investor-owned SFH and its impact on Chicago rents (Time: rentals, houses)

[sydlee]

Found this interesting note about Chicago and home/rent prices. Just wanted to share with you guys. It's definitely hit us hard here in California.

"And while Invitation Homes rents vary widely by neighborhood and city, some studies suggest that the heavy concentration of investor-owned housing is already having a detrimental impact on affordable housing. A report from DePaul University’s Institute for Housing Studies found that the rapid growth in investor-owned single-family housing may be one factor fueling a widening gap between the supply and demand for affordable rental housing in Chicago and the surrounding suburbs, given that the median rents in single-family-home rentals are 41 percent more expensive than those in other types of rental properties, once utilities are factored in."

Game of Homes - In These Times

[chet everett]

I can guarantee that the folks from Blackstone are setting themselves to learn the hard way that NOBODY can consistently get occupancy rates of over 90%, housing courts will NEVER line up behind "fat cats" that expect tenanants to take primary responsibility for maintenance, and the overall economic cycle of "gentification" rarely meshes well with the a long term desire to bank on cashflow...

Experience of even the best managed REITs shows that the rates of return for residential units is inversely proportional to the number of tenants one has to deal with -- find ONE good business that will take a massive warehouse or office building "in toto" and you have a much greater marginal return than splitting the space into ever more numerous potential headaches...

While I can't really disagree with the good sense that might come from "stabilization" of neighborhoods that otherwise would have a lot more vacant homes the countervailing force is that eventually Blackstone might look for an "exit strategy" that involves finding a new set of suckers to take these money pits off their hands and that could lead to a while new wave of incompetant landlords watching their investors turn to ashes...

[sydlee]

Originally Posted by chet everett

I can guarantee that the folks from Blackstone are setting themselves to learn the hard way that NOBODY can consistently get occupancy rates of over 90%, housing courts will NEVER line up behind "fat cats" that expect tenanants to take primary responsibility for maintenance, and the overall economic cycle of "gentification" rarely meshes well with the a long term desire to bank on cashflow...

Experience of even the best managed REITs shows that the rates of return for residential units is inversely proportional to the number of tenants one has to deal with -- find ONE good business that will take a massive warehouse or office building "in toto" and you have a much greater marginal return than splitting the space into ever more numerous potential headaches...

While I can't really disagree with the good sense that might come from "stabilization" of neighborhoods that otherwise would have a lot more vacant homes the countervailing force is that eventually Blackstone might look for an "exit strategy" that involves finding a new set of suckers to take these money pits off their hands and that could lead to a while new wave of incompetant landlords watching their investors turn to ashes...

good points, chet everett.

[ToriaT]

Interesting but I have a few questions. Does it pay for an individual or investor to buy houses and rent them out? I am assuming they are paying cash. Secondly what is considered maintenance. My son rents a house in Chicago from someone who now lives in Seattle. They are responsible for snow shoveling and grass cutting for a postage stamp sized yard. But if something breaks like plumbing or the furnace, the landlord is responsible. What is reasonable? A friend who is a landlord complained that some woman who he considered helpless wanted him to come over and change a simple light bulb. Should this stuff be put in the lease or in an addendum to a lease?

[Peer79]

Originally Posted by chet everett

I can guarantee that the folks from Blackstone are setting themselves to learn the hard way that NOBODY can consistently get occupancy rates of over 90%...

I can guarantee you that well-managed multifamily can consistently maintain occupancy rates of over 95%. Single family home rentals are a different ballgame. I'm not sure if you we're specifically referring to SFH or residential rentals in general.

[chet everett]

Originally Posted by Peer79

I can guarantee you that well-managed multifamily can consistently maintain occupancy rates of over 95%. Single family home rentals are a different ballgame. I'm not sure if you we're specifically referring to SFH or residential rentals in general.

The problem with a house is that tenants, even former owner type tenats, are very likely to move in a far more seasonal manner than the less homogenious tenants in mult-family....