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How to keep great Tenants without squeezing your margins

August 31, 2016 By Erion Shehaj 3 Comments

A little less than a year ago we got the hardest part right.

Like leasing Sherlock Holmes-es we pored over lease applications, ran countless credit checks, background checks, prior eviction checks, cross reference checks, written and verbal rental and employment verifications and found a great Tenant.

Over the course of the year, our predictions came true. The Tenants paid rent on time, took care of the property like it was their own and even went over an above to improve it without costing you a dime.

Captain Obvious shares benefits of lease renewals

Now the lease is nearing it’s end and it’s time to discuss renewal. We would love them to stay for another year and re-up each year going forward till the end of time. The reasons are obvious – If they renew:

Zero vacancy for another year – This means the amount you had budgeted for vacancies in your cashflow analysis flows straight to your bottom line and who doesn’t like a “healthier” bottom line.
Zero make ready for another year – No matter how great Tenants are, when they decide to move out there will be some make ready costs. Locks need to be rekeyed, carpets shampooed, paint touched up, landscaping trimmed, utilities turned on in the meantime etc. If they renew, no make ready is required so another WIN for us.
Zero leasing commission for the year – When existing Tenants renew, we prepare the lease renewal paperwork free of charge – another perk we offer to our clients to thank them for their repeat business. So if they renew, there’s no leasing or renewal commission you need to pay for another year and guess where the budgeted amount for lease commission flows straight down to? Yessir – Bottom Line.

So now that we’ve established that we definitely want them to stay and renew the important question becomes: At what rental rate? Over the lease term several factors have come into play. If the property is in an appreciating market, county authorities probably gave you a higher property tax bill as a present for your birthday. Ditto from the insurance agent. Plus, over the year the market rate for rents in the area has probably risen. So you want to make sure that your profit margin doesn’t shrink by leaving the rent the same while your expenses go up. And at the same time, you don’t want to leave money on the table and significantly underprice your property.

But on the flip side, the great Tenants will probably not like to see their rent increased. And if requested in a careless manner, they can be left feeling like they’re being punished with higher rent.

Tips professionals use to secure lease renewals and rent increases

In order to avoid losing great tenants and/or facing shrinking margins and leaving money on the table we have a process we follow to secure more lease renewals and rent increases. I’d like to share with you some tips that you can use to do the same with your properties.

Tip 1: Run a market analysis for lease on the neighborhood – If your tenant is more knowledgeable than you are about market conditions, you’ve already lost the argument. An updated market analysis for lease will give you the backup to support your arguments. In addition, it will give you a clearer picture of what the current market rate is for your property and the competition you face. Bottom line: You need to know your numbers because they represent the alternatives your great Tenants have to jump ship.
Tip 2: In an appreciating market, offer a rent increase that’s below full market rent– Think of your offer to renew as a marketing offer and consider the question: Why should the Tenant renew their lease with you? No, your good looks don’t count. Give them a reason, a benefit they wouldn’t get if they moved out and leased another place. Here’s what we normally do: Dear Tenant – After performing a market analysis, the market rent for the property has risen to X. You have been a great Tenant and we appreciate the care you have shown the property. Therefore, we’re prepared to offer you a lease renewal at X-$25-$50. This way it’s a win-win. The Tenants still get below market rent and you get your rent increase and renewal. If they were to move out, they’d likely have to pay market rent and move which we all know is so much fun (not).
Tip 3: Discuss the lease renewal in person or over the phone – Negotiations over email are a recipe for disaster. I think it’s pretty safe to assume that anything written in an email is read to the recipient by an angry antagonistic old man. If you are trying to persuade and influence, do it in person or over the phone where the tone of your voice can convey where you’re coming from.
Tip 4: Make it much more expensive to go month to month – Texas leases have a provision in them that allows the lease to auto-renew on a month to month basis unless either of the parties gives 30 days notice. In your offer to renew, the price offered for a one year or 6 month extension should be much more attractive than the month to month price. Typically, we do $100-200 more to go month to month.
Tip 5: Be a pragmatist but not an appeaser – Lease renewal negotiations aren’t an ego contest. If after reviewing the market analysis, days on market to get a property leased have increased, you may be better off renewing at the same rate. The alternative is to renew at a higher rate but missing out on rent through vacancy which lead to a lower net rent than if you’d just left the rent unchanged. So be a pragmatist and look at the situation through the lens of reason. But don’t be an appeaser and fold just to avoid confrontation. It’s a delicate balance but it can be done.

