with the economy would make leasing investment properties difficult this year.

THE REALITY HAS BEEN THE EXACT OPPOSITE:

• (There have been 25% less homes for sale) + (Buyer demand has INCREASED) + (Historically Low Mortgage Rates) = a 13% INCREASE in sales prices comparing summer 2019 with summer 2020!

• At Townside, where we manage around 700 rentals, only 3 went unleased for 2020-2021.

The potential impact of Covid on where people live and work

As the onset of Covid caused offices to close, many workers who began to work from home beginning the avalanche of zoom meetings that we’ve all grown accustomed to. For a growing number of workers living in expensive city centers, the ability to work from home has opened up the possibility of living in lower cost areas that offer a more attractive pace of life. A microcosm of this was reported on the NBC Evening News which you can view in this video:

Location Independence and NRV Real Estate

When you can work anywhere, you can live anywhere.

Location independent work environments accelerated by Covid are resulting in more people to have the option to move to more affordable areas that offer a high quality of life.

This is potentially great news for the NRV! With the tens of thousands of VT and Radford grads spread out all over the country, it will only take a small percentage of them to consider moving back to the NRV and working from here to keep our housing market stable and even growing.

We already see this trend with retirees who have historically made the NRV a top location in the country to retire. This trend has the potential to accelerate if VT and Radford grads, along with anyone desiring affordable housing in a beautiful mountain setting, decide to settle here in the NRV.

What are these potential buyers looking for?

As you consider selling your home or investing in a rental targeted toward someone ‘migrating’ to the NRV, keep these amenities in mind:

• This type of buyer/renter will be looking for an updated, move in ready home

• For retiree buyers/renters, they would prioritize hassle free living where exterior maintenance is provided - such as in an HOA. Places where one can age in place with amenities like a master on main are important.

• For buyers/renters looking to work from home: a dedicated office space that is separate from the main living area. Potentially even multiple spaces that could be used for office/school.

Conclusion

Covid has turned life upside down in many ways and there will be lasting effects of the disease and the pain it has caused for some time to come. There are also impacts of covid that have accelerated trends that were already present in our culture that could have some positive effects in some arenas of life such as real estate.

Speaking purely in terms of NRV real estate, with the potential that the universities in our area will rebound as well as the desirability to live in a region that has as much to offer as ours does, there is good reason to remain positive about the long term outlook of our real estate market.

Do you know a seller who is ready to get their property listed?

Are you trying to figure out how to purchase a home in this fast paced market?

Do you want to learn how to build long term wealth through real estate?

Please get in touch. It would be my privilege to help you.

Philip Bowling, REALTOR

PhilipBowling@gmail.com

(978) 473-0587 (c)

Late Summer 2020 NRV Real Estate Market Update

Bottom Line: What do you get when you add low interest rates and continued buyer demand to a real estate market with a historically low number of homes for sale? Even higher prices with fairly priced homes selling within days (or minutes) of being listed.

Late Summer 2020 Market Stats

Here are some stats comparing the summer months last year (in a historically ‘hot’ market) with what we have seen in the same time period this year in 2020:

Number of Homes for Sale

Number of Sales YTD

Average Days on Market Before a Home Goes Under Contract

Average Increase in Sales Price for Homes Under $450k

A Note About Interest …

As a buyer, you might see these stats and think it would be wise to hold off on buying until the market cools off. Please consider two things before you do and know that I believe in the first more than the second:

1. With interest rates at historic lows (I’ve seen under 3%!!!) - and I mean historic - like never happened before historic - you might pay more for a property but end up with a lower payment because of the favorable rates. A mortgage on a $300k home at 4% would be $1145/mo. That same home priced $15k higher at $315k with a 3% mortgage would have a $1011/mo payment. Less per month for a home $15k more expensive!

2. If you decided three years ago to wait for prices to fall before purchasing you would still be waiting and a home you could have gotten for $220k then would cost you $270k today.

A mortgage on a $300k home at 4% would be $1145/mo. That same home priced $15k higher at $315k with a 3% mortgage would have a $1011/mo payment. Less per month for a home $15k more expensive!

What all this means for:

Investors:

• If you can take advantage of these low rates, it might be ok to pay market value for a property to have a property in your portfolio financed at this wicked low rate.

• With continued uncertainty due to Covid, it could be worth taking advantage of these sky high prices to sell today and have cash on the sideline ready to redeploy if the uncertainty continues and prices fall - especially starting this fall.

Sellers:

• Wait?! You are considering selling and have not listed your property yet?! Call me right now and let’s get it listed! Prices could continue to rise, however with 1. uncertainty in the future with the economy 2. historically high prices, and 3. historically low interest rates, there might not be a much better environment to sell your property in. Really, now is the time.

Buyers:

• See the note on interest rates above. This market in some ways is a win win for buyers and sellers in that you can pay a little more today and end up with a lower monthly payment because of the low rates.

• This is a market where it benefits to work with a real estate agent. When properties are moving in 3 days or less, you need to be the first to know when something is new on the market and be ready to make a good decision quickly - both of which a good agent can help you with. I get a heads up weekly both on properties that I will list but also on properties that the other 50 agents in my office have coming and can give my buyers a head start. I recently helped an investor friend put a duplex under contract that never went to market he would not have known about had it not been for our connection. I would love the chance to be that connection for you, too!

Conclusion: Low interest rates still make this hot market an attractive time to buy. High prices and an uncertain economic outlook make this a great time to consider selling (get while the gettin’s good). You have to move fast to get a property today, but it is a market where there are truly wins for buyers and sellers.

Do you know a seller who is ready to get their property listed?

Are you trying to figure out how to purchase a home in this fast paced market?

Do you want to learn how to build long term wealth through real estate?

Please get in touch. It would be my privilege to help you out.

Philip Bowling, REALTOR

PhilipBowling@gmail.com

(978) 473-0587 (c)

*Data comes from statistics pulled from InfoSparks, a service provided by the NRVAR.

97 Hours per week to afford housing on minimum wage? What this means for investors.

In a recent article citing a report from the National Low Income Housing Coalition, it was reported that a minimum wage worker earning $7.25/hr would need to work 97 hours per week to afford to rent a 2 bedroom apartment at the national average of $1276/month without spending more than 30% of their income. That is crazy (and a mouthful)! Of course, a headline like this is meant to sensationalize and does not take into account widely varied market conditions around the country.

Here in Virginia’s New River Valley, the wage to rent/mortgage ratio is not as bad. A 2 bed apartment in Blacksburg or Christiansburg can rent for $800-$1000/month and if you look to Radford or Pulaski a reasonable rental can be found for an even lower price. While this still does not make up for the gap between earnings and rents for a minimum wage worker, it does make renting slightly more attainable for a renter on a single income and possible for a rental with multiple incomes represented.

Let’s take a moment to look at what this might mean for rental property investors. I will use a property in Radford at 1908 Third St that I am listing for $124,700 (or listed years ago depending on when you read this) to give a real world example.

Bottom line: For investors, affordable rentals are an incredibly stable, fairly easy to obtain asset that should always be in demand.

Two Takeaways for Investors:

1. Ensure that your rentals stay rented by purchasing low to median priced rental properties that will be affordable to the largest number of renters. Are there units in our area that rent for $2k and higher? Yes. However, there is a limited buyer pool for this type of property and you might risk your property going unrented by competing for them. Someone who can pay top dollar for rent can also likely afford home ownership so might go this route instead.

2. This is great news for newer investors who might have less capital to invest. The reality is that building a portfolio of $100k-$200k in Blacksburg/Christiansburg/Radford that rent for $700-$1300/mo (depending on area) will both be attainable in terms of saving a 20% down payment for newer investors and be the kind of properties that will be easy to rent. And, you can feel great knowing that you are providing a quality, affordable home to someone who needs it!

An Example: 1908 Third St, Radford

1908 Third St, Radford, VA. Click on the pic to check out my new toy for listings - a 360 Tour Camera!

1908 Third St in Radford is a 4 bed/2bath and will easily rent for $1000/mo (probably more) and listed for $124,700. It would be a great rental for a family working in Blacksburg or Christiansburg who would like the comfort of living in a large, single family home at the rental price of a smaller townhome/condo near VT.

If you purchased this property with a conventional loan and put 20% down ($25k), even after factoring in 10% of gross income for both maintenance and property management, you could still expect to have a 28% overall return on your initial equity!

Numbers like this are why I am all in on rental property investing and am buying properties like these myself. Homes like these are stable, appreciating assets that stay rented because of the large renter pool they draw from (… and also provide greater overall returns than the S&P 500!).

Conclusion

I have enjoyed reading investment advice from a real estate investor named John Schaub. Schaub’s advice is to buy one affordable rental like 1908 3rd St. every year. You might enjoy reading his book, Building Wealth One House at a Time. Just doing this, a person could build massive wealth in 10-20 years while serving their community by providing stable rentals that the average worker/student can afford.

In 2020, with the uncertainty in the market due to Covid-19, buying homes that will attract the largest pool of rentals that also cash flow is a good strategy to consider as an investor.

What do you think about this? If you are interested in learning more about building wealth through rentals like these or want to know more about how to calculate the overall rate of return on investment properties - let’s talk!

Philip Bowling // philipbowling@gmail.com // 978-473-0587