How To Invest In Rental Property When House Price Trends Are Up


Tim Hix is a client of JWB who shares how to invest in a rental property when the house price trends are on the rise. In 2012, Tim and his wife began their investment strategy in the Jacksonville, FL, real estate market as unseasoned real estate investors. Today, they have invested in real estate and bought a rental property in Jacksonville, Jackson Hole, Wyoming, and Bend, Oregon.

Can You Make Money On Rental Properties In Expensive Real Estate Markets?

Before investing in an income property, Tim Hix lived in costly real estate markets that made buying a rental property challenging. So when Tim calculated the real estate prices, property taxes, rental income, and credit score, he worried that he would never become a real estate investor.

Fortunately, Tim heard about JWB from a buddy of his. So he talked at length with the JWB team about home sales in the Jacksonville, FL real estate market and how affordable they were compared to the home prices in more expensive markets.

After many conversations, Tim realized he could hire a property manager — the JWB team — and let them handle the rent collection so he could make the monthly mortgage payments. So Tim decided to move forward with JWB and bought his first two properties in 2012 when housing prices were low.

Why Is Jacksonville, FL Real Estate Such a Good Deal?

Looking back on it, Tim did a lot of research and got into some “analysis paralysis” with spreadsheets before buying from JWB. But he was happy he started working with JWB. They took a terrifying situation and made it painless.

What was that terrifying situation? The Great Recession caused a major housing price crash. In 2012, the idea of buying a turnkey real estate investment property was a relatively new concept for many new investors of rental properties.

Today, there are so many positive things happening in the Jacksonville, FL real estate market:

  1. The global pandemic changed millions of people's work and commuting habits, which made many people want to move to Florida.
  2. Jacksonville has it all: beaches and all kinds of waterfront property, high quality of life, affordable living costs, an International airport, a thriving economy, and a growing population. 
  3. Jacksonville is a large, growing city with plenty of lands to build upon. Because land is so plentiful, there are no permit restrictions.

What Are Permit Restrictions?

Tim explained that there's a short-term rental permit shortage in Bend, Oregon, where he lives. You can't get one if there's another short-term rental within a 250 feet radius. 

Plus, there are national forests and parks in states that won't let you build. The only way to go is up, and there are height restrictions. That's what drives housing prices up. Oregon has a state law that forces density in a city and has an urban growth boundary. You can't build outside the boundary until you've reached saturation within the boundary.

Space and land are limited in Oregon, California, Washington, and many other states, making for high competition over fewer resources. This is why investing in the Jacksonville, FL, real estate market gives real estate investors way more room to grow. There are hundreds of acres in JAX that are waiting to be built. 

How Do Restrictions Affect Building Costs?

You can't just build your own subdivision this way, and it keeps property values up. Tim is the Director of Finance for a prominent builder in Oregon. So he is intimately familiar with home pricing trends across the United States and major metro areas.

How do these artificial boundaries in Oregon and other states exaggerate costs for development, construction, and such? If you buy land within the urban growth boundary, you're going to pay more for it. Some people can buy outside of the limits, but that's a gamble because it's unknown when you'll be allowed to build. In Idaho, it's much easier to acquire land, so homes are more affordable there.

The bottom line is this: You can purchase land in Jacksonville at a bargain and get positive cash flow from your renters, plus a steady appreciation of your property. The JAX market is the second-fastest-growing urban real estate market in the country, and it has experienced continued growth since the 1960s. This trend is expected to continue well into the 21st Century.

What Made Tim Decide to Purchase Rental Properties Before Buying His Primary Residences?

It was a leap of faith to invest in property, especially when it's far away from where he lived. But now that he looks at it, buying in 2012 was an ideal time to buy. It wasn't a “no brainer,” but now that we have a bigger, long-term view of the complete 10 – 20 year real estate cycle, it shows Tim made the right decision. 

When analyzing how to invest in rental property in Jacksonville, Tim's spreadsheets didn't lie. Even his most conservative analysis showed positive cash flow, and someone else, the tenant, is going to pay his mortgage. The numbers showed that even his worst-case scenario was still going to look pretty good. Bills were going to be paid, and it's a scalable way to grow your investments.

Now that we can look through the lens of 2021, the returns in 2012 were unreal! Of course, it would have been great if he could have bought more. But he didn't because he wasn't as evolved in his career yet and didn't have as much cash on hand. 

Where Should You Buy an Investment Property?

You should analyze the real estate markets you are interested in and look closely at the numbers. What are your goals around those numbers? Are you seeking positive cash flow? Are you more interested in appreciation? Perhaps a combination of both?

Where you should buy an investment property is where you will get the most return for your money. Look at the interest rates, the purchase price, the rent prices, the appreciation, and the health of the local economy. A thorough analysis of these numbers should give you a clearer picture of where you should purchase rental properties.

