For many years, Houston has been a promising city for property investors. There are dozens of interesting neighborhoods and suburbs, ripe with a diverse range of different properties, and demand for homes in the Houston area has been surging.
However, in recent years, the extra demand and attention has been problematic for property investors in one significant way: low inventory.
How can you overcome this challenge and still make good investments in the Houston area?
The Issues With Low Inventory
First, let’s recap the main issues associated with low inventory in local real estate marketing. In case you aren’t familiar, real estate inventory refers to the number of homes being sold on the market. High inventory means there’s an overabundance of homes to choose from, and low inventory means there are fewer homes than usual.
Low inventory can result from a number of different factors, and typically, multiple factors are in play simultaneously. In Houston, low inventory is mostly stemming from a surge in buyer demand, coupled with a limited number of properties to choose from.
These conditions present a number of challenges, whether you’re interested in buying a residence for your family or an investment property for building wealth:
- Limited selections. One of the first issues you’ll deal with is a limited selection of properties. Most property investors are picky about the types of properties they want to buy, with a size, location, and price range already in mind. Because there are fewer homes being listed, your chances of finding the perfect property will be lower.
- Higher prices. Higher demand and lower supply have a predictable effect on economic systems: higher prices. Under conditions of low inventory, you can expect to pay more than usual for properties in the area. This can make it difficult to find a profitable purchase.
- Cutthroat buyers. You’ll also be dealing with more cutthroat buyers, who are desperate to get their hands on a property. This can make the bidding process much more complicated.
So how can you overcome these challenges?
Managing Low Inventory
These strategies can help you continue to make valuable investments, even under low inventory conditions in Houston:
- Broaden your search criteria. One of the best things you can do is broaden your search criteria. If you’re looking for a property that looks a certain way, in a very specific neighborhood, with a specific price range in mind, you’ll probably find it hard to discover the perfect property. If you expand your horizons a bit, you’ll find many more interesting deals. Consider looking at a range of different neighborhoods, or even in cities in Texas other than Houston. Consider the possibility of buying a property that needs extra work, or a different type of property than you’re used to. These options may not fit your initial vision perfectly, but there are plenty of opportunities to find this way.
- Work with the right real estate agent. It’s also important to work with the right buying real estate agent. A good real estate agent will work with you to get to know your goals, needs, and interests; they’ll also be more familiar with the ebb and flow of the market, and will have access to properties as they become listed. If you find the right partner, they’ll work aggressively on your behalf to find great properties that meet all your criteria—no matter what the current conditions are.
- Network to find new deals. It’s also worth your time to network with other property investors, real estate agents, and residents in the Houston area. If you’re competing with other investors, browsing typical listings, you’ll be dealing with a surge of competition. But if you get to know other property traders on personal terms, they may be willing to offer you a deal on property before it hits that open market. If you’re on good terms, they may even be able to give you a better deal.
- Make offers on unlisted properties. Another strategy you can use is making offers on unlisted properties—in other words, finding properties that aren’t currently being sold. The low inventory problem isn’t an issue with the total number of homes in an area; it’s a problem with the number of homes being actively sold. You may be able to close this gap at least slightly by making compelling offers on properties even if they’re not being sold. You can do this by advertising your willingness to pay in cash, marketing your desire to buy properties, or even visiting properties door-to-door to make an offer in person. You can expect to get a lot of rejection this way, but if you find even one property for a bargain that you wouldn’t have found otherwise, it might be worth it for you.
- Bid aggressively. When you see a property that meets all your desired criteria, you have to acknowledge the amount of competition you’re going to face when bidding on it. If you want a chance of winning the property, you have to bid aggressively. That means starting the bidding process as early as possible, making a decision faster than you might normally make. It also means putting in an attractive offer right away, even if it means going over list price. Run the calculations in advance and figure out the most amount of money you’re willing to pay
- Offer to pay in cash (or make your offer more attractive). You can also make your offer more attractive in other ways. For example, you can offer to pay all in cash if you can afford it. You could also offer to buy the property as is, if you’re willing to put in some work. Sellers love to see these subtle benefits, and they can help you secure the deal if you’re competing with other aggressive bidders.
Do you need help finding the perfect Houston property? Or are you interested in reducing the demands of your existing rental property? Contact Green Residential today for more information about how we can help.
Michael is Green Residential’s Vice President. He helps to keep the team organized and running smoothly. Prior to joining Green Residential, he spent 12 years working at Cadence Bank in the mortgage loan servicing department, where he specialized in loan audits, modifications, and bankruptcy-related issues for the mortgage portfolio.
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