Kyla Linn of the Kyla Linn Group is one of the panelists at the fall edition at Tidbits & Takeaways, our lunch series spotlighting dynamic Houston women leading their fields. We asked her about her real estate career and how she has personally invested in properties in Houston and beyond.
You’ve built personal wealth through real estate investment. Tell us how.
The easiest way for everyday individuals (who are not institutional investors) to build wealth through real estate is through a primary residence. Often, down payment requirements, interest rates, and qualification thresholds are lower for loan products on a primary residence vs. an investment property. There are two main ways everyday people build wealth through their primary residences. The first (and most common) is purchasing a home, living in it for a number of years (at least two, but we recommend 5-7 or more for the biggest returns), and cashing out on the gains in equity. There is even opportunity for “forced appreciation” by adding value to the property through renovations or adding square footage. You can enjoy up to $250,000 in capital gains on a primary residence as a single person (or $500,000 as a married couple) tax-free. Use that towards a bigger and better property, rinse, and repeat.
Another way is to hold on to that primary residence as a rental and start building a portfolio of rental properties. This is a slower burn, as your equity is often tied up in the properties and you aren’t able to use that cash towards other investments easily, but the idea is for your tenants to cover your debt obligations and you enjoy cashing out down the road once your mortgage has been paid off by your tenants and appreciation has caused the value of the home to skyrocket. I like to say I keep a property for each of my big money goals later in life (college tuition, retirement home, etc.). If, for some reason, I don’t have the cash on hand for these things later, I will always have these piggy banks to tap into.
Another key element: leverage. People with wealth understand how to take advantage of leverage. So many people get fixated with waiting to put 20% down on a property, but by buying a property sooner, you are typically buying at a lower price and enjoying more years of appreciation. I’ve also leveraged the equity in my rental properties through refinances and lines of credit that allow me to pursue bigger investment properties than I could with just my cash on hand.
How closely are you involved in the design process of your investment properties?
I am extremely hands on in every aspect of our businesses, but I know my limits! Big picture, I know what buyers and renters are gravitating towards in the market and certain timeless elements to lean into vs transient trends to shy away from, but I am not a designer by trade, so I have a ton of respect for people who can see a blank slate and have the vision to create beauty and texture in unique ways. While I enjoy the creativity of the design process, I don’t always have the time to commit to it, so I try to focus on the fundamentals of the properties — square footage, bedroom count, layout, location, etc., and I have no problem outsourcing to a design team to bring those fundamentals to life.
Tell us about your team and what kind of manager you are.
My team is incredible! There is absolutely no way I could operate at the high level of service that I do without them. I am a big believer in hiring the best talent, and it will pay off in your business, and my team is a clear testament to that. I expect my team to be an extension of me, and I hold them to a very high standard. On one hand, I’m a pretty hands off manager. Once you understand the priorities in the business, I like for people to take the initiative to figure out the best ways to prioritize and achieve those goals on a daily basis. I really don’t like to micromanage or be constantly delegating small tasks. I enjoy working with resourceful self-starters who understand the big picture goals and have the ability to execute them. On the other hand, I am extremely particular — in how we communicate with clients, in our marketing efforts, in the way we present our brand to our community, so when it comes to maintaining those standards, I am heavily involved.
How has the Houston real estate market changed in the last 5-10 years?
Houston is such a huge and varied market, it’s tough to make blanket statements about overall trends, but I will say a few things are true. If you purchased 5-10 years ago, you have experienced unprecedented gains in equity in your home and likely have a very low interest rate. We have many homeowners now that are sitting on a lot of wealth, but are reluctant to tap into it (i.e., sell) due to current interest rates. It’s no secret that the rise in interest rates since the end of 2022 has made a significant impact on demand. With less owners willing to sell, especially in desirable areas, we find ourselves with low supply in these neighborhoods. So even as Houston in general hits “buyer’s market” territory, we’re still seeing record pricing and bidding wars in key areas like the Heights, Memorial, and West University.
As Houston continues to spread out, we’re seeing the “suburban shuffle” where many families who would love to live closer to the city are priced out due to rising prices in high demand areas or a lack of access to quality education for their children. Private school applications are at record highs, but not every family can afford that, so we’re seeing a lot of families move further out.
And finally, “up and coming” areas have become stagnant. Neighborhoods that seemed prime for redevelopment ten years ago such as Independence Heights, East Downtown, and Northside have flatlined in the past few years. In an unfavorable interest rate environment, investors are not as interested in investing in these areas and individual owners are looking for longer term solutions, which has caused a bit of a stall in some of these neighborhoods.
In a crowded market, how do you find clients?