At JWB, we make the analysis part easy. We show you the property price, the expected cash flow income, the property management fees, and other costs related to the rental property. Because we believe in transparency and doing what is best for our clients, the numbers are evident. As a result, you can make intelligent decisions if buying investment properties in Jacksonville aligns with your financial goals.

What Are the House Price Trends Around the Major Metro Areas in the United States?

Because land is scarce and prices are high, there are bidding wars across most major metro areas to buy homes. On the other hand, the same cannot be said for commercial real estate since more people choose to work from home. Regardless, many potential home buyers are putting offers down on multiple homes, only to be outbid by competing families.

As long as there is a low inventory of homes in the major metro areas, the prices will continue to remain high. For example, Tim shared that in Oregon, there are only four weeks of housing inventory. That means that if no new homes came on the market today, they would run out of homes within one month! That scarcity is what makes other major metro areas so expensive. 

What about the Cost of Building Materials?

Prices are very high for lumber, and materials costs have increased dramatically since 2020. Tim says the 2021 prices are insane. Price increases are substantial and have impacted home pricing. Construction companies will soon hit the ceiling where affordability becomes an issue. Costs for JWB construction have gone up 20 – 30% every year, and the same is going on everywhere in the country.

At some point, affordability becomes a limiting factor for the growth of your rental properties. As prices go up, it'll be harder to get into the rental market around the country. A complete real estate cycle has a ceiling on growth, and that's why JAX needs to attract more people with good incomes to the area.

How Do People Invest in Rental Properties in the Jacksonville, FL, Real Estate Market?

For Tim, it was a matter of saving enough money to get started. He saved $50 – $60K and bought his first two JWB properties in 2012. He bought another one in 2014. After that, Tim and his wife finally bought their own home — a condo — in Jackson Hole, WY, for approx. $500K! Tim's career took him out to Bend, Oregon, and he now owns two rental properties in OR. The Hix family are real estate believers, for sure!

The Not Your Average Investor show community is full of people who use different tactics and methods to invest in rental properties with JWB. Some, like Tim, save their money for a down payment. Others use the equity in their existing properties to make a down payment on a JWB turnkey rental property. Finally, others take money from their stock market investments and use that to purchase rental properties.

No two investors are the same. Everyone has different income levels, financial goals, and investment timelines. The JWB team works with each investor to create a success plan that is designed specifically for them. We do our part to make the process as stress-free and straightforward as possible.

If Home Prices Go down, How Will That Affect Buying a Rental Property?

At some point, affordability becomes a limiting factor for the growth of your rental properties. As prices go up, it'll be harder to get into the rental market around the country. A full real estate cycle has a ceiling on growth, and that's why JAX tends to attract more people with good incomes to the area.

To add, the rent prices in JAX are high, much like they are in more expensive United States areas. Because rents are high, the cash flow is excellent!

Rental properties are a terrific investment because they continue to provide income as rent prices increase. Rental income goes up as inflation goes up. You cannot say the same about the stock market. 

Where Is Tim Seeing Investment Opportunities Now?

Tim is trying not to play the short-term guessing game. Long-term, Tim is very optimistic and feels we are set up well. The pandemic has allowed many people to save money, pay down debt, hire companies, and wage growth. If we can grow wages, affordability is less of an issue. As wages go up, the ability to rent or buy a home gets better.

Should I Invest in the Jacksonville, FL, Real Estate Market in 2021?

The short answer is yes! Real estate in Jacksonville is affordable, interest rates are low, appreciation continues to grow, and people steadily move into the area looking for a place to rent.

Tim Hix works for a home builder in Oregon, and he hired his employer to build homes for him. With these investments, he's looking at these Oregon investments for equity, appreciation, and cash flow. Bend, Oregon is more expensive than Jacksonville, FL, so Tim says the cash flow in JAX is a lot better than where he is in OR.

What Other Investments Have Tim Looked At?

Tim has looked at other investments over time, but not lately. The stock market isn't a bad investment, and he maxes out his 401K. But if he wants to retire early, he can't use it for cash flow. Rental properties, however, provide passive cash flow that will allow him to replace his earned income. “That makes a lot of sense,” he said. “I see real estate as an opportunity to retire early.”

How Do You Get Started with JWB?

If you are thinking about investing with JWB, tune into our Not Your Average Investor show on Tuesdays and our Property Of The Week on Thursdays to feel more comfortable about our approach. Also, join our Facebook community at www.jwbfacebookgroup.com

You can also go to www.jwbinventory.com to see what properties are currently available. We encourage you to contact the JWB team for a consultation to find out how our property management team can be of service in providing passive income cash flow. 

When you are ready to take the next step with Jacksonville real estate, visit www.chatwithjwb.com. We will walk you through the numbers to show you what your potential Return On Investment will be.

If you enjoyed hearing Tim's story and learning how to invest in rental property, we hope you will join our NYAI Community. As house price trends continue to rise across the country, the Jacksonville, FL, real estate market will be a safe place to invest your money. You'll be glad to have JWB as a long-term partner for your JAX real estate investments.

To Your Success,

Gregg Cohen

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