The most amazing real estate deal of all time

August 25, 2016 By Erion Shehaj Leave a Comment

Imagine for a moment that you just orchestrated the most amazing real estate deal of all time. This deal is so impressive Scorsese will make a movie about it with Di Caprio playing your part. People who aspire to become successful real estate investors will hold week-long case studies of this deal for years to come.

All the elements are present. Through world-class negotiating skills during purchase, you locked in so much equity it should be illegal. Price to rent ratio is in the low single digits so your property throws off cash like an ATM machine. And finally, the return on investment might make people think you’ve entered the loan shark business. A thing of beauty, a work of art.

And yet, I’ve got news for you. The most amazing real estate deal of all time, will NOT change your life.

Let’s run through the numbers of one such hypothetical scenario.

Suppose you were able to purchase a $250,000 property for $150,000 and secured six figures of built-in equity. No repairs are needed. The first week on the market you find a great Tenant willing to pay $2200 per month for a two-year lease on the property. Total operating expenses plus mortgage payments add up to $1400 per month leaving you with positive cash flow of $800 per month. Assuming a 35,000 capital investment that’s a 27% cash on cash return with an internal rate of return in the triple digits.

If you zero in on the numbers of such an amazing real estate deal, it’s pretty impressive. But when you open up your focus and look at the big picture, things come into perspective a little clearer.

Let’s look at the end result. With all the amazing equity, cash flow and returns, at the end of the day, even the most amazing real estate deal produces just $800 per month in passive income. That’s a fantastic return on the capital invested but from the perspective of your complete financial picture, that cash flow will not change your life. It will not allow you to retire early or do the work you want to do instead of the one you have to do.

The main point I want you to take away is this: Real estate investing isn’t some form of Olympic sport where investors compete for the highest return or the largest amount of built-in equity record. Instead, it is a vehicle you use to create the passive income and net worth required so you can design and live the life you want.

Even when you pull off the most amazing real estate deal of all time, if the aggregate of your investing efforts fails to create the life-changing circumstances that set you financially free, it’s all for naught. Or put a different way – if all you do in a lifetime of investing efforts is pull off a couple of “most amazing deals” but fail to fundamentally alter your financial life then what good did it do?

How the oil market crash impacted the Houston real estate market

August 18, 2016 By Erion Shehaj 2 Comments

Every conversation I have with Investing Architect clients or prospective clients these days eventually veers into the impact the oil market crash has had on the real estate market in general and investment opportunities in particular. With all the dramatic media coverage on the topic their expectation is one of a Buyer’s market with increased opportunities both in terms of options (inventory) and better deals (lower prices).

When you look at the aggregate numbers (all price segments lumped into one figure) the market has handled the effects of the crash surprisingly well. For instance, in the last six months aggregate year over year property sales were flat in June, up 7% in May, down 2% in April, down 1% in March, flat in February and flat in January. Same story with the year over year average sales price that were flat in June, flat in May, down 1% in April, down 1.6% in March, flat in February and flat in January.

Home inventories are up double digits from last year year’s drought but still averaged 3.5 months – well into Seller’s market territory. Not exactly something to write home about which I guess is a good sign on the back of 50%+ price drop oil crash.

A Tale of Two Cities

But, the reality on the ground is much more nuanced than those numbers suggest. It reminds me of Dickens’ book “A Tale of Two Cities”: It was the best of times, it was the worst of times. When you look at the data through the prism of price segmentation you get a very different and much more accurate view of what’s going in the real estate market. Take a look at the price segmentation schedule for a zip code in North Houston (Spring) prepared by my friend Ken Brand:

The price segments $0 to $300k reflects a Seller’s Market with improved selection through higher inventory in the upper limit. The price segments between 300k-600k is pretty much a balanced market entering a Buyer’s market. Finally, the price segment of $700k to $1MM+ is a strong unabashed Seller’s market.

From my experience on the ground, the numbers for this zip code are representative of what’s happening across the city. Generally speaking, it’s a Sellers market for price points up to $500k and a Buyer’s market for price points above $500k.

Price reductions on every other listing

If you dig below the surface, even in the price segments under $500k that are doing better many of the listings have been reduced in price. In a recent report covering The Woodlands area “48% of listings on the market have been reduced at least once” (cit Ken Brand). What’s happening in the Woodlands is typical of the Greater Houston area as a whole.

