Rental only neighborhoods?

[kdonnel]

Rental only new construction neighborhoods are being built all around Metro Atlanta. It is not a concept I knew about until recently.

Apparently the Metro Atlanta area is one of the largest markets for investment by large corporations in single family rental properties.

I wonder what the impact of this much corporate ownership of single family homes will have on long term values?

I also wonder if the neighborhoods will transition to owner occupied at some point and how that would work?

 

[Cadiewampus]

Rental only new construction neighborhoods are being built all around Metro Atlanta. It is not a concept I knew about until recently.

Apparently the Metro Atlanta area is one of the largest markets for investment by large corporations in single family rental properties.

I wonder what the impact of this much corporate ownership of single family homes will have on long term values?

I also wonder if the neighborhoods will transition to owner occupied at some point and how that would work?

Interesting. I had not heard about this. Of course we live up 75 in the boonies

 

[FreeTime]

Similiar neighborhoods are being built in my metro. They are also doing non-rental ones with 99 year land leases from the city at $100 annually to lower the price of the home.

 

[china mom]

I had not heard of this prior but it would provide a solution the problem of corporations purchasing al of the available house and turning them into rentals, leaving nothing for people to buy. Let them build their own new houses.

And, as some people prefer to rent, it would provide rental properties for them. Any additional housing options would help ease the housing burden.

Not the same situation but I own a short term rental just outside of Disney World and it was built specifically as a rental community. Initially, we only had a very few of our 1,000 homes occupied by full time resident owners but in the 202 housing boom, people looking for home to live in and not finding anything else, started moving in. It is still a rather small number but w do have some owner occupied houses.

 

[White Cat]

Rental only new construction neighborhoods are being built all around Metro Atlanta. It is not a concept I knew about until recently.

Apparently the Metro Atlanta area is one of the largest markets for investment by large corporations in single family rental properties.

I wonder what the impact of this much corporate ownership of single family homes will have on long term values?

I also wonder if the neighborhoods will transition to owner occupied at some point and how that would work?

They will. The idea is to rent them out until it becomes no longer worth it. Then the homes will go up for sale. Roughly 10 years is the idea.

 

[Travel60]

The first thing I thought of was who does the maintenance - inside, outside? People who rent often (and understandably) do not take care of the property the same as owners. I'm thinking gutters cleaned out, mulching, tree maintenance, yard maintenance, flower beds, cleaning windows and siding. These all affect the look and attraction of the entire neighborhood. Then inside - cleaning out dryer vents, carpet cleaning, painting, etc.

Do the builders/developers hire all that done?

 

[kdonnel]

They will. The idea is to rent them out until it becomes no longer worth it. Then the homes will go up for sale. Roughly 10 years is the idea.

How is the rental worth it? At the rental prices it must just be covering the mortgage.

Is all the profit in the selling at 10 years?

 

[Brian Noble]

It might depend on build cost vs. market rents. If the build cost is low enough that market rents make sense, and you assume that property values will increase at a rate faster than market rents, then this strategy makes a certain amount of sense.

There are a lot of places where home prices vs. rental markets favor renters, and more places are joining those ranks over time. Ring exurbs are places that might not be there now, but might be after a decade's more growth.

 

[White Cat]

How is the rental worth it? At the rental prices it must just be covering the mortgage.

Is all the profit in the selling at 10 years?

There are a lot of rich people that can just do this as an investment. In other words there are no mortgages.

 

[kdonnel]

There are a lot of rich people that can just do this as an investment. In other words there are no mortgages.

This isn’t a person. This is a company building an entire 200+ home neighborhood.

And isn’t there opportunity cost? That money could be earning more invested another way.

 

[tvguy]

How is the rental worth it? At the rental prices it must just be covering the mortgage.

Is all the profit in the selling at 10 years?

Well, some landlords do hope to make money on the appreciation of the property value, but I think most landlords charge rent that covers all their expenses (mortgage, insurance, repairs) and a small profit. I know my daughter bought half a duplex instead of renting because it is cheaper to own than rent. Of course, you have to have the down payment to buy, but her payment with taxes and insurance is $1,100. The same floor plan duplexes rent for $2,000 a month. She was thinking about going back to school overseas and renting out her duplex and the property management firms suggested she should set aside half her $900 a month profit for repairs and upkeep, but she could still earn $450 a month over her costs.
Landlords would go bankrupt if they didn't charge at least what it is costing them to own the property.

 

[china mom]

The first thing I thought of was who does the maintenance - inside, outside? People who rent often (and understandably) do not take care of the property the same as owners. I'm thinking gutters cleaned out, mulching, tree maintenance, yard maintenance, flower beds, cleaning windows and siding. These all affect the look and attraction of the entire neighborhood. Then inside - cleaning out dryer vents, carpet cleaning, painting, etc.

Do the builders/developers hire all that done?

It depends on the lease. I put in my lease that tenants are responsible for cleaning the gutters at least once a year and providing me a receipt (no one has said they will do it themselves yet) showing that they did it. They have to keep the yard mowed and the gardens free of weeds and debris.

I pay for annual mulching and cutting back overgrown plantings when it is needed.

I typically power wash the exterior and walkways as needed but they should be the ones to keep the windows clean (not in the lease, though).

If the developer owns the entire neighborhood, they are especially invested in keeping it looking nice.

 

[china mom]

How is the rental worth it? At the rental prices it must just be covering the mortgage.

Is all the profit in the selling at 10 years?

I have four rental properties and operate at a slight annual loss but I am in it for the long game. I have built equity that is much more than my annual losses.

 

[tvguy]

Rental only new construction neighborhoods are being built all around Metro Atlanta. It is not a concept I knew about until recently.

Apparently the Metro Atlanta area is one of the largest markets for investment by large corporations in single family rental properties.

I wonder what the impact of this much corporate ownership of single family homes will have on long term values?

I also wonder if the neighborhoods will transition to owner occupied at some point and how that would work?

We have a rental only housing development being built here. It is being built by a company that already owns 1,000 rental houses here that they bought one at a time in different neighborhoods. This is the first rental only housing development project I am aware of here. But the rental market is nuts here, as I noted in my other reply.
https://www.abc10.com/article/news/...nity/103-6c803133-e84a-44b6-aac9-8dab61f16d34

 

[china mom]

There are a lot of rich people that can just do this as an investment. In other words there are no mortgages.

White Cat just called me rich

 

[TippyThomas]

 

[tvguy]

I have four rental properties and operate at a slight annual loss but I am in it for the long game. I have built equity that is much more than my annual losses.

Yeah, my daughter's duplex has increased in value by 50% in the 4 years she has owned it. And that doesn't include the tiny bit of equity each monthly payment gets her. But with a 2% mortgage, she is building equity far faster than my wife and I did in our first home with a 12.25% mortgage.

 

[soccerdad72]

I've not heard of it before, but apparently, it's a growing trend:

https://realestate.usnews.com/real-estate/articles/the-rise-of-built-for-rent

 

[china mom]

Yeah, my daughter's duplex has increased in value by 50% in the 4 years she has owned it. And that doesn't include the tiny bit of equity each monthly payment gets her. But with a 2% mortgage, she is building equity far faster than my wife and I did in our first home with a 12.25% mortgage.

If I didn't have low mortgages, I would be sunk. On paper, I should be making money but I have this one house that I keep getting crappy tenants. Right now, the tenant is $9K behind.

And the short term rental is underperforming. The other two are carrying them so I am not too much in the hole.

 

[cabanafrau]

I've not heard of the new neighborhoods being developed this way, but a large part of the reason the housing market has become so tight is a growing proportion of existing homes are being purchased as rental properties. Jeff Bezos is heavily involved in purchasing homes across the country, amongst others. Foreign investors have been in the market for well over a decade as well. It's particularly hitting the starter home market, but it doesn't stop there by any means. Many, many predictions that home ownership is quickly on pace to disappear from the American Dream.