Coastal housing dollars hit Oklahoma rent ceiling

Out-of-state housing dollars cut both ways in Oklahoma. Homebuyers can buy high here. Sell a $1 million house in California, and use the proceeds to buy your wildest dream home here. It remains generally true despite price fluctuations — yon, not hither. Yon, markets are crazy, y'all. Hither, values have risen slowly but steadily for so long that cries for "affordable housing" sometimes sound a little off, at least outside of nonprofit housing circles. It's all fly-over affordable here compared with coastal markets. Housing investors, though, get stung sometimes if they don't fully adjust their books for the full reality of intrastate housing currency exchange rates. David Dirkschneider and Micheal Massad, multifamily brokers with Price Edwards & Co., point out the disconnect in the firm's 2018 year-end multifamily market summary. They're writing about capital invested in apartments, but singlefamily home investors sometimes discover the same unexpected challenge: Out-of-state dollars buy a lot of house here, or apartment house, but the generous market that let them buy-in relatively low is stingy when it comes to returns. First the backdrop: "While primary markets such as Los Angeles, Dallas, and New York will continue to see the largest dollar investment, secondary and tertiary markets are becoming more popular to the larger investors in their pursuit of higher yields," Dirkschneider and Massad wrote. "Many such investors have already expanded their search into Oklahoma and similar metro areas, increasing the market liquidity and boosting overall values." So far, so good. But, they went on: "One of the main complaints echoed by many investors new to Oklahoma is the inability to increase rents on a pound per pound basis compared to other markets. With the benefits of the low cost of living, also comes a ceiling on rent increases. Whereas in markets similar to Dallas/Fort Worth, a standard $5,000 interior upgrade can often yield an instant $200 or more per month rental premium, the Oklahoma City market will not support this level of rental increase." Investors aren't turning away, according their report, available at www. priceedwards.com. They are having to be "savvier and not just invest based on pure projections, but to rely more on fundamental economics," according to Dirkschneider and Massad. "Creative owners are looking for ways to not only increase revenue from renovation and rent increases, but also by boosting their NOI (net operating income) from supplemental income and effective cost management." Something about this makes me feel good about the market. Your coastal housing dollars are welcome here in flyover country — but fly-by-night investors, not so much.