Are investors missing a trick? Check this out...
The "Boomers" are retiring or, at the very least, shifting gears again and that means they're moving into a different house. The kids are long gone. The big rambling house is too costly to maintain and the big get-togethers are getting fewer and fewer.
So, what do they want? One thing that stands out like a sore thumb - they don't like stairs. Yup. When you get past sixty years of age, you're not that into running up a flight of stairs every now & then. You'd rather stay on one floor... well, I'm assuming that as I'm not quite there yet but I haven't met many people past the age of sixty that like to climb stairs so I think I'm pretty safe here!
Anyway,... let's "unpack that for a minute" (as my pastor would say when he's analyzing a short piece of scripture like "Jesus wept" [John 11:35] and then goes on to speak on it for about 30 minutes, I'm always amazed by the amount of "unpacking" he can do!).
Okay... they don't like stairs. Great. So?
Well, I think there's possibly an opportunity here for the smart investor.
I looked through the "active" & "sold" data in The Woodlands in the 77381 & 77382 zip codes (the two newer zip codes). Right now there are 83 2-story homes for sale in the $150 000 to $250 000 price range. In the same price range, there are only 33 1-story homes for sale. Hmmm, interesting...
Let's look at the rentals.
Right now there are 46 2-story homes for lease in the $1400 to $2500 price range. In the same price range, there are only 26 1-story homes for sale. Hmmm, interesting...
So...let's see. "Boomers" are a large group of people and we think they might want to move into 1-story homes as they don't like stairs. There are more than 50% fewer 1-story homes available for sale in a particular price range compared to 2-story homes. There are just over 40% fewer 1-story homes available for lease in a particular price range compared to 2-story homes. Hmmm, interesting...
Okay.... in that case, using the laws of supply & demand one would expect people to pay more for the 1-story homes per square foot and one would expect them to be on market for fewer days when selling or leasing. Right? Right!
So... I dig through the data to see whether this is actually the case. What do I find?
Since 1st October 2006, in the 77381 & 77382 zip codes between the prices of $150 000 & $250 000:
2-stories: sold for an average price p/sf of $83.99
1-stories: sold for an average price p/sf of $92.66
That's better than a 10% price difference!
What about days on market i.e. how long did they take to sell?
2-stories: on the market for an average of 51 days
1-stories: on the market for an average of 40 days
That's over a 20% difference!
How about rentals?
Since 1st October 2006, in the 77381 & 77382 zip codes between the prices of $1400 & $2500:
2-stories: leased for an average price p/sf of $0.72
1-stories: leased for an average price p/sf of $0.79
Days on market?
2-stories: 65 days
1-stories: 60 days (quite a bit longer than I expected but still less than a 2-story)
So.... what's the ideal property an investor should try to buy if he wants to focus his efforts in this area?
Well, if you were flipping a property within the $150 000 to $250 000 price range, you want to sell a 3-bedroom home with about 2084 square foot for around $195 000.00. So, if you can find a run-down one for quite a bit less than that and fix it up easy, this is relatively easy money compared to doing the same thing with a 2-story.
If you want to be a landlord within the $1400 to $2500 price range, you want to put a 2130 square foot 3-bedroom home on the market for about $1700.
Note: Obviously the above are broad market trends in the overall zip codes. Each individual "pocket" within the zip code would have to be analyzed when identifying a potential "flip" candidate to ensure you don't overpay. This analysis is intended to portray a trend. To analyze the source information for this story... click here.
Note 2: This information is specific to The Woodlands but the same idea has application throughout the US.
For more Woodlands Investment ideas & deals .... go to www.thewoodlandsinvestor.com
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