So how are prices being reduced at least once but average prices remain flat?

One characteristic that all hot Sellers markets share is Sellers getting away with unreasonable prices because of a buying frenzy. If one neighbor gets away with a higher price then others will follow suit even as the market shifts and balances itself. The original price when the reduction was made was often unreasonable and reflective of a hot Seller’s market that for all intents and purposes is no longer with us. The price reductions you are seeing are those Sellers coming back down to earth. Having said that, price reductions have a strong psychological effect on Sellers that leads to more leverage for Buyers in negotiations where they had none in the last few years.

Investment Opportunities

What does this mean for investors who are trying to dip their toe back into the market or get started for the first time? Well if you segment the market even further and look at the price point between $140-$200k where most investment opportunities will be found you will find an even stronger Seller’s market. Especially in the lower end of that range, it appears that the market keeps chugging along like it’s 2014: Days on market in the single digits, sometimes multiple offers, a bit more flexibility on price (but not much). We are still finding opportunities but the competition is fierce.

The rental market

On the rental side the situation is a lot brighter. In the last six months of the year, leases were up an average of 8% while rents were up and average of 1.55% year over year.

But, this tale of two cities analogy applies to the leasing market as well. Luxury rentals ($2000+/mo) have born the brunt of the impact while listings priced around the average have continued to perform well. Layoffs in oil and gas and dramatically reduced exploration budgets have meant that fewer people are moving into the area so the Tenant demand while solid, is now more balanced against supply. There has been a slight uptick in days on market and we are seeing an increase in Tenant requests for price reductions.

The state of Houston’s rental market: A year over year study [UPDATED]

January 26, 2016 By Erion Shehaj 1 Comment

Note: This article was originally written on October 27, 2015 and it has been updated to reflect all data from 2015 now that it’s in. To request a full copy of the report https://investingarchitect.com/contact-us or if you’re viewing this in your email, please hit reply.

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“Are we here yet?”

A concerned Investing Architect client asked me that question out of the blue. In his email he sent a link to a BiggerPockets article (link in the footnotes) that warned about the risk of over saturation in certain rental markets (i.e Atlanta, GA).

In essence, over saturation occurs when there is an imbalance in the rental market caused by excessive supply. Basically, too many properties for lease and not enough tenant demand to lease them all. As a result, days on market increase significantly and there’s substantial downward pressure on rents. In these market conditions, tenants have increased leverage to negotiate lower prices (due to availability) and investors are eager to lower rents to fill vacancies. Not matter how you look at it, over saturation is bad news for long term real estate investors.

Back to the question that started it all: Is the Houston rental market experiencing over saturation? We can answer this question two different ways: 1) Blurt out a short answer that fits our existing opinions or 2) Look at empirical data and let it answer the question unequivocally.

When in doubt, LOOK AT DATA!

Methodology and Criteria

As we set on this journey to satisfy our common deeply-held nerd cravings for numbers, we had to use a clear methodology so the conclusions could lead us to meaningful answers.

First, we were only interested in “investment grade properties” single family homes that are zoned to great school districts, built after 2000, between 1500-3000sf, with at least 3 bedrooms and 2 baths. Further, we wanted to focus our search on properties leased for 12 months or more – so, no short term leases – and no subsidized Section 8 leases.

Next, we organized the data by school district (instead of lumping it all into one big pile) and focused our attention on four metrics: Number of units leased, Average rent, Median Rent and Days on Market.

Further, we did a side-by-side, year over year comparison for those four metrics for each month as well as on an annual basis.

Last but not least, we used the findings to project current absorption rates and inventory levels for each school district to give us forward looking perspective of the rental market in those locations.

Needless to say, the findings didn’t disappoint.

Study Results

Once we crunched the numbers, some interesting patterns emerged. Here are some of the most important ones:

Annually, Units Rented were up an average of 1.47%. In fact they were either higher or flat in all school districts except Katy ISD which saw an 11.5% decline. On the flipside, Klein ISD saw the sharpest increase in units leased which soared 13.2%.
Annually, Average Rents rose by an average of 4.27% . Median Rents rose by an average of 5.17%. In both categories, Klein and Tomball ISD properties posted the highest gains.
Annually, Days on Market rose by an average of 21%. Katy and Cy-Fair ISD had the highest increase at 36% and 27% respectively.

