Out-of-state investors pump up OKC’s single-family housing market
Oklahoma City listed as 9th most affordable housing market in US
Edwin Su lives in a rented apartment in the San Francisco Bay Area and had no connection to Oklahoma until he bought a house in Mustang — not that he intends to move here.
He’s a real estate investor, the kind helping push home prices up in competition with buyers who do live here, or want to live here.
Still sky-high demand across the metro area, although it appears to have slackened some, could be pricing some buyers out of the market.
But Oklahoma City is a bargain bin of houses to a Californian with California money to spend. Several houses can be bought here with the proceeds from the sale of one relatively small house out west.
Su said the 1,650-square-foot house he bought for $180,000 in Mustang would fetch around $1.6 million in the San Francisco area.
That’s somewhat more than the median asking price of $1.4 million, which made San Francisco the fifth least affordable market in the country at the start of August. Oklahoma City was the ninth most affordable market.
Su said he couldn’t say what kind of a house $180,000 would buy where he lives.
“I don’t think — that’s not an option here,” he said with a chuckle, noting that to rent a parking spot in downtown San Francisco costs up to $400 per month.
California logistics engineer by trade, Oklahoma homes for an investment
Su, 33, works as a logistics engineer for Flexport, a global freight service. What drew him to Oklahoma City for his first investment in real estate? Affordability, especially compared with home prices in his part of California.
Plus, he said, “There’s a lot of good people and really good schools. That was very important to me. And I was introduced to a good property manager.”
Su thinks more like a homeowner than some investors, valuing public education and stability, and he said he intends to keep buying houses in neighborhoods dominated by homeowners — not renters and absentee owners like himself.
That’s what he did in Mustang and in Edmond, where he also bought four attached rentals for $460,000.
‘Everybody’s trying to buy real estate’
Demand from Californians like Su and others from higher-priced markets is also squeezing local real estate investors, said Toby Brown, founder of TB Realty, a property development, investment and management firm in Oklahoma City.
“There’s a lot of activity and competition. Everybody’s trying to buy real estate,” said Brown, whose firm owns and manages more than 500 houses, 350 apartment units, some 200,000 square feet of commercial property, and land.
He said the sharp appreciation in home prices is good for owners, who are watching their equity grow with the booming market. Equity is the difference between what a house is worth on the market minus how much is still owed on it.
For an investor, rising equity provides capital for further investment — buying more houses. More rent houses means more cash flow and more income.
Rising home prices grow home equity
Through August, the median sale price was up about 12% in the metro area compared with the first eight months of 2020, according to the Oklahoma City Metro Association Realtors.
Nationally, homeowners with mortgages — about 63% of all properties — have seen their equity increase by nearly $2.9 trillion since the second quarter of 2020, an increase of 29.3% year over year, CoreLogic, a real estate data analytics firm, recently reported.
The downside of the boom is the same for local investors as for people looking to buy a house to live in: bidding wars and plans dashed by lost opportunities.
“Inventory is an issue,” Brown said, and homes are hard to come by — in fact, the metro-area supply is still down to a single month, the Realtors reported.
Not that long ago, before the coronavirus pandemic threatened the economy and the federal government acted to keep mortgage rates at historic lows, spurring demand, an investor could call an agent “and find you a deal,” Brown said.
“Now, nine times out of 10, you’re bidding against 10 other investors,” he said, and taking a chance on overpaying.
Brown said “low barriers of entry, mainly pricing,” keep out-of-state investors investing in Oklahoma homes, although they’ve been finding slim pickings.
“It may be hard to find, but not impossible, to buy a three-bed, one-bath brick distressed home in metro OKC for $50,000,” he said. “There’s plenty capital in the market, including private money, so funding deals is not a challenge — it’s finding them.
“So essentially anyone can do real estate in OKC because of the price points and the funding availability.”
Out-of-state dominates residential real estate investment in Oklahoma
It was a few months into the pandemic when low loan rates and comparably low prices caused the influx of out-of-state buyers to take off for mortgage lender CMG Financial in Edmond, said Shelley Hentges, a loan officer there with her husband, Daniel.
“Our business shifted 12 to 14 months ago into heavy out-of-state,” she said, estimating that one-half of her loans are to investors, and 60% of those are based somewhere besides Oklahoma.
That’s about how many non-Oklahomans own the houses in Oklahoma handled by HomeRiver Group, a national property management company with properties here and in Tulsa, said Jeff Wood, business development manager for the state.
Wood said he is new to his job with HomeRiver.
One of his first tasks was introducing himself to the investors the company works with, and he was floored by what he found.
“I opened up this spreadsheet and I could not believe my eyes,” he said, because 60% were owners out of state, and some outside the United States. “I was just literally amazed at the 2,500 properties I saw, and more than half belong to out-of-state owners.”
Hentges said lately she’s been seeing “a pretty good mix” of seasoned investors already with multiple properties and novices like Su.
Single-family homes give investors more flexibility than apartments
Oklahoma attracted single-family investors from other states before the rush, and multifamily investors, those who prefer big apartment complexes, routinely drive that part of the housing market in Oklahoma.
The shortage of single-family homes for sale has many would-be home buyers settling for renting a house, which has strengthened the rental investment market and drawn new single-family investors, said apartment broker Mike Buhl in Norman.
Some people are attracted to singlefamily homes as an investment because they provide more flexibility than investing in big multifamily properties, said Buhl, owner of Commercial Realty Resources Co.
He said it’s easier to sell one or a few houses quickly for several hundred thousand dollars, if needed, especially right now, than to market a big apartment complex, asking for millions, to other investors.
And it can take a much longer time. Su was on the opposite side of exactly that.
Oklahoma rent houses give owners good cash flow and equity growth
Su paid several hundred thousand dollars for a few properties, $640,000 in all — $180,000 for the house in Mustang, less than 20 years old, with 1,650 square feet; and in Edmond, the four attached homes, all built in 2003, ranging in price from $111,000 to $120,000 and in size from 1,245 to 1,415 square feet.
Su said he was looking for a good balance of cash flow and equity growth, and he found it in Oklahoma City, plus the good people and good schools.
“I was looking elsewhere,” he said. “Everybody I’ve talked to has been such a pleasure to work with, and so honest, I’m leaning very heavily to staying in Oklahoma, Oklahoma City, and Tulsa as well.”
Richard Mize at rmize@oklahoman.com.