Effects of Institutional Investor Activity in the Dallas Fort Worth Market

[Tony Sera]

Hello All - I'm a small time buy-n-hold investor from Dallas/Fort Worth. Got 4 rentals currently, all renting within the $1675-$2050 range, solid cash flow. My goal was to grow into 10 properties but the institutional investor activity and focus here is making me nervous. I was doing some research into institutional activity in my County (Tarrant) and I can tell that they are fairly active. Colony American for example has acquired about 80 properties in my County in the last 9 months. American Homes 4 Rent is still buying as well. When my last property came up for re-leasing it took a while longer than I was used to (about 45 days, although that was in Dec but still raised a few red flags in my mind). There seems to be plenty of rental inventory but I've never figured out who to determine demand. So here are my questions -

- Beyond keeping an eye on some generally available historical metrics such as avg rental prices, days-on-market and months inventory, how does one gauge the short term future health of a rental market? Is keeping any eye on these same metrics the only way to indirectly monitor the supply-demand equation?

- If you are local to DFW, what do you think the impact will be of this institutional investor activity to our rental market? Is it time for the small time investor (less than 20 properties) to leave the market, stay put or even expand?

Ali Boone wrote a great article recently on market over saturation due to institutional investor activity (in Atlanta)

Happy Investing folks!

[Brett K.]

This is outside my expertise but I'll chime in for two reasons.  First, this may get the ball rolling and second, some times you just need to hear some one else say what you already know..... or you'll know they are wrong when you hear them say it.  

So, unless you think the institutional investors are naive, dumb, or ill-informed, I would look at their entry into the market as a positive.  Do they have a history at buying at the top?  Or buying as a rental market is drying up?  What do you suppose their strategy is, appreciation, rent rates increasing, both?  

Commercial appraisers who do apartment buildings keep great data on their markets.  They'll have employment growth, population trends, etc.  Your banker will have their name and tel.  If you tell them you got their number from your banker they may even offer the information for free.  In some markets I've seen them package the data into a report they disseminate free to market their business.