I sponsor Tidbits events. Just kidding 🙂 When I first launched my business, the majority of my clients came from social media. It’s crazy to think that this is where people are finding their representation these days, but I’ve found it’s a great way to reach people I would not have otherwise and build trust within the Houston community. I didn’t have a huge network when I started, and I focused on sharing my expertise and creating more transparency into what we do as realtors and concrete ways we add value. The ability for people to get to know me and see how I can add value to them well before they may even be ready to reach out has been hugely beneficial. Some people say they followed my content for years before they ever had a need for assistance with buying, selling, or investing. It’s a huge compliment that my content still felt relevant and interesting enough for them to continue to engage and remember me years down the line. Now, social media is still a huge piece of my business, but a lot of my clients come from referral. My biggest priority is creating incredible experiences for my clients, and by doing that, I now have a whole army of people who have worked with me and are my biggest champions to their circle of friends, family, and colleagues, which is such an honor.
How does the chronically online generation use Realtors that is different than their parents?
Historically, real estate agents were the gatekeepers of information. You needed them to find listings and open doors, so the expectations of what level of services a Realtor must provide to stay relevant is hugely different now. We are no longer the gatekeepers of information, with the exception of our off market offerings, which while beneficial, is a lower percentage of inventory. Now that anyone with a phone has the ability to source inventory or list their own home, we have to go beyond opening doors for clients and adding data to the MLS. To stand out, a Realtor needs to be able to articulate the ways in which we create value — by leveraging industry relationships, helping clients avoid costly pitfalls, and guiding them through likely the largest investment of their life.
How has social media impacted your career or industry?
Information is so much more accessible than it once was. The increased transparency can be beneficial for consumers and industry professionals alike. There are a lot more creative avenues to get exposure for our clients than there once was, which means we can broaden our reach much further than traditional methods of marketing. For me, social media has been a valuable platform to expand my brand and create authentic relationships while building trust with an audience beyond the people I would encounter in my everyday life. While it’s been a wonderful change for some, I can imagine it is challenging for others in the industry who have not been able to adapt to the digital age.
Next hot or up and coming neighborhoods?
For the reasons mentioned above, I’m not huge on chasing “up and coming” neighborhoods, particularly in the early stages of development. While investing in those areas can be quite advantageous in the long run (imagine buying in the Heights 30 years ago!), in the short term the timelines and levels of appreciation are too unpredictable for me. Instead, I focus on areas that are well established and as close to “Tier A” neighborhoods as you can get. Think areas such as Brooke Smith, Sunset Heights, Lindale Park, Spring Branch… as prices in the nearby high end neighborhoods continue to rise, these adjacent neighborhoods tend to rise as well.
Benefits and drawbacks of owning an investment property and using it as a rental or short term rental.
The largest benefit is owning an asset and enjoying year over year capital appreciation on an asset worth far more (usually) than your initial cash investment while a third party pays all of your carrying expenses. Short term rentals sometimes provide more cash flow upside but can be a lot more work given the faster turnover between tenants and the added costs of having to furnish the property and keep utilities on in your name. For both long and short term rentals, potential volatility with rental demand, damage from tenants, and repairs that arise out of normal home maintenance (both large and small) can be significant drawbacks.
Is it a buyer’s market?
The latest data shows that Houston is reaching close to 6 months of inventory, the highest level in recent years, technically putting us in “buyer’s market” territory. However, every micro market is different in Houston, so this bigger picture number doesn’t tell the full story. I would say it’s a more buyer friendly market. We are still seeing multiple offer situations in high demand neighborhoods, but it is not near the frenzy it was from 2020-2022. I think there is a perception that buyers are getting more “deals,” but I’ve seen that in those instances, the seller usually had unreasonable expectations on price to begin with. Homes that are priced well and marketed right continue to move quickly and for close to list price. I warn buyers not to be too focused on days on market right now. It’s not uncommon for a listing to take 3-6 months to sell, and just because something has been on the market for that amount of time, does not mean a seller wants to give it away for a low price. Many sellers in this market have low interest rates, which means it does not cost them a lot to hold out for the right buyer or they have the option to lease it, if needed. I have seen multiple instances this year where a home has been on the market for months and all of a sudden still got multiple offers when the right buyers happened to enter the market at the same time.
How concerned should we be about interest rates?
I tend to tell people not to be concerned about things they cannot control. There are so many external factors that go into interest rates. We are seeing slow movement downwards, but I don’t see us dipping below say 5% any time soon barring an economic disaster that would prevent sales for other reasons. Even if it were to happen, it would cause a huge surge in pricing that might negate the savings on the interest rate altogether. Focus on whether you can comfortably afford a home that will serve you well for the next 5-7 years at today’s interest rates. If the answer is no, then it might make sense to stay put. But if you can afford a home that meets your needs and provides good investment potential (lean on your Realtor for this perspective!), then the sooner you can buy, the better!
Along with Kyla, the next Tidbits & Takeaways lunch features panelists interior designer Marie Flanigan and Architect Nadia Palacios Lauterbach. Interested in these topics? Send a note to rsvp@gotidbits.com and we’ll reach back out with event details.
Tidbits & Takeaways | Tues, Oct 21
TMC Helix Park | 1885 Old Spanish Trail Houston, TX 77030