Single Family Home Values Continue to Rise in Strong Dallas Market; Strategic Partnerships Key to Liquidating Real Estate Portfolios

FRISCO, Texas, Nov. 2, 2016 /PRNewswire/ -- Hedge funds and REITs are beginning to slow the pace of their single-family rental home investments, pushing real estate investors to find buyers among smaller private equity companies, according to Bruce McNeilage, founder and CEO of Kinloch Partners. McNeilage made his remarks as part of a panel discussion at the Five Star Single-Family Rental Conference in Frisco, Texas, today.

"The days of the big hedge funds and REITs swooping in and buying up large chunks of single-family rental homes is coming to an end," McNeilage said. "Investors seeking to liquidate their portfolios are going to have to look for a second tier of smaller private equity companies to fill the void. They are out there, but most investors will have to work a little harder to form strategic partnerships."

McNeilage also noted that escalating prices in most markets are further distancing Millenials from their first purchase. Nationally, housing prices jumped 5.2 percent in the year ending September 30.

"With potential mortgage rate hikes on the horizon, Millennial first-time buyers are in a virtual mine field, feeling the pressure to take that first step, but wary of where they come down," McNeilage said. "On the other side of the equation, sellers who want to claim equity gains or improve their position may find it easy to liquidate existing properties, but much more difficult to find the next property into which to move their investment."

McNeilage offered sound advice to both Millenials and investors here today groups to help in meeting their real estate needs, based on data on housing sales ending September 30, the most recent quarter. With some current home prices still below 2006 values – in some markets significantly so – he predicted that both Millennials and investors should be able to find value-priced homes that will appreciate and provide good medium- to long-term equity.

Strong Markets for Both Buyers

McNeilage recommended three markets that are among the ten best in which to buy or own rental properties. He hailed Dallas as being very strong with a median sale price of just $129,700, but having appreciation of 10 percent in 2016. He also called out Atlanta, which had a median home price of $180,000 and 9.1 percent appreciation year-over-year (and still 17.6 percent below 2006 values), and Nashville, with a $158,000 median price and 7.3 percent appreciation, but with a caveat that the current Cap Rate to investors may compress but there will still be very strong appreciation.

Motor City Curb Appeal

Based on a median sale price of $147,000 and year-over-year appreciation of 12.5 percent, McNeilage said metro Detroit remains an interesting play (sale prices are still 40.3 percent below 2006 levels). He recommended capitalizing on lower-priced houses built in the 1950s and 1960s in the outlying suburbs, but staying away from the urban core.

Sunshine State Suggestions

While many have come to believe that Florida, with a plethora of retirees and the draw of warm weather and sunny beaches is a "can't-lose" formula for success, McNeilage suggests trimming back in the Fort Lauderdale and Miami areas. Despite a year-over-year appreciation rate of 10 percent, average prices are among the state's highest at $210,000. A better bet for the Sunshine State, he said, was to look at Tampa Bay and Jacksonville, situated on opposite coasts, which have median sales prices and appreciation of $140,000/9.0 percent and $165,000/7.8 percent, respectively.

About Kinloch Partners, LLC
Kinloch Partners, LLC is a real estate investment company formed in 2011 by childhood friends Bruce W. McNeilage and Christopher P. Zachary, who met on the playground at Kinloch Elementary School in Dearborn Heights, Michigan, in the mid-1970s.  The company specializes in providing a path to home ownership for new homeowners through new construction, home renovation or investment in financially distressed real estate properties.

SOURCE Kinloch Partners, LLC