To get a sense for how the market might behave going forward, we “weighed” the current number of listings active on the market for each school district against the adjusted absorption rate (the number of properties leased this month last year adjusted by the annual year over year increase or decrease in overall units leased). That provides a crucial metric for the health of a rental market (Days of Inventory) which in a nutshell tells you how many days it would take to clear out all existing inventory for lease based on last year’s adjusted absorption rate.

As of the date of this writing, there were an average of 123 listings on the market with an absorption rate of 54 properties per month. That tells us there are 72 days worth of inventory currently on the market.

Study Conclusions

So what does it all mean and what’s the answer to the question that started the nerd avalanche?

The Houston rental market is NOT experiencing over saturation. The fact that units leased and rents are up year over year is a testament to that simple truth.
Having said that, the market balance is shifting from an overwhelmingly landlord-friendly market to a more balanced market, as more properties have become available. That is being reflected in the increase in days on market for investment grade properties for lease. This will result in more competition for tenants so rents will probably not rise at the same clip going forward.
The days of putting your investment property on the market and having multiple lease applications within the first week may be behind us. Therefore, investors must adapt their expectations, and most importantly their projections, to the new market realities of longer days on market.
The filters we used to compile the data eliminate all properties and locations that don’t fit general “investment grade” criteria. However, the properties we present to our clients as acquisition targets are only a small fraction of this filtered list. The creme de la creme, if you will. As always, the best locations and properties outperform their less than excellent peers.
As much as we tried to segment the market (using school districts), I’m afraid the segmentation isn’t granular enough. For example, within Cy Fair ISD there are pockets, neighborhoods, zip codes that behave differently than other counterparts within the same district. Therefore, this analysis isn’t meant as a substitute for neighborhood level analysis that tells a clearer story about what’s going on in that neighborhood. The study is a 10,000ft view to look for general patterns – property specific market analysis is the microscope view.

We will continue to keep a watchful eye on the Houston rental market in order to provide you with the insight and strategies to make smarter long term real estate investments.

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If you’re interested in a PDF report of the study (and a Google Spreadsheet file if you’d like to play with the numbers) contact us or if you’re reading this in your email, just hit reply.

Footnotes:

The Pivotal Factor You Probably Don’t Know to Watch for in a Rental Market – http://www.biggerpockets.com/renewsblog/2015/01/19/pivotal-factor-rental-market/

BiggerPockets, January 2015

The Fermi Technique: How to analyze investment properties in under 5 minutes

January 7, 2016 By Erion Shehaj Leave a Comment

Over the last decade, I have worked with many successful long term real estate investors. They have different personalities, different professions and often employ different strategies. But they all have one critical thing in common:

Successful long term real estate investors possess the ability to quickly and accurately “size up” a potential deal.

If someone were to call you on the phone to offer you a potential real estate deal, would you know how to evaluate it quickly and accurately within 5 minutes?

If not, the technique I will share with you today will change that. It will allow you to analyze any long term real estate deal in 5 easy steps that fit in the back of an envelope.

The technique was developed by world-renowned Italian physicist Enrico Fermi. He created the world’s first nuclear reactor, has been called the “architect of the atomic bomb” and had a substantial role on the Manhattan project. So, in a nutshell a brilliant fellow. Fermi was known to use his technique to get quick and accurate answers to very complex physics problems on the back of an envelope. Today, I’ll show you how to use the same methodology, to solve a much easier problem: How to analyze a real estate deal in under 5 minutes on the back of an envelope.

Let’s dive right in. Someone calls you and tells you about a potential investment opportunity.

It’s a single family home that would make a great investment property – according to the caller. Here’s how you can run a back of the envelope analysis within 5 minutes.

Collect Information and/or Make Assumptions

To get started with the analysis you need 5 numbers that you can easily get by asking or making simple assumptions: A) Purchase price B) Monthly Rent C) Down Payment D) Loan Amount and terms and E) Monthly Payment. Let’s say you determine that the property is being sold for $170,000, would rent for $1700, you’d put 20% down, borrow $136,000 at 4.5% for 30 years and pay $689/mo.

Calculate key data

• Step 1: Calculate the annual rent – Monthly Rent x 12

• Step 2: Calculate cashflow before financing – Annual rent from Step 1 multiplied by 0.54 (operating expenses typically run about 46%)

• Step 3: Calculate the annual cost of financing – Monthly payment x 12

• Step 4: Calculate cashflow after financing – Cashflow before financing (Step 2) less Cost of Financing (Step 3)

Final Step – calculate critical metrics

There are three critical metrics that will tell you everything you need to determine if this is a good deal: Return on Assets, Cost of Financing and Return on Equity.

