Meet your new neighbor, the LLC. What to expect from Tarrant County’s most common homebuyer

Near the northern intersection of Interstate 35W and North Loop 820 sits a $5.75 million real estate listing in the Eagle Mountain-Saginaw school district that features 51 bedrooms, 20 bathrooms and enough garage space for 15 cars.

But, it’s not an opulent, sprawling mansion. In fact, it’s not “a” house at all.

It’s almost a whole neighborhood.

The seller bundled 16 single-family homes to sell to an investor. The homes will likely be rented to families, some of whom have been priced out of buying a first home.

Of course, businesses’ foray into residential real estate isn’t a new phenomenon. Since the Great Recession, investors turned to single-family homes as stable investment vehicles that protect wealth during stock market volatility.

This kind of activity spiked during the pandemic.

Institutional buyers purchased 13.2% of residential properties in 2021, up from 11.8% in 2020, according to a report from the National Association of Realtors.

But in the Sun Belt — and Texas specifically — institutional home buying has exploded.

In 2021, institutional buyers accounted for 28% of home sales in Texas. And, in Tarrant County, one in two homes sold in 2021 was bought by a company or corporation, according to the report. .

Tarrant County’s share of institutional buyers ranked third nationwide among counties with a population over 50,000, behind Lincoln, Mississippi, and Van Buren, Iowa. Companies and corporations made up 52% of home purchases in Tarrant County in 2021.

While the trend has earned some a lot of money and made selling a home easier, others argue the rise of corporate homebuyers makes renting more precarious and buying a home for the first time nearly impossible.

And then there’s the question of inventory. When a corporation buys a home, it’s unlikely it will return to the market any time soon.

The rise of corporate homebuyers

Mike Colegrove is one of many Fort Worth area homeowners inundated with calls and text messages from people trying to buy his house.

Sometimes he humors the callers and says, “Yes, you can buy it for $500,000,” which is at least $100,000 more than it would sell for. His wife has started to get calls pressuring them to sell properties they don’t even own.

About two years after the Colegroves moved to their newly built Saginaw home in 2001, the houses in the 660-lot neighborhood started selling to big companies. He estimates about 40% of the homes in his neighborhood are rentals.

You’ve undoubtedly noticed the billboards and signs all over Fort Worth: We Buy Houses!

Investor homebuyers love Tarrant County. It matches the descriptors of areas with high shares of investor home buyers. For example, counties with higher shares of investor homebuyers are more likely to have a high share of renters, a low vacancy rate and increased home price.

More than 40% of Tarrant County residents are renters; the county has a vacancy rate of only 7%, and home prices have more than doubled in the past decade.

In 2011, the average home price in the Tarrant County was $174,825, according to data from the Texas Real Estate Research Center. The average price rose to $370,449 in 2021. Meanwhile, the average rent in Dallas-Fort Worth reached $1,489 per month in January, according to reports from ApartmentData.com.

Who are they?

When you’re selling your home, it’s obvious when a corporate buyer throws its hat into the ring.

“It will be a cash offer and they’ll send you proof of funds. There will be a letter, and it will literally have several hundred million dollars in their account,” said Shelby Kimball, a Realtor and former president of the Greater Fort Worth Association of Realtors.

Some are giant corporations like Dallas-based Invitation Homes, which went public in 2017, five years after Blackstone Inc. acquired the company resulting from the merger of Treehouse Group and Riverstone Residential. Invitation Homes owns more than 80,000 rental homes and reported an 11.6% year over year revenue increase to $569 million in the third quarter of 2022.

Recently, Fort Worth Realtor Keenen Lee has noticed people increasingly using e-commerce real estate companies like Opendoor to sell their homes. Opendoor makes instant cash offers on homes and resells them.

Some corporate buyers are mom and pop investors, who are saving for retirement or padding kids’ college funds with passive income generated from a few homes.

These kinds of buyers — especially the big ones — often pay cash and make an offer over asking. Factor in the ease and speed of a sale without potential financing hiccups, and it’s not difficult to see why this might be a lucrative option for a seller.

“If it’s a good offer, ultimately the client wants to sell their house and make money on it,” Kimball.

But the ease comes at a cost that’s shouldered by the jilted competition. It has become another thorny obstacle to first-time homeownership, said Sandy Rollins, executive director of Texas Tenants’ Union.

“And one of [the obstacles] is when somebody’s selling a home and they can sell to a hedge fund or an algorithm and get cash versus selling to the human beings who are trying to enter the market for the very first time … Somebody who’s trying to sell in a hurry might choose that without realizing the ripple effect that it has,” Rollins said.

This isn’t the case for every seller. Some families try to avoid seeing their former home managed by a distant landlord. But, in most situations, Kimball said, the better offer wins.

Corporate landlords

When Northpoint Asset Management purchased the home she’d been renting in Mesquite, Madilynne Cantrell thought she’d finally see some improvements.

But, in the course of doing work in her kitchen, the contractor left holes behind the cabinets, which exacerbated the house’s rodent problem.

“I have a 4- and 5-year-old,” Cantrell said. “And there are rodents in my kitchen. That is a huge health issue.”

