Investors were putting money into multifamily housing complexes during the first quarter of 2018, but higher interest rates could slow future investment according to a report by the Journal Record’s Molly Fleming.
This week on the Business Intelligence Report, Fleming talks with KGOU about apartment investments, and a program at the University of Oklahoma School of Law that provides pro bono legal services to tenants who are facing eviction.
Jacob McCleland: It's the Business Intelligence Report, a weekly conversation about business news in Oklahoma. I'm Jacob McCleland and I'm joined today by Journal Record reporter Molly Fleming. Hi Molly. Thank you for talking with us.
Molly Fleming: Hey thanks for chatting with me.
McCleland: I want to talk to you today about investment in multifamily housing in Oklahoma City. There were a lot of sales in the first quarter of this year but brokers don't expect that trend to continue. Why do they think that investment will slow down?
Fleming: So a lot of the sales in the first quarter were carryovers from 2017. You know, sales rarely happen overnight. So it takes a while to get the final contracts done. Most of those deals in this year's first quarter were ones that just couldn't get wrapped up last year. With that being said, the interest rate has gone up and will likely go up at least two more times. This makes properties more expensive so the return on investment is lower.
McCleland: So higher interest rates could scare off investors. But up until now, investors have been attracted to the Oklahoma City market as compared to other cities like Dallas. Why is that?
Fleming: Oklahoma City offers a lower interest point for purchasing. So in the long run it won't take too long to get the return on your on your purchase. Dallas has a higher rent rate, but Oklahoma City's is lower and continues to increase.
McCleland: So most of the apartment complexes that have been purchased recently in Oklahoma City were originally built in the 1970s and 1980s. Why are investors putting their money there?
Fleming: Investors like this age of properties because they have a value-add opportunity, as they say in the commercial real estate world. That means you can buy the property at about $35,000 a unit, refurbish each unit and then sell it at a higher rate. Oftentimes the investor has the money to build a new property, but it's much easier to buy an old one and fix it up. You don't have to find land, install utilities, you know, get city approval, you know, do a market study, see who would use it, all those things, and all those other initial requirements for new construction.
McCleland: I want to talk with you about another story you wrote for The Journal Record that has to do with apartments. This one is about the pro bono eviction program at Oklahoma City University School of Law. Professor Dick Klinge is the program director. What kind of services do they offer?
Fleming: He offers legal help to see what it can take to get someone back in a home. He's been in this position since January and he said he gets about 30 calls a day. Sometimes he can't help folks, but he will help when he can. So he'll review the law or even lease contract to see what he can do to get that person back to their home. There's a Harvard Law study that came out that says that if people have legal representation in eviction lawsuits they are two thirds more likely to get back in their home.
McCleland: So what are some of the things that could lead to eviction and that the OCU law program would represent?
Fleming: So some of it is domestic abuse. You know if you have in your rent contract that you won't make too much of a disturbance to the apartment complex but somebody comes over and attacks you and you know you have a loud outburst, then, and somebody kicks you out, you know that's that's not a problem that you created. And so you can fight that in court and say you know you're the victim in this situation. There's other things sometimes people get evicted, you know, because lower income people work on an hourly rate and if they can't work because they have to take care of somebody or they're sick themselves then that's just one slip up that causes them to not have the money to pay rent. You know there's a lot of things that can lead to eviction. It's not just failing to pay your rent on time.
McCleland: And once somebody has been evicted from an apartment doesn't that make it more difficult to get back into a home? I mean especially now in an environment where we're seeing rent prices increasing in Oklahoma City.
Fleming: Absolutely. You know once you've been evicted, most apartments won't take you again. I mean you're kind, I mean, you're very much a liability at that point. That's one thing that's Professor Klinge at OCU School of Law can do, is he can review the situation and possibly get your record expunged. I know that when I talked to Dan Straughan at the Homeless Alliance, he said that's a challenge that they've seen as well with some people is, you know, having that record that still has an eviction on it and maybe it wasn't your fault. You know there's there's a lot of circumstances that can lead to somebody being evicted.
McCleland: Molly Fleming covers real estate for the Journal Record newspaper. Molly thank you so much for your time.
Fleming: Hey thanks for having me.
McCleland: KGOU and the Journal Record collaborate each week on The Business Intelligence Report. You can find this conversation at kgou.org. You can also follow us on social media. We're on Facebook and Twitter, @journalrecord and @kgounews.
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