Is Northwest San Antonio Oversaturated?

Question

Hi everyone, long time BP reader and first time poster!

I know a lot of people here have rentals in NW San Antonio. Would be great to get people’s thoughts on rent growth in the next 5-10 years.

I currently own two buy-and-hold 3/2 SFR properties in northwest San Antonio, inside the 1604 loop near Bandera road. I’ve been seeing a large number of available rentals on Zillow similar to my own houses, all in the ~$1200-1400 / mo price range. Some of them are sitting on the market for a month+ ; vacancy times appear especially long once you get above ~$1300 / mo.

Does anyone else feel there is a bit of oversupply of rental properties? Do you think the economy, wage growth, tenant base will support higher rents in the next couple of years?

Would love to get your thoughts!

Will Pritchett · Answer

@Michael M. I have a few in the NW area.  They have all rented quickly for the last several years.  I just don't see rents dropping or vacancies increasing anytime soon.  Keep in mind that Zillow doesn't take into account all of the mom and pop investors who don't list their properties online.  We call all of the signs in yards to get a complete story.  Difficult to do from afar, I realize.  But sometimes we get more for rent than MLS comps would indicate without figuring in yard sign comps.

Most of our tenants stay for several years so we haven't had to re-rent any lately.  I don't target rentals above 1300 because in my experience, they were temporary renters at that income level who would move to buy or build or relocate again pretty soon.  My highest priced rental in Braun Station attracted great tenants but turned over almost every year.  We sold and repositioned.

We try to have all leases lapse in the summer months while kids are out of school and people are moving.  Even if we acquire in December, it will be a six month lease or an 18 month lease.  This has kept vacancies very short.  I'm curious if you've seen these longer vacancies through summer or if it is just since kids are back in school.

To answer the last part of your question, I don't know about higher rents in coming years.  I don't count on them.  With our high property taxes, however, without some rent increases taxes could eventually consume cash flow.  I don't see wage growth to be significant in San Antonio but I think this makes buying a home in this appreciating market more and more difficult; thus putting more demand on rentals.

I hope this helps some.

Best of luck

Will Pritchett · Answer

@Hassan Oukacha we do collect the application fee on the spot. We have a card reader for our phone for those without cash. Works out great.

We do paper applications for that reason. We still have to enter the fields online for screening but they tend to complete a paper application on the spot.

Hope that helps.

Hassan Oukacha · Answer

@Will Pritchett encouraging people to fill out application on the spot is a good strategy. Once I show my rentals in SA and ask people to fill out an online application, not too many of them do that.

Do you collect application fee on the spot?

Thanks

Will Pritchett · Answer

@Michael M. I am glad that was helpful.  We always attempt to be at a fair price with a very clean unit so that we have several tenants to pick from.  Picking the best tenants has made property (read "tenant") management an easy task.  I really like having one month where all leases expire - especially in the summer.  Most of our rentals are from 950-1250 per month fyi.

One other tip, and might be difficult with a PM, is that we list a week ahead of when we intend to show it.  We put it on Zillow Rental Manager and FB.  Then we do a mass showing at one set time so we aren't spending the whole day there and waiting for no-shows.  Multiple interested potential applicants tends to motivate them to fill out the application on the spot.  There's something psychological about them knowing someone else wants what they want that encourages action on their part.

I hope you have multi-year tenants and don't have to think about this for a while unless it's with new units!

-Will

Michael M. · Answer

@Will Pritchett Thank you very much for the insight! Extremely extremely helpful.

To be honest I can’t recall what time of year I noticed these extended vacancy trends. I’ve had one of the properties for about a year and the other for 6 months — my observations come from casually browsing Zillow from time to time in order to get a general read on market conditions. I also have properties in other markets so while Zillow not a perfect tool, the vacancy trends stood out to me when I compared San Antonio to those other markets.

Another data point — when I bought my first San Antonio property in August 2018 I had a very difficult time getting any interested tenants at $1300 / mo. As soon as I dropped to $1200 it was like night and day and my property manager was able to get it rented very quickly. Of course there are a lot of factors that go into this but I agree that ~$1300 / mo seems to be a bright line where you start to get more turnover / more competition etc.

Is Northwest San Antonio Oversaturated?

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