She’s pestered management for two months to no avail. So, she started emailing and leaving voicemails at North Point’s corporate office.

“I’ve never received anything back from them,” she said.

The Star-Telegram reached out to Northpoint’s corporate office multiple times but did not get a response.

Now, Cantrell is looking for a new home for her family, because the property manager raised her rent from $1,300 to $1,545 and tacked on nearly $1,000 in additional fees, like a $150 lease document preparation fee.

“It’s been hell, and I’m just ready to move on and hopefully find somebody who cares about their tenants,” she said.

Cantrell isn’t alone in finding that additional fees often come with new corporate owners.

In June, the topic of institutional homebuyers attracted the attention of the House Committee on Financial Services Subcommittee on Oversight and Investigations, which conducted a hearing on the topic. A survey conducted by the subcommittee found the five largest operators of single-family rentals increased fees per lease per year by about 40%.

“In a tight housing market, a lot of landlords’ attitude is: ‘You don’t like it? You can move. I’m not fixing anything,’” said Rollins, of the Texas Tenants’ Union. “For some tenants, they don’t have other options. They can’t vote with their feet. It’s expensive to move.”

Corporate neighbors

These companies aren’t only getting heat from tenants; some have also fallen out of favor with their home-owning neighbors.

Colegrove’s disdain for his corporate neighbors stems in part from his interactions with them as a member of his homeowners association board.

The board is in constant contact with the companies that own homes in the neighborhood, he said. They have had issues with corporate neighbors who won’t maintain yards or pay HOA fees.

As the president of the North Fort Worth Alliance, Russell Fuller has fielded concerns from many neighborhoods about the proliferation of corporate ownership.

When a company purchases multiple homes in a neighborhood, it could dilute the voting power of owner-occupiers in the homeowners association, Fuller said. Homeowners are most concerned that this could sway votes on contentious issues, like short-term rentals.

“The focus is more likely to be economic as opposed to all the other reasons that people purchase here, which is schools, safety, our ability to maintain our amenities,” said Tony Perez, former president of the Chisholm Ridge Homeowners Association, which falls under the North Fort Worth Alliance.

Voting isn’t the only arena where corporate homebuyers can exercise undue sway.

Throughout the pandemic housing frenzy, companies purchased homes with cash and made offers above the asking price, thus driving up the values of nearby homes, Fuller said. Because property tax appraisals use comparable properties to determine value, owner-occupiers feel the hit when they get their property tax bills.

“Take my house for instance. Somebody bought a house with the same floor plan and paid $400,000. I know that my house is not worth $400,000,” Fuller said. “There’s not a thing I can do about it.”

Legislative endeavors

When Dallas landlord Khraish Khraish of HMK Ltd. announced in 2017 he would shutter his 300 low-rent properties, turning out more than 1,000 tenants, housing rights advocates in Dallas pushed for statewide legislation that would protect tenants in these situations.

In 2017 and 2019, state Rep. Royce West introduced legislation forbidding landlords from refusing to renew a tenant’s lease for the purpose of rehabilitating or redeveloping a property without granting the tenant a right of first refusal to purchase the property, if the property is a single-family home or duplex and the landlord intends to sell it.

Giving tenants the first right to purchase a building when it goes up for sale could have prevented precarity in this situation. It’s also a measure that could keep homes in the hands of the people who live in them, said Rollins.

The measure wasn’t successful. But, in the upcoming legislative session, state Rep. Gina Hinojosa of Austin is championing two bills that aim to curb the institutional homebuyers’ frenzy.

House Bill 1056 would require institutional landlords to register with the state comptroller. The registry would be searchable on the comptroller’s website. House Bill 1057 would keep institutional investors from purchasing homes until 30 days after listing.

Some efforts to cut down on corporations purchasing single-family homes are local, coming from organizations like homeowners associations.

The Chisholm Ridge Homeowners Association was one of the first in the Fort Worth area to successfully establish a policy response to the increase in institutional homeowners.

The board voted to enact a 20% cap on rentals in the community and require rental registration.

In devising the policy, former HOA president Tony Perez wanted to do so in a way that doesn’t demonize renters, but rather regulates absent landlords.

“We never pushed or fought against renters, because renters are our neighbors. There are good reasons that people want to rent here,” he said.

There are also exceptions to the policy. For example, one homeowner was relocated to Houston for a temporary job. The HOA board permitted her to rent her home during her absence, so she didn’t have to sell her house.

Will we see them again?

We’re already seeing the effects of governmental inaction on this trend, said Rollins. It comes in the form of stratified cities where blue collar workers can’t afford to buy or rent homes where they work. As well as in the growth of homelessness.

“I think we should expect to see more of that unless policymakers start taking housing policy seriously,” she said.

Realtors report some of this activity has waned with the cooling off of wild pandemic housing market activity, said Kimball.

But the effects of the corporate homebuying frenzy on housing inventory will be felt for years to come. It’s likely many homes won’t be seen on the market for a long time.

Of the homes purchased by institutional buyers, 42% were converted to single-family rentals and 45% were flipped and resold.

“With the mom and pop, you’re definitely more apt to see them come back. Sometimes, they want that liquidity,” said Kimball.

But with large corporations, “they’re in it for the long term.”