Continued job growth in San Antonio made the city the second best market for real estate investing during the first quarter of this year.
According to HomeVestors and Local Market Monitor, the market was a prime one for multifamily investors as rents continued to grow and the demand for units drove down vacancy rates.
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Investor-attracting market conditions are expected to persistent in the city’s multifamily sector throughout 2016. Marcus & Millichap forecasts the addition of 25,000 workers this year, which will push the metro’s employment base beyond one million for the first time. The metro’s unemployment rate is expected to hover above and below 4 percent throughout the year.
Average effective rents are expected to rise 4.2 percent in the metro reaching $933 per month. Heightened demand for rentals will push San Antonio’s overall vacancy rate down by 30 basis points to 5.8 percent.
HomeVestors cautioned that while San Antonio ranked as a top market for investors last quarter, prices for multifamily assets could be overpriced in another year– as discounts associated with buying newly built projects have largely disappeared.
Multifamily investors in San Antonio
Within the metro, institutional buyers and REITs are said to be targeting newly developed, stabilized properties. These assets are typically trading at a low or high 5 percent cap rate.
The opportunity to purchase more newly built product will be able to these investors this year, as multifamily completions will total 5,700 units. Roughly 3,000 of these units will be delivered in the Far North Central, Far Northwest and Far West portions of the metro.
Far Northwest should be an attractive market for investors as the submarket realized the strong decline in vacancy rate last year, 300 basis points. Entering the year, Far Northwest had a vacancy rate of 5.8 percent. Another intriguing market should be Central San Antonio, as the submarket has a metro-low vacancy rate of 3.8 percent.
Growth within the metro’s southern portion is drawing more private, local buyers that are targeting value-add acquisition opportunities. South San Antonio’s vacancy rate stood at 5.5 percent entering this year.
Single-family rentals in San Antonio
HomeUnion recently identified San Antonio as the ninth strongest market nationally for home rental growth, with rents expected to rise by 4.7 percent to $1,165.
This along with San Antonio’s considerably affordable home prices make the market an intriguing one for single-family rental investors eyeing fix and flips.
According to the San Antonio Board of Realtors, nearly 55 percent of homes sold in February were priced under $200,000, with the metro’s median price sitting at $190,400.