Return on Assets is calculated as the cashflow before financing (Step 2) divided by the price of the property. Another term for this metric is Capitalization or Cap Rate. It simply tells you the rate of return the property would produce if you owned it free and clear.

Cost of Financing is calculated as the annual cost of financing (Step 3) divided by the loan amount (your Assumptions). You would calculate this metric so you can compare it to the return on assets figure. If your return on assets is higher than your cost of financing that means you have positive leverage. Put a different way, you using the bank’s money to generate higher returns than what it cost you to obtain that money. You should avoid the opposite at all costs.

Finally, Return on Equity is calculated as the cashflow after financing (Step 4) divided by your down payment (your Assumptions). This metric tells you what your invested capital is earning. When you achieve positive leverage, your return on equity will be higher than your return on assets. Or put a different way, you are earning a higher return by using the bank’s money to finance part of the purchase.

The first time you do this analysis, it will take a little longer to complete until you get used to it. Afterward, it becomes second nature and a powerful skill to make you a better investor.

The technique is especially powerful, after you’ve run the initial analysis because it allows you to quickly evaluate potential scenarios (i.e sensitivity analysis). What if you paid $160,000 for the property instead – how would that impact your returns? What if the property rented for just $1600 instead? What if you could secure financing at lower interest rates?

Run the Fermi Technique and within 5 minutes you have critical information to make better investing decisions and make more money in the long term.

Closing Note

The Fermi Technique is an approximation method that provides some insight whether you should pursue any further, deeper analysis. It is NOT a substitute for the full fledged analysis that we discuss in How to property calculate the return on a long term investment.

5 Critical Real Estate Investing Lessons I learned in 2015

December 31, 2015 By Erion Shehaj Leave a Comment

Today is the last day of 2015. In a few hours, the bubbly will flow and we get to write a new chapter. That’s why this is the best time to reflect back on the year that was, learn the critical investing lessons it taught us and become better investors in the process.

Year in Review

Real estate markets across Texas entered 2015 with a lot of momentum from the previous year but one giant “elephant in the room”. Oil prices had dropped by 50% at the end of 2014 and everyone questioned how it would impact the labor and real estate markets. And nowhere were these questions as loud as in our home base of Houston – the energy capital of the world.

In “Why did oil prices drop in 2014” published here in February, I offered my take on the impact it would have on our real estate market. The central thesis of that article was that oil prices would certainly have an impact as expected layoffs would affect housing demand, but it would not lead to significantly lower real estate prices in 2015.

After a somewhat nervous start in January, the Houston real estate market didn’t miss a beat and resumed the “song” it had been singing over the last 24 months. The spring and summer seasons swept in and brought with them bidding wars, multiple offers, rising prices. Move on, nothing new to see here.

On the rental market front, it was the same story. High tenant demand, low days on market and multiple applications.

In September, official stats remained strong with rising sales and prices but in the trenches we started seeing the signs of a slowdown. Price reductions, more room to negotiate, some unsold listings. Major players in oil and gas had trimmed down their workforces by 15-20%, decimated exploration budgets and the inward migration of people coming here for work slowed. As it’s often the case with the oil market, no one really knows what will happen before the fact (although many are “experts” afterward). I suppose that after seeing lower prices stabilize and slightly rise midyear, the market and its players realized we were in for a longer slog and lower prices were here to stay.

In October and November, the official statistics reflected what we had seen for some time. Year over year sales dipped during that period and average prices were lower in November as the luxury segment of the market bore the brunt of the hit. Properties priced closer to the average price mark still posted stronger YOY sales and prices. December numbers won’t be out for another couple of weeks but they’re likely to follow the same fourth quarter trend.

After intensified calls for location diversification, Investing Architect explored the DFW market in October.

Again, the rental market followed a similar trajectory to the sales market. October and November are typically slower than the red hot spring and summer season for rentals but this year we felt it more than others.

Lessons Learned

All considered, 2015 was a fantastic year despite some of the challenges posed by volatility in oil markets. When all stats are done and counted, it will be yet another year of strong sales and rising prices.

There are 5 critical real estate investing lessons I learned during 2015 that I want to share with you now.

Lesson 1: Mama said there’d be days like this

When you invest in real estate long term, for next 10, 15 or 20 years, the one thing I can guarantee you is that there will be volatility. I don’t care which period in time you pick, it will never be a linear, sunshine and butterflies, comfortable ride. You can rest assured that there will be times when the rental market is blazing hot and other times when it’s sluggish, when vacancies are zero and when tenants are harder to come by, when values rise by double digits and when they stagnate or fall.

When things are volatile, the best advise I can give you is to trust the process and stay disciplined. Keep your principal goal front and center and don’t forget it. You will be tempted to sell and get out (when you should stick it out) and worst case you might even feel like you don’t have the stomach for it.

Stay the course. Execute.

Lesson 2: “Moving on up” – Interest Rates

December brought us our first FED quarter point rate hike in God knows how long. It was the first but likely not the last. The FED seems determined to get some “bullets back in their gun” just in case there’s another economical slowdown. After all the economy is doing better but not THAT much better. But if they don’t hike now, they won’t have any room in the principal mechanism they have to stimulate the economy.

So in 2016 you should expect a couple more similar hikes. The question I hear most often is: What effect are these rate hikes going to have on investment property mortgage rates? The short answer is: Rates will be higher but only by a fraction of the actual rate hikes. Typically, mortgage rates rise 0.25% for each 1% hike in FED rates. The first hike had more of a 1:1 impact because it was the first time the FED hiked in many years. Subsequent hikes will likely increase rates only incrementally.

Lesson 3: Value increases = Property Tax Increases

Regular readers of Investing Architect know that we are conservative with numbers. Despite the fact that in the last 36 months property prices have appreciated by 2-3 times that rate, we run our cashflow analyses assuming an appreciation rate equal to the rate of inflation (3%). Still, for existing owners of long term investment properties appreciation is the cherry on the cake also thanks to that beautiful thing called leverage.

Let’s say you purchase a property for 170k and you put 20% down. If that property appreciates by 6%, that represents an increase of $10,200 in property value. But you don’t have $170k of invested capital in the property – you only invested $34,000. So that 10,200 increase in property value represents a 30% return on your $34,000 investment. In other words, when you only invest 1/5 of the value of the asset, your return is 5x the property appreciation rate. Like I said, a beautiful thing.

But you know who else notices that your property went up in value? Taxing authorities that rely on property taxes for their revenue. They think to themselves – would you look at that, market values are up, so should property tax values.

And so, your property taxes, the main driver of operating expenses go up.

What are the real estate investing lessons? First, this is exactly why a disciplined long term investor should not engage in optimistic, best case scenario investing. If the analysis was performed correctly, there should be room in the numbers to absorb tax increases when they happen. Second, the disciplined long term investor should always pursue periodical rent increases with their renewal tenants. I know what you’re thinking – they’re great tenants, they pay on time and take care of the place – if I ask for an increase they will walk away and never talk to you again. I get that and the fact is it may not always be possible depending on the market. But it should be the investors ongoing policy to pursue periodical rent increases. Then the decisions on how far that pursuit goes can be made on a case by case basis.

Lesson #4: Greedy when others are fearful

The aggregate behavior of real estate investors is very similar to stock market investors. Both groups tend to invest heavily when the market is comfortable (read: higher) and step back when Volatility brings his old friend Fear to the party. In Buffett’s sage words, be fearful when others are greedy and greedy when others are fearful.

Volatility is opportunity. If properties aren’t selling as fast, you have significantly more leverage in negotiations with Sellers. That presents some interesting opportunities. For example, you could negotiate for the Seller to pay for closing costs thereby lowering your total investment in the property and boosting your return. Or you can make an offer below market and the Seller won’t throw it back in our face like they did 2012-2014.

Don’t sit it out. Adjust your strategy so returns reflect risk.

Lesson #5: Location Diversification

The reaction of the local economy, labor and real estate markets to substantial volatility in global oil markets reinforces our long held belief that Houston remains a strong market for long term investors. If our economy was not diversified, the impact of such a drop in commodity prices would be devastating – similar to 1980s. Having said that, investors with a strong Houston presence in their portfolio should take a look at other Texas locations as well as other similar states to bring some location diversification to their portfolios.

Location Diversification is a major theme for us in 2016. Stay tuned, or better yet (email us) for what’s to come. Hint: We plan to expand our focus to markets across Texas and other similar states